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Holiday Shoppers Plan to Flock Online

Shoppers plan to purchase more online this year, according to an S&P survey. Apple and eBay stand to benefit

From Standard & Poor's Equity ResearchForty percent of consumers will dedicate more of the increase in their 2007 holiday spending to the Internet than to any other channel, according to a recent Standard & Poor's Equity Research Services survey. This discovery is coupled with the finding that among those polled, 70% planned to do at least a portion of their shopping online. Participants' responses further revealed that 22% of holiday shopping in 2006 was done online.

The results of the survey also showed that online features such as product search, comparison shopping sites, and product reviews influence holiday shopping more than online dollars spent would suggest.

"We believe responses to our survey highlight the continued acceptance of and comfort with the Internet for gift purchases, and shopping overall," says Mark Basham, an analyst with S&P Equity Research Services. "Online retailers are commanding more dollars and a greater part of the holiday spend. They've responded and are feeding into this by giving customers more reasons to shop online, including promotions specifically for shipping."

Peak Selling and Buying Times

According to a recent National Retail Federation study, two-thirds of online retailers indicated consumers need to place their orders by Dec. 18 to receive standard delivery orders by Christmas. At the same time, three-quarters of retailers polled in a fall, 2007, survey planned free standard shipping promotions up until this date. S&P believes this perk will be a significant sales driver as the online holiday shopping season (, 11/26/07) enters its key seven-day stretch that ends with its climax on Dec. 18.

"Online sales have become a key part of the retail landscape, particularly during peak selling times, such as the holiday season," notes Marie Driscoll, head of the consumer discretionary-retail group for S&P Equity Research Services. "Overall, online retail sales account for approximately 6% of total retail sales, and are steadily increasing market penetration. Among traditional retailers, we're seeing the Internet or direct channel providing significant growth and branding opportunities, as it achieves 20% or more year-over-year sales gains."

Healthy Growth

Despite notable economic uncertainty, S&P Equity Research projects that U.S. online retail sales will increase a healthy 17% in 2007 and 15% in 2008. "These forecasts reflect how powerful the appeal of online shopping has become," says Scott Kessler, Internet retail analyst for S&P Equity Research Services.

"We believe that consumers are attracted to the online shopping experience because it offers significant information, expansive selection, considerable convenience, and substantial values," Kessler says. "As a result, companies such as eBay (EBAY; $35; ranked strong buy) and Apple (AAPL; $191; ranked buy) have benefited."

S&P Equity Research Services' survey of consumer behavior and attitudes was conducted during November, 2007, by InsightExpress. The survey sample consisted of 1,100 respondents throughout the U.S. to an online survey consisting of approximately 25 questions regarding their holiday spending plans as well as their outlook for early 2008.

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