Some National analysts say Internet retail is leveling off, but Dan Gerler isn't buying it. Gerler, president and CEO of Seattle-based Onlineshoes.com, which became the nation's first online shoe retailer when it was established in 1996, says his company will soon top $100 million in revenue. Suffice it to say, Gerler isn't worried about the future of online retail. "We still have a lot of ground to cover," he says.

That's not to say Internet retail doesn't have its limits. Sure, it swaggered onto the scene in the mid-1990s and prompted some experts to declare it had virtually no boundaries and that it signaled the end of traditional retailing.

Not anymore. According to a 2006 forecast from Jupiter Research, a New York-based market research firm, growth of online sales slowed to 20 percent last year from 34 percent in 2002, and it predicts growth will continue to slide to about 9 percent by the end of the decade.

That's because brick-and-mortar retail giants such as Wal-Mart Stores Inc. and Issaquah- based Costco Wholesale Corp. are making strong progress in the online arena, intensifying competition for an online buyer base that is reaching saturation. Only the emergence of new technologies that enrich the online shopping experience, such as life-size holograms that "display a coffee table in a shopper's living room via the Web," according to Jupiter Research, will prod consumers into buying things like furniture online.

GROWING UP WIRED

But that doesn't mean there isn't room for retailers to make a lot more money online. Changing demographics and a rise in the number of young people accustomed to shopping online will boost online sales. And new niches will continue to emerge in which customers find comfort shopping online. Locally, companies have established product niches in areas ranging from shoes and jewelry to electronics and video games where, Jupiter's analysts say, buyers will continue to flock. Gerler, the Onlineshoes.com CEO, is counting on it. His company offers dress, casual and athletic footwear for men, women and children in more than 33,000 styles. "It's important for consumers when they come to our website to understand what it's about," he says. "For us, we're really trying to stand for an active lifestyle approach."

Profitable since 2000, the private company began with about a dozen employees. It now has 180. This year the company's annual online unique visitor count is expected to surpass 28 million.

Analysts agree that in many niches sales growth could continue in the double digits. But even if it does fall to 9 percent, online retailers would still be growing much faster than the retail economy as a whole. And that would mean continuing to take market share from brick-and-mortar outlets which, even as they see online sales grow, are experiencing fewer customers at their stores as fuel costs rise and the housing market tumbles.

Retail strategist J'Amy Owens, principal at J'Amy Owens Group in Seattle, adds aging baby boomers and Generation Y as reasons to believe online retail has a robust future. Retiring baby boomers are going to shop online more because it's convenient and "because they know how, the mystery is over," Owens says. Meanwhile, Generation Y, the population born between 1977 and 1994, will outnumber the boomers by 2010 and "they grew up with this thing called the Net in their life."

Pete Shimer, office managing partner of the Seattle office of Deloitte & Touche USA LLP, says local online retailers are leaders nationally in finding the right product niches and in designing user-friendly and educational websites. Amazon.com Inc., he says, "sets the bar very high for what it means to be customer service-oriented and to have a user-friendly website," which includes customer- written reviews of products. And the online retail giant has diversified its offerings, adopting product lines that are projected to do well in years to come, including DVDs, computer software and video games.