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Strong online growth seen this holiday shopping season

SAN FRANCISCO -- E-commerce is expected to grow strongly this holiday season, spurred by early online deals, the rise of mobile devices and more free shipping offers.

Holiday sales will likely increase 16.4 percent from a year earlier, outpacing total retail sales, which are forecast to grow about 3.9 percent, according to analysts at Jefferies & Co.

Doug Anmuth, an analyst at J.P. Morgan, expects online purchases to top 10 percent of total U.S. retail spending for the first time in the fourth quarter.

"It's still early, but our sense is that we will have a really positive holiday season," said Joel Anderson, head of, the online business of Wal-Mart Stores Inc, the world's largest retailer.

Wal-Mart expects 600 million online visitors online during its holiday quarter, which runs from November through January. That is up 13 percent from the same period last year, according to Anderson.

"We're still on forecasts and off to a good start," he added.

The holiday season is crucial for retailers because that is when they make the most revenue and a big chunk of their earnings.

Thanksgiving and the days following, which include what is traditionally the busiest online shopping day, Cyber Monday, are more important this year as retailers lure consumers with earlier promotions.

"This trend could drive a disproportionately higher percent of overall holiday spending to the first half of the period," Brian Pitz and Brian Fitzgerald, Internet analysts at Jefferies, said. "Heavy promotions would be needed later on to achieve the growth rates of last year."

Starting on Thanksgiving, Wal-Mart will send early online deals to customers who connect with the retailer via email, Facebook or by downloading its mobile shopping application to their smartphones.

The spread of mobile devices, such as smartphones and tablet computers, will also drive online sales growth this holiday, analysts said. 

J.P. Morgan's Anmuth estimates that mobile shopping will account for 12 percent of holiday e-commerce spending in the United States in the fourth quarter, up from 3 percent in the same period of 2010 and 9 percent last holiday season.

Some mobile shopping represents a transition from personal computers to smartphones and tablets, rather than extra spending. However, Anmuth said the rise of mobile devices is fueling a faster switch to online commerce from physical retail.

Free shipping will also be a major driver of online sales growth this holiday, according to Anmuth and others.

More than half of consumers will abandon online shopping carts if they have to pay for shipping, recent data from comScore Inc showed.

Retailers have responded by offering more free shipping for online purchases. Between 50 and 60 percent of online transactions this holiday will come with free shipping, according to Shawn Milne, an analyst at Janney Capital Markets.