E-tailing growth slows, sales to rise 17 pct - study

LOS ANGELES (Reuters) - Online retail sales growth in the United States is slowing, but sales are still expected to rise 17 percent this year, even as consumers cut back on overall spending in the sluggish economy, according to a study released on Monday.

But the Shop.org study conducted by Forrester Research also found that retailers are tightening purse strings and pulling back on free shipping offers, with only 33 percent of respondents saying they would focus more on those promotions in 2008.

The projected 17 percent rise in online retail sales, not including travel, would be the first time such growth fell below 20 percent. Still, growth comes on top of a larger base, with $204 billion in sales projected for this year compared with $175 billion last year, when online retail sales rose nearly 22 percent.

The industry has enjoyed explosive growth -- sales rose 44 percent in 2001, for example -- as more Americans have gained broadband Internet access and embraced online shopping. But decelerating growth is expected, as the Internet reaches a point of saturation and as online retail becomes a bigger part of the overall retail pie, said Shop.org spokeswoman Ellen Davis.

"As the overall (sales) number gets higher, it will be harder to achieve the same level of growth," Davis told Reuters, adding that online retail sales will eventually fall to single-digit growth, even as their share of the total retail pie increases.

Last year, for example, online retail sales represented just 6 percent of total U.S. retail sales. In 2008, it is expected to rise slightly to 7 percent.

Apparel is expected to be the largest sales category in 2008, reaping an expected $26.6 billion, followed by computers, at $23.9 billion, and autos, at $19.3 billion, the study found.

The expected double-digit growth in online retail sales comes as U.S. brick-and-mortar retail sales have been falling since early this year. Skittish consumers have pulled back on spending, concerned about a possible recession and hurt by high gasoline prices, falling home values, tighter credit standards and concerns about job security.

"With the U.S. economy struggling, it's interesting to see that online retail is taking on a larger share of the retail industry," Davis said.