Apr 11, 2008 6:01 AM

Despite concerns about the economy, people continue to shop using the Internet to buy clothing, computers and cars, a recent survey found.

The Shop.org survey, “The State of Retailing Online 2008,” conducted by Forrester Research, found that U.S. sales rose 17% to $175 billion in 2007, making up 6% of retail sales. And while retailers are expecting challenging growth this year, online sales are expected to increase to $204 billion in 2008, up an estimated 7% over last year, the report said.

“From higher shipping costs to changes in consumer shopping habits, online retailers are not immune to the current economic climate,” said Scott Silverman, executive director of Shop.org, in a statement. “But the fact that online sales will increase substantially this year demonstrates the resilience of the channel and is a testament to the value and convenience most customers find when shopping online.”

Online retailers budget 53% of their marketing to customer acquisition and 21% to customer retention. But other methods, such as search engine also perform well for retaining existing and acquiring new shoppers, according to the report.

Overall, search engine marketing is the most effective way to reach new customers, which accounts for 35% of sales, according to the survey. Some 90% of online retailers polled said they use pay-for-performance search placements, and 79% said that tactic would play a larger role this year.

E-mail marketing is also popular. On average, retailers surveyed sent 77 e-mails per year to customers, spending about $300,000 on e-mail marketing and $1.9 million on search marketing, the survey found.

Firms are also using offline tactics, including direct mail, catalogs over TV and newspaper advertising to reach customers.

What’s driving people online? Free shipping offers, for one. While 85% of retailers offer free shipping with conditions, just 33% said they would focus more on this promotional tactic. Some 82% of companies favor percent off and 69% offer dollars off deals, followed by gift with purchase at 68% and online-only sales at 67%.

Those retailers polled said they plan to test social computing initiatives, such as social network advertisements (55%) and widgets (65%) this year to lure customers. Meanwhile, stored value cards and gift cards are holding steady with 45% of retailers using the offer. And some 52% of retailers said they plan to focus more on recognition programs this year.

The report is available now at http://www.shop.org.soro08 or on http://www.forester.com starting May 7.

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