• by Jack Loechner , Staff Writer @mp_research, June 23, 2005

According to The State of Retailing Online, an annual study conducted by Forrester Research, 2004 online sales rose 23.8 percent to $141.4 billion. Excluding travel, online retail sales represents 4.6 percent of total retail sales. The report predicts that online sales (including travel) will rise 22.0 percent to $172.4 billion this year. Sales excluding travel are expected to reach $109.6 billion.

Several retail categories will experience steep growth this year, largely due to the growing acceptance of online shopping by women. In fact, categories with products purchased largely by women will see the most growth this year.

• Online sales of cosmetics and fragrances are expected to grow 33 percent
• Over-the-counter medications and personal care sales will rise 32 percent
• Sales of jewelry and luxury goods to grow 31 percent
• Flowers, cards, and gifts up 30 percent

Scott Silverman, Executive Director of Shop.org, said "Though initially adopted by men as a shopping tool, women are flocking to the Internet in droves to comparison-shop, research, and buy. We expect categories purchased by to grow substantially."

In addition, several categories are expected to receive at least 10 percent of their sector's sales from the Internet this year:

• Computer hardware and software (48 percent)
• Tickets (28 percent)
• Travel (26 percent)
• Books (20 percent)
• Consumer electronics (13 percent)
• Cosmetics and fragrances (12 percent)
• Toys and video games (12 percent)
• Flowers, cards, and gifts (10 percent)

Search engine marketing appeared as the clear leader as a source of new customers, says the report, with retailers reporting that search engine marketing delivered 43 percent of overall customers to their sites. In 2004, 87 percent of retailers who participated in the study used pay-for-performance search placement and spent more than twice as much from their marketing budgets on this category than they did in 2003.

Read more on the state of retailing.