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Online shopping growing up

With analysts projecting billion-dollar holiday sales, it looks as though online shopping is maturing--but it still has a ways to go.

Last year, analysts were questioning the viability of online shopping. This year, they are talking about reaching the magic $1 billion mark and looking at ways to improve the experience.

In roughly a year, online shopping has moved from the tenuous to the assured. Although it is still not a mature market, retailers are no longer sitting on the sidelines and wondering whether they should invest in the online market.

Now they are trying to figure out how to make the shopping experience online more like the nonvirtual world. And some are scrambling to get sites up in time to cash in the Christmas rush.

Today Jupiter Communications released a report predicting that online sales will top the $1 billion mark this season, accounting for 44 percent of all online sales this year.

Forrester Research released a report recently with similar findings, predicting that the industry would pull in $750 million and possibly up to $1 billion this quarter. And so far, online stores are reporting that they are right on track, said online analyst Kate Delhagen.

"Last year was infancy," she said. "This year I'd say we're toddling. Merchants have said we're running at our pace or above. That's pretty big news for the Internet. In the scheme of things it's just a tiny blip on the radar. But it's still a billion dollars."

Where last year people were worried about security threats, this year Delhagen said about one out of four of the 40 million people online are shopping.

But even with the rosy forecasts, online shopping still has a ways to go.

Most online transactions are goal-oriented: people who buy things know what they want to buy and they go to the proper place to buy it, said Jupiter's Vanderbilt.

But many sales in the offline world are made after a person browses at a store or gets advice from a helpful salesperson. That's why malls are so successful.

But to be truly successful, online stores will have to master the art of luring the customer. "The reason consumers have not yet bought a lot of goods online is that they're missing an incentive," Vanderbilt said. "While a lot of online merchants have done well to serve a consumer that has one decided item in mind, what they haven't been able to do is capture the traditional shopping behavior: browsing, shopping for goods, impulse buys."

Until that happens, the mass market won't come.

But Vanderbilt and others say it's only a matter of time.

"I think it's on the cusp of breaking into attempting to capture the mass market," she said.

Some companies have been trying to lend their hand to businesses in showing them the online shopping ropes. IBM, for instance, has been running an online forum on how to buy and sell holiday gifts over the Internet, advising both shoppers and merchants.