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Online sales to rise 20 percent in 2006

Online sales are expected to rise 20 percent this year to $211 billion, with pet supplies and cosmetics experiencing leading growth, according to a report to be published on Tuesday.

Internet has more than doubled in the three years through 2006 as more retailers offer consistent prices on their Web sites and in their brick-and-mortar outlets, and use gift cards and loyalty programs to increase sales, according to Forrester Research and's annual State of Retailing Online study.

Excluding travel, 2006 sales are expected to increase 22 percent to $138 billion.

"Online is a key growth driver for retail overall," said Executive Director Scott Silverman. "It's going to be a bellwether for overall retail."

Computer hardware and software, cars, and apparel, accessories and footwear are expected to be the largest non-travel categories driving the increase, with anticipated sales of $16.8 billion, $15.9 billion and $13.8 billion, respectively.

But sales of pet supplies, cosmetics and fragrances will increase faster than other categories at growth rates of over 30 percent, the report found.

Last year, online sales rose 25 percent to $176.4 billion, with 28 percent growth in online purchases excluding travel. Total Internet sales in 2004 and 2003 reached $141.4 billion and $114.1 billion, respectively, Silverman said.

"I think we're still looking for the next several years (for) growth over 20 percent per year," he said, adding that growth closer to 30 percent was probably not sustainable.

The National Retail Federation has estimated that retail industry sales, which exclude automobiles, gas stations and restaurants, will increase 4.7 percent in 2006.

Gift cards offered by nearly half of all online retailers and loyalty programs offered by a third have helped increase sales, the study found. Additionally, greater integration between retailers' traditional stores and their Web sites have alleviated pricing confusion and increased loyalty, Silverman said.