Online sales up 25 percent

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As sales increase, online retailers are getting more sophisticated with social media and better images, according to the latest installment of the "State of Retailing Online 2007," released by Shop.org and Forrester Research.

As part of the initiative to improve product detail pages and content, 80 percent of retailers say they will focus on adding alternative images, 72 percent will incorporate lifestyle photography and 63 percent plan on integrating social media tools such as customer reviews and videos.

"I think that in the past retailers were more focused on customer acquisition and on the marketing effort, and for a long time product details were neglected, but we are now seeing higher levels of detail standards coming to maturity," said Sucharita Mulpuru, senior analyst at Forrester Research and author of the report.

According to the report, e-commerce sales in 2006 grew 25 percent over sales during 2005, exceeding expectations of only 20 percent growth.

The report also found that the channel is continuing to grow and expects that it will be a year before the online channel reaches saturation. The report predicts continued growth for leading online retailers and a shift of store sales, which are growing slower than their online counterparts.

"I was surprised at the fact that many Web retailers are focused on their own P&Ls, with the overall company sales a distant objective," Mulpuru added. "This has to change over time."

Even though many retailers have yet to develop good detail pages, 50 percent expressed interest in podcasting, a much higher level technological task.

Only 27 percent of retailers say they have live chat on their Web site now, but 33 percent say that it will be an investment priority in the next 12 months.

One third of all retailers say that product customization is very effective and nearly half of retailers say they are considering an online customization application in the coming year. Forty-nine percent of retailers in the survey offer custom products now.

E-mail marketing continues to be the most effective tool for customer retention, as nearly three-fourths of retailers e-mail customers about new product availability. While branded search needs some kinks worked out.

"The dominance of branded terms in paid search creates a favorable cost per order, but it is probably less that it would be if there was no brand involved," Mulpuru added.

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