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Jupiter Forecasts Solid Growth in Online Sales

Still, growth is slowing, the numbers show.

Forget the first sighting of decorations at

Macy's

; nowadays, the holiday season kicks in when online research firms start making their annual sales predictions.

One of the biggies weighed in today:

Jupiter Communications

expects online sales to reach $11.6 billion in November and December (that breaks down into $9 billion from retail, $2.6 billion from travel). That would represent a 66% increase from sales of $7 billion last year, compared to a more than 100% gain between 1998 and 1999. Just as individual companies' results are showing, Jupiter's numbers show the rate of growth in online sales is slowing.

The mood is definitely more grim in the wake of the spring selloff in e-tailing stocks.

Amazon

(AMZN) - Get Report

has lost 41% of its value this year;

eToys

TST Recommends

(ETYS)

has seen its market cap cut by 77%. Almost all pure-play e-tailers trade in the single digits. And many companies have simply shut down, including

Toysmart.com

and

Boo.com

. "This market constriction, more than any other factor, will define the 2000 online holiday season," Jupiter says.

Companies struggling to convince investors that they have a viable business model aren't likely to spend big for TV ad campaigns. That new parsimony may reduce costs but will also cut down on traffic. Scaling down ambitions, however, is a good thing, says Jupiter. Their latest bit of jargon: "natural markets," or another way of describing the group of people who will buy from an online retailer without having to be begged, bribed or harangued by Super Bowl ads. In other words: Expect online retailers to focus on low-hanging fruit this holiday season. (Focusing efforts on people most likely to actually make a purchase? What a concept!)

One side note on Jupiter's forecast: For the past two years, Jupiter has underestimated sales. In 1998 it predicted sales of $2.3 billion; sales were actually $3.1 billion (35% higher than the estimate). Last year, Jupiter said sales would rise to $6 billion; they came in at $7 billion (17% higher than the estimate).

Earlier this month,

Gartner Group

estimated worldwide online sales of $19.5 billion for all of the fourth quarter, an 85% increase from last year's $10.5 billion. Last year, Gartner overestimated demand, predicting sales of $12.2 billion.