Retailers count on Web appeal for holiday shopping

The Gap company's stores have hardly been the hottest spots at the mall in recent months — or even years.

In a market where most retailers are posting single-digit monthly losses, its brands — Gap, Old Navy and Banana Republic — had a combined double-digit drop in September, and Old Navy's sales that month were down a startlingly bad 24%.

But view Gap Inc. through the prism of the Internet, and a different picture emerges. Its online sales are soaring. They were up 50% from 2005 to 2007, more than doubled in the last five years, and are expected to hit $1 billion this year, accounting for about 6% of total sales.

How can putting the same merchandise in a different environment produce such different results? The answer lies in the increasing appeal of the Internet and the steps Gap has taken to capitalize on it. There's more of a democracy in decision-making when a shopping search site or Google is doing your browsing. When people rely on retail preconceptions and feet to find what they want, they might never stop at Gap or Kohl's. But online, it's all there for the perusing.

That's a big reason, along with gas prices and the Internet's attraction to bargain hunters, that websites may offer retailers their only cheer this holiday season. And it's why retailers are paying unprecedented attention to the Web.

"It's the only place you can go for an optimistic outlook" for retail this year, says trends expert Nita Rollins of digital marketing agency Resource Interactive.

Forrester Research predicts online retail sales will grow 12% this holiday season, the slowest growth to date but more than five times the tepid 2.2% increase the National Retail Federation predicts overall in November and December.

"The brick-and-mortar retailers who haven't made online a priority are going to be most challenged this holiday," says Matt Poepsel, a vice president at Web experience manager Gomez. "If their attention wasn't on the Web before, it certainly is now."

Research out Wednesday by NRF's digital division, Shop.org, and shopping search site Shopzilla, shows online retailers even more optimistic: 56.1% expect their holiday sales will be up at least 15% from last year. They, too, predict slower growth: 77.5% of the retailers surveyed last year expected their sales to grow more than 15% — and they were right. Online holiday sales overall rose 19% between 2006 and '07, according to Web marketing firm ComScore.

"Online retailers are resilient, but not immune, to the challenges of this holiday season," says Scott Silverman, Shop.org's executive director.

Shopping online is growing in popularity because not only have websites gotten better, but also people are getting more comfortable with the concept. Amazon.com, launched in the mid-1990s, helped pave the way as consumers became enamored with fast and often free deliveries. Now, some of the biggest growth in online retailing this year is expected to be in apparel. That's partly because holiday shoppers are focusing more on essentials. But it's also because online return policies are often more liberal than in the past (returns are typically accepted at stores), and zoom views and improved photography make it more likely that what you see is what you will get.

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