Despite concerns about consumer confidence, US online retail sales this holiday season will hit $18 billion, a 25 percent increase over last year, according to Forrester Research, Inc. (Nasdaq: FORR).

Even if economic worries dampen consumer spending, simple math accounts for a likely healthy increase in online sales: 2.5 million new households are expected to begin shopping online in 2005. In addition, a greater number of retailers will use the traditional lure of free shipping to entice consumers to spend more, albeit with minimum spending thresholds to ensure profitability. Last year, 25 percent of online holiday shoppers indicated that they purchased more online to avoid shipping charges.

“This is shaping up as a good — not great — holiday season,” says Carrie A. Johnson, vice president and research director at Forrester Research. “The mainstreaming of the Web means that if offline retail sales suffer, online sales do as well. The average online consumer is no longer insulated from broader economic concerns such as volatile energy prices.”

As they did last year, brick-and-mortar retailers nervous about soft consumer spending will use their Web sites to drive in-store traffic. One example of this is Circuit City’s 24/24 promotion, which guarantees in-store pickup of an online order within 24 minutes, with the promise of a $24 gift card if the order is not met.

What categories will see the strongest growth online this holiday? Traditional items such as consumer electronics and toys, but also apparel, which is surging as more women shop online and retailers offer increasingly sophisticated tools to illustrate style and fit.

A note about this forecast: Forrester defines the holiday shopping season as the period between Thanksgiving and Christmas. “US Online Holiday Sales Bring Good Tidings To Retailers” is available to WholeView 2™ clients and can be found at