U.S. online holiday retail sales will reach $39 billion in 2007, an increase of 20 percent over last year's holiday season according to a new report from JupiterResearch, "US Online Retail Holiday Forecast, 2007."

JupiterResearch predicts that a record 126 million people, a 6 percent increase over last year, will make online purchases this holiday season.

Because of the record number of people expected to order online, retailers are boosting their efforts to attract customers with a number of tactics including search marketing.

"Over half of online retailers say they will increase efforts with search engines, despite rising costs and some reports of declining ROI. Shoppers can also expect to take advantage of more free shipping offers this year," said Patti Freeman Evans, JupiterResearch Senior Analyst and lead author of the report.

"This enticement will also translate to online retailers with brick-and-mortar stores who will likely to beef up their use of percent-off discounts."

Computer and consumer electronics sellers are expected to aggressively use percent-off discounts further driving an already popular category.

Only using such incentives may not be enough to attract consumer traffic, especially among those who do not regularly shop online during the rest of the year.

Consumers who are undecided if they will shop online are expected to stick to traditional sources to find gifts this year as they gravitate to store visits and retailer Web sites more than places like wish lists and social sites, which means that retailers will have to focus on a number of shopping tendencies to be successful.

"Online retailers have an opportunity to gain market this year because of the resilience of online shoppers, in spite of a relatively soft off-line holiday season," said David Schatsky, President of JupiterResearch. "Aggressive use of cross channel messaging and promotions will be key to capturing undecided customers."

Online Holiday Retail Sales Ecommerce