Online retail sales this holiday season will reach $27 billion in the United States alone, according to Forester Research. JupiterResearch is even more optimistic, adding $5 billion to that figure. Jupiter further predicts that a record 114 million users will buy online this holiday season.

Meanwhile, three out of four (76 percent) holiday shoppers say they plan to shop for holiday gifts online, according to a recent Yahoo! Small Business survey, and 75 percent say they are likely to purchase gifts online from small businesses. Nearly a third of holiday shoppers say they would do half or more of their holiday shopping online.

Nearly two thirds say online specialty, "niche," or boutique retailers are one of the best places to shop for unusual or hard-to-find gifts.

"Many consumers rely on small businesses that are online during the holiday shopping season because they offer variety, value and unique gifts that aren't always available in stores," Rich Riley, VP and GM of Yahoo! Small Business, told E-Commerce Times.

Yet nearly half of all small businesses have not established a solid Web presence, according to a recent AllBusiness.com study.

In the United Kingdom, more than two thirds of retailers are missing out on potential revenues by not offering their goods for sale online, according to Barclaycard. The company said many retailers are reluctant to embrace e-commerce because of the perception that set-up costs are too high and that a high level of technical know-how is needed.

While Barclaycard's findings are not necessarily surprising, retailers' reluctance to trade online means they are missing out financially. In fact, 63 percent of 1,000 surveyed businesses that trade online had seen an increase in revenues over the past 12 months.

The Web offers one advantage that the brick-and-mortar world of business does not: greater selection.

Just as important as online presence for a small business, however, is the security it provides its potential customers. Of the many surveys and reports name-checked above, all express respondents' strong support for e-commerce with small businesses that offer a secure payment system (such as Paypal).

In fact, due to consumers' concern about the security of the Internet, approximately $913 million in 2006 e-commerce sales was lost because of security concerns among online shoppers, according to Gartner.

Gartner recommends that enterprises online employ a two-prong strategy — increasing consumer confidence while reducing fraud and keeping the crooks out. "The two goals don't necessarily call for the same technical solutions since the most effective fraud prevention applications are often invisible to consumers and criminals," said Avivah Litan, VP and distinguished analyst at Gartner, in the announcement of the findings last month.

Litan continued:

A layered approach to solving security problems is the most effective. Companies should implement back-end fraud detection, stronger user authentication (beyond single factor passwords), transaction verification for high-risk transactions, and data masking/truncation of sensitive data that is shown on Web-based screens.

A small business must gain trust if it is ultimately to gain sales from customers.

While security is vital, successful e-commerce has seen other trends.

For instance, one of the most interesting developments this year has been the rapid (some say sudden) adoption of online video technology. The addition of videos to an e-retailing site creates a whole new site landscape and customer experience.

Some are dubbing it e-commerce 3.0. Rather than follow the Amazon model, the trend involves "exploiting the penetration of broadband to create truly differentiated retail brands," said OMMA magazine. Consumers have more customized options than ever and are gaining access to richer product information through interactive video demonstrations.

"The value in video is demonstration," Doug Mack, CEO of Web development firm Scene7, told OMMA. "Retailers are trying to figure out the best interactive experience at the best possible cost."

A big part of the momentum behind online video, of course, has been the unbelievable growth of 21-month-old YouTube, which Google acquired in October for $1.65 billion. Clearly, video is important to Internet users.

To bring customers to their Web sites, multichannel retailers have been planning a variety of online and offline marketing strategies for the holidays. According to this year's Shop.org/Shopzilla "eHoliday Mood Survey," most online retailers (74 percent) are investing in search engine marketing and comparison-shopping engines (73.1 percent). Further, companies are using more unconventional online marketing strategies, with 41.6 percent of retailers incorporating blogs or RSS feeds and 79.5 percent using viral marketing. (Offline, retailers are investing traditional media advertising in newspapers, magazines and on radio and television.)

If it hasn't yet become obvious, businesses moving online, at least in some part, goes beyond the holiday months and is vital.

According to a comScore Networks study, total online retail spending reached $8.31 billion during the first 24 days of November alone, marking a 23 percent increase over the corresponding days in 2005. And online sales this Black Friday grew 42 percent to $434 million from last year, according to the same study.

"I think we'll see the continued trend of people shopping a little bit later," JupiterResearch retail analyst Patti Freeman Evans told E-Commerce Times. "Even though the ultimate peak might be around the 15th" — that's this week, folks —"we don't expect to see a dramatic drop-off during the following week." In fact, there will be more activity online and greater revenues across the board both during the peak season and after Jan. 1 when the frantic pace dies down. "We'll see a continued trend toward post-holiday purchasing which has been a trend offline as well," Evans said. "A tremendous amount of business will occur from the week between Christmas and New Year's and the first week or so of January."

The annual e-commerce survey of investment bankers Cowen & Co. reported 41 percent of consumers plan to increase e-commerce spending next year. Moreover, e-commerce sales are projected to grow roughly 20 percent per year through 2010, according to a number of researchers. Because the business is maturing, the growth must come from retaining existing online customers and getting them to buy more, not just by attracting new ones.

Today's online shopper is more sophisticated and ready for a richer experience. In the mid-1990s, people bought mostly books and CDs online; now apparel and furniture are among the fastest-growing purchase categories. Whatever an enterprise sells, though, selling online is crucial if the business wishes to remain relevant.

Resources

Yahoo! Poll Shows Three Out of Four Holiday Shoppers Will Buy Gifts Online and Most Are Likely to Purchase from Small Businesses
Yahoo! Small Business (via Business Wire), Nov. 16, 2006

Holiday Shopping, Part 1: Familiar Trends, Soaring Online Sales
by Jennifer LeClaire
E-Commerce Times, Nov. 21, 2006

69% of retailers shun e-commerce
E-consultancy.com, Nov. 29, 2006

Nearly $2 Billion Lost in E-Commerce Sales in 2006 Due to Security Concerns
Gartner, Inc., Nov. 30, 2006

The Next Frontier: E-Commerce
by Laurie Petersen
OMMA, December 2006

Online Retailers' Holiday Promotions Starting Earlier
Shop.Org, Oct. 4, 2006