Online Shopping Continues to Click

"Online retailing has experienced its own version of survival of the fittest, in which those online retailers that couldn't control costs while attracting online consumers shuttered their doors," the study said, citing the fact that two-thirds of Web-based retailers reached profitability in 2003.

Retailers also are realizing important synergies between their online business and in-store business. In 2003, 24% of retailers said in-store sales were influenced by customers' ability to view items online. That's up from 15% in 2002. In addition, 87% of retailers accepted returns or exchanges in stores of items purchased online, the study also said.

"Retailers online have found the right balance between selling a product, acquiring and retaining customers, and earning a profit," said Chairman Elaine Rubin of Shop.org.

Specialty retailers with the bulk of business coming from in-store sales are also benefiting from the overall increase in online sales. Upscale gadget company Sharper Image(SHRP Quote) had a 58% spike in Internet sales in the first-quarter 2004, to $26.2 million. Overall sales rose 34% to $156.4 million, while net earnings increased to $2.1 million, from $700,000 in the year-earlier period.

In all of 2003, Internet sales increased 37% to $95.1 million at Sharper Image, while total sales increased 29% to $379.3 million.

Meanwhile, Internet sales at apparel retailer Urban Outfitters(URBN Quote) have also boosted quarterly sales. In the latest first quarter, the company had a 95% in direct-to-consumer sales, which include Internet and catalogue sales, to $18.6 million. Net sales in the quarter increased 59% to $170.3 million.

In 2003, the company said total sales rose to $422.8 million, of which direct-to-consumer sales were $31.8 million, or 7% of total sales. That compared with total sales of $349 million in 2002.