Posted October 22, 2007 4:12 pm by with 2 comments

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JupiterResearch predicts that US online retail during the holiday season will grow to over $39 billion this year. This represents an increase of 20% over last year. About 126 million users are expected to buy online, which is a 6% increase over last year.

Internet retailers plan to drive their holiday sales primarily through search marketing, even though they are noticing that costs are rising and ROI is dropping. They also plan to increase free shipping offers and promote percent-off discounts.

None of this is a surprise. Internet retail has grown at 20% for the past two years after the huge explosion of growth early in the decade. As retailers find themselves fighting for their share of the stagnant (not increasing) pool of internet shoppers, they are becoming more desperate. It is no surprise that price wars continue to dominate the landscape.

My guess is that there are going to be a lot of blood baths in the coming holiday season as retailers accept a negative ROI under the misguided notion that their customers will stay loyal for future purchases. My advice is this—there is no better time than now to focus on building a business model that does not force you to have to compete on price.