RAPAPORT...  Online retail sales during the upcoming U.S. holiday season should reach $44.7 billion, which represents a healthy increase of 8 percent from 2008, according to the latest forecast from Forrester Research. Online sales in the U.S. grew only 5 percent in 2008 for the November and December period, Forrester found.

“Despite the lingering effects of the recession, the online space remains the retail industry’s growth engine,” said Sucharita Mulpuru, Forrester Research's vice president and principal analyst. “What’s different this holiday from past years is that online retailers will manage to the bottom line, which will change some of the tactics they have employed in the past.”

Based on Forrester's report, titled "U.S. Online Holiday Retail Forecast 2009," online retailers will "strive to balance consumer demand" with profitability. Retailers will also work on improving margins this year, representing a change in strategy from simply chasing sales. This change will manifest itself in a number of different ways, Forrester found, including more limited-time and limited-quantity sales, as retailers seek to reduce across-the-board discounting.

Retailers will also reduce automatic free shipping and institute price thresholds for free shipping. Forrester found that customer engagement is a priority this holiday season, when online retailers will utilize more cross-channel customer service options, advanced merchandizing software that will provide more product information and enhanced social networking tools that will enable consumers to share purchase decisions with their friends.

“Tighter offline inventories may benefit the online channel as consumers go to the web looking for products — and prices — they can’t find in stores this holiday,” said Mulpuru. “Online retailers will be ready for them with a special focus this year on engagement and service.”

LH