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Will the Grinch Steal This Year’s Online Holiday Shopping Season?

Candy or coal?

Amid a season of bad economic news, when overall retail sales growth is forecast to remain nearly flat, online retailers have reason to be guardedly optimistic.

eMarketer estimates that online holiday season sales will reach $32 billion in 2008, up slightly more than 10% over 2007.

“More than ever, in order to save money on holiday gifts, consumers will turn to the Internet to get gift ideas, find bargains and locate retailers that stock desired products,” says Jeffrey Grau, senior analyst at eMarketer and author of the new report, Online Holiday Shopping 2008 Preview. “In addition, shoppers will shift a larger share of their purchases from stores to the Internet to save gas money and take advantage of free shipping offers.”

Even so, online merchants cannot afford to be complacent.

“In the past, e-commerce analysts believed that online shopping was immune to economic downturns because affluent consumers—the core online buyers—had the financial resources to weather hard times,” Mr. Grau says. “But this time around the wealthy have become unnerved seeing their stock portfolios and home values shrink.”

Feeling the financial pinch, high-income shoppers have told pollsters that they will reduce their total spending online and offline this holiday season. When they do buy, they will hunt for bargains just like other consumers.

“This new frugality is a large reason why eMarketer predicts that growth in online holiday sales will drop to one-half of what they were last year,” Mr. Grau says.

See what to expect this holiday season—before the season arrives, download the new eMarketer report, Online Holiday Shopping 2008 Preview, now.

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