As total web sales are projected to hit $259 billion this year, some shifts are taking place among the top selling online product categories. For example, as the Internet continues to grow, computers have moved over to make room for clothing at the top of the sales list, according to the first part of The State of Retailing Online 2007, the tenth annual Shop.org study conducted by Forrester Research, Inc. among 170 retailers.

In the past year, Americans spent more online for clothing than they did on computers for the first time in history. The report found that the combined apparel, accessories and footwear categories reached a total of $18.3 billion in 2006, and is expected to hit $22.1 billion this year. Ten percent of all clothing sales are expected to occur online. This compares with the Internet's total of six percent for all retail sales.

"Apparel retailers have overcome a number of hurdles to encourage shoppers to buy clothing and accessories online," says Scott Silverman, executive director of Shop.org. "Retailers are doing such a great job online that in some cases it's easier to find and buy clothing on the web than it is in a store," he contends.

The apparel and accessories category has experienced strong sales, primarily because of an influx of new companies and liberal shipping policies, such as free shipping on returns and exchanges, among both newcomers and previous apparel web sellers. In addition, online apparel and accessories retailers are integrating new technologies into their sites.

Among them are rich imaging, which allows customers to zoom and rotate merchandise, or see the items in different colors and from different angles before buying. Zappos.com, for example, shows each of its thousands of shoes from the side, top, bottom, singly and by the pair. In addition, it offers free shipping on the initial buy and any return, and allows shoppers to print out a return label. Such capabilities ease the mind of a customer who is hesitant to purchase apparel online.

Computer hardware and software, long the frontrunner for non travel related online sales, moved into second place in 2006 to reach a total of $17.2 billion. That category was followed by sales of autos and auto parts, which reached $16.7 billion, and home furnishings, which hit the $10 billion mark.

Better Times Ahead
The rise in web sales is not expected to slow this year. 2007 online sales, including travel products, are expected to rise 18 percent to $259.1 billion. Excluding travel related products, online sales are projected to total $174.5 billion.

"As consumers flood the web to purchase merchandise and research products, online retail is moving full speed ahead," says Sucharita Mulpuru, Forrester Research senior analyst and lead author of the report. "This strong growth is an indicator that online retail is years away from reaching a point of saturation." Another sign that ecommerce has come of age is that profitability throughout the sector has stabilized. Eighty-three percent of respondents to the survey reported profitability and 78 percent said they were more profitable in 2006 than in 2005. Profit as a percentage of revenue did not change, the report notes, because revenue and expenses grew as well.

A Credit to Credit
The Electronics Payment Coalition heralded Forrester's forecast of an 18 percent increase in web sales this year. It suggested the data demonstrates the contribution of debit and credit card purchases to online retailer growth.

"Every day, consumers continue to validate the convenience and efficiency of shopping online with their debit or credit card," says Peter Madigan, executive director of the coalition. "With the advent of payment cards and ebusiness, consumer purchasing power and retailer growth has limitless potential. Many of the barriers that used to prevent or dissuade consumers from making certain purchases are gone, boosting the retailer's bottom line and allowing people to purchase goods and services around the globe."

The Electronic Payments Coalition, based in Washington DC, is a broad based group of more than 50 community banks, trade associations, financial services institutions, and payment card networks.