Holiday Central

Online sales growth to slow this holiday: Forrester


Online sales revenue are expected to reach a record high during the months of November and December this year, according to a new report by Forrester Research.

But in what could be a sign that the category is edging closer toward saturation, the digital sales growth rate is only expected to increase by 13 percent this holiday, marking their first deceleration since the 2010 to 2011 period.

In its 2014 holiday forecast, released Monday, the research firm predicted online sales will hit $89 billion during the final two months of the year, representing 30 percent of all online sales for 2014. They will also make up 14 percent of total sales during the holiday season.

File photo: A worker in a UPS sorting facility around the holidays.
Tim Boyle | Bloomberg | Getty Images

Still, despite these record figures, these sales gains represent a slowdown in growth rates after three straight years of 15 percent growth, as online shopping becomes more mainstream and there are fewer new consumers to convert.

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"While there are fewer new web shoppers every year ... we expect 3.4 million customers to fall into the 'new shopper' bucket in 2014," Forrester analyst Sucharita Mulpuru said in the report.

Consumers who already shop the web will also drive sales, as they become more comfortable buying online and expand their purchases to additional categories. Widespread smartphone usage (213 million consumers are expected to have these devices in 2014, according to Forrester) is also expected to drive visits to online retailers.

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But while traditional retailers have made a big push in their online offerings over the past year, the web still poses significant challenges for businesses. For one, consumers have come to expect free shipping, which can eat into a company's profits.

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Shoppers also tend to resort to the Web to place last-minute orders, which—combined with a flurry of bad weather last year—caused many deliveries to arrive after Christmas.

To combat these issues, Mulpuru said retailers should promote their store networks to procrastinators, so they don't overload carriers such as UPS and FedEx. She also recommended retailers limit free shipping offers, which tend to delay deliveries and cut into margins.

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Target last month announced it will offer free shipping on all its web purchases through Dec. 20, regardless of the amount spent, a move some experts predict will be replicated by other retailers. And while UPS and FedEx have warned retailers not to offer 11th-hour shipping promises, Kevon Hills, vice president of research at StellaService, said it remains to be seen whether they will listen.

"It's probably the No. 1 thing that I'm most curious to see," he said. "I think we could see people get more aggressive to capture more revenue a few days before Christmas."