Online shopping made a major breakthrough this holiday season, writes Karlin Lillington

Online sales captured a significant share of the retail market in both the US and UK over the holidays, with one American survey placing the figure this year at over $23 billion (€15.57 billion) in total gift purchases, a 26 per cent rise on the same period in 2005.

Total online spend for 2006 surpassed $100 billion for the first time, added Reston, Virginia analyst comScore Networks, and now accounts for a significant 7 per cent of all US retail sales.

However, Irish consumers remain reluctant online shoppers, to such an extent that researchers at Dublin City University have conducted a survey to find out why the Irish don't like to click and shop, even with the spread of broadband connections and a relatively affluent population.

While the research failed to provide any definitive answers, study authors Dr Sarah Ingle, lecturer in enterprise and entrepreneurship, and Dr Regina Connolly, lecturer in management information systems at DCU Business School, did determine that 70 per cent of Irish online shoppers are women between 30 and 50, an unusual profile compared to similar US surveys that show the sexes equally split and predominantly under 35.

They also found Irish shoppers spend an average of €50-150 per transaction, that 29 per cent shopped monthly, 27 per cent every two to three months and 15 per cent weekly. The bulk of purchases were small items: DVDs, CDs, food and books, with airline tickets popular as well.

Ease of access and use on retail sites and prompt product delivery were critical to consumers' perception of value and their intention to return to the site, the researchers said, adding that consumers noted continuing privacy concerns about how vendors use their personal data. The researchers conducted the survey with retailers and consumers using Irish online retailer Buy4Now.

In the US, though, shoppers were clearly avid online purchasers, with no qualms about making big purchase items or returning to sites regularly. During the eight-week period leading up to Christmas, total online retail spending reached $23.11 billion. Sales during the week before Christmas rose 38 per cent compared to the corresponding week in 2005, reported comScore.

"Online sales continued to show strong growth during the last week before Christmas when procrastinators were clicking with confidence," said Gian Fulgoni, chairman of comScore.

"Consumers making purchases in those final days expressed both their faith in retailers' ability to pick and pack their orders in a timely fashion and shippers' ability to drop them on recipients' doorsteps in time for Christmas."

Only a few years ago, post-holiday stories of late deliveries and website crashes marred the nascent online retail sector but analysts say it is now rare for major online sellers to have websites that succumb to heavy traffic.

An exception this year was Apple's iTunes store for US consumers, which experienced slowdowns and sluggish downloading and blamed the flood of people redeeming iTunes gift cards, a popular 2006 holiday present, and trying out gift iPods.

Online market research company HitWise reported that there were four times as many people visiting the iTunes site on Christmas than at the same time last year. comScore ranked Apple.com number seven on its list of top 10 online retailers in the holiday period and number eight for the year.

According to comScore, Amazon led all retailers in online holiday sales, followed by Dell.com, Yahoo.com, Walmart.com and Ticketmaster.com. Ticketmaster.com, BestBuy.com, and Walmart.com posted the biggest gains over last year, with both sites sales up by over 50 per cent.

Amazon had its single best day of business ever on December 11th, with more than four million items ordered on its worldwide sites, the retailer said. In Britain, Amazon.co.uk said its best day was December 4th, when the retailer said a truck left its warehouse distribution centre every eight and a half minutes. Its most popular item in UK holiday sales was the DVD of Pirates of the Caribbean: Dead Man's Chest.

Nielsen/NetRatings reported in late December that visits to online-only retailers on its Holiday eShopping Index were 54 per cent higher than visits to retailers with online offerings and brick-and-mortar stores.

In Britain, "e-tail" industry body IMRG said it believed British online sales in the 10-week period leading to Christmas were up 50 per cent, to £7.5 billion and formed 10 per cent of total retail sales, up from only 0.5 per cent in 2000.

The Daily Telegraph reported that Tesco's online sales were up 30 per cent this year, while other British retailers reporting strong double-digit online growth up to Christmas included Boots, ToysRUs, Play.com, Marks & Spencer, Wal-Mart and Littlewoods Shop Direct Group.

IMRG attributed rising online sales to factors such as bad weather and frustration with transport.

Though the common image of online buying centres on small items like books, music and DVDs, e-commerce sales growth in the US was actually fuelled mainly by purchases made in big-ticket and popular gift categories including jewellery and watches (up 67 per cent), video games (64 per cent) video game consoles (63 per cent), event tickets (55 per cent) and consumer electronics (39 per cent), said comScore.

But small firms say they also saw significant growth in online sales, up an average 96 per cent year on year in Britain for turnover during the holiday period, according to a survey of 57 British SMEs by Actinic, an e-commerce software supplier.

Some 75 per cent of the respondents said they expected to see significant growth in online sales in 2007, in comparison to only 25 per cent who expected to see offline sales growth.

In another sign of a maturing online market, the 26 per cent increase in 2006 online holiday sales in the US is only slightly more than the 24 per cent gain in e-commerce activity during the rest of the year, said comScore. In earlier years, holiday buying drove overall retail sales online and opened the door to consumer acceptance of online purchasing.

Consumers apparently feel free shipping is the most decisive factor for them in choosing where to make holiday purchases on the web.

According to a study of the 40 largest-volume e-tailers by ForeSee Results, free shipping without restrictions significantly affects customer satisfaction and loyalty and is an effective tool for converting first-time buyers.

Among 10,000 respondents to a ForeSee survey, 41 per cent said free shipping was the key factor in online purchase decisions, and 79 per cent said free shipping persuaded them to choose one online retailer over another. ForeSee said that consumers expect free shipping, discounts and other "gimmicks" during the holiday buying season.