Online Spending to Go Up 17 Pct in 2008?

A new study from Forrester finds online spending during 2008 will increase 17 percent, despite a lagging economy.

According to the 11th annual Shop.org State of Online Retailing survey conducted by Forrester Research, online spending will increase some 17 percent during 2008 to a total of $204 billion—despite a sluggish American economy. Although the number is lower than the 21 percent growth seen for the previous year, Forrester attributes the slower rates of growth to a maturing industry, not larger factors in the U.S. economy.

“From higher shipping costs to changes in consumer shopping habits, online retailers are not immune to the current economic climate,” said Shop.org executive direct Scott Silverman, in a statement. “But the fact that online sales will increase substantially this year demonstrates the resilience of the channel and is a testament to the value and convenience most customers find when shopping online.”

According to the survey, retailers say that search engine marketing is the most effective way to reach prospective customers, saying the promotional technique accounts for 35 percent of sales. The vast majority of online retailers (90 percent) use pay-per-click ad placement, and 79 percent say they plan to use pay-per-click advertising even more in 2008.

The survey also revealed retailers aren’t as keen to offer free shipping this year, possibly because rising costs of fuel and transportation make the loss-leader more of a burden on retailers bottom lines. Instead, retailers are looking to leverage social networking services to attract customers—65 percent said they’re looking at social network ads and 55 percent at widgets—although industry analysts consider social networks more significant for building brands rather than attracting sales.

The Forrester survey says online sales growth is being driven by two primary kinda of online shoppers: casual shoppers who use search capabilities and comparison features to save money on purchases, and more affluent customers who shop online for convenience rather than merely for the best deal.