An increasing number of sites have had success by engaging customers in a personal way, something online retailers hadn't counted on.

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Online retailers never meant to offer highly customized service when virtual stores were a new concept. But a decade later, it’s that personalization that sets some sites apart from the thousands of others selling clothes, shoes and gifts.

An increasing number of retailers have distinguished themselves from the pack by giving users a little something extra beyond intuitive navigation and easy checkout.

One shopping service sends e-mails alerting customers to sales of their favorite brands. Another retailer offers an “online stylist” who can answer questions before a purchase. A Web gift site is toying with a Facebook application that lets “friends” see your wish list for gift ideas for birthdays and holidays.

“Retailers have always struggled with the fact that the Internet is not a personal channel for selling certain goods,” said Ellen Davis, senior director for the National Retail Federation. At the same time, an online presence is a must to keep a competitive edge.

Online shopping continues to be a growing segment of the retail industry: Revenues reached $260 billion in 2007, up from $220 billion in 2006. But that represents only 5 to 7 percent of total retail sales. Analysts call it a sure but slow evolution.

“It’s been around for more than 10 years, but it still has a long way to go,” said Sucharita Mulpuru, a retail analyst for Forrester Research.

While the definition of what constitutes a good online shopping experience is debatable, many experts say it’s all about customization.

“The customer has very high expectations, and the merchant has to figure out how to meet them,” said Lauren Freedman, president of the e-tailing group. “It’s not that they don’t want to have more customized features, it’s that in some cases, there has to be more advances in the technology for it to be effective.”

Adds Forrester’s Mulpuru: “The personalization engine is getting a lot of funding because a lot of data support it as an area that can drive online sales.”

Customized alerts

The concept for San Francisco-based ShopItToMe came to Charlie Graham when he became frustrated searching the Web for sales of his favorite brands. It was a cumbersome process to surf every store’s site.

In 2005, he came up with a personalized free shopping service that sends e-mails to those who sign up and specify favorite apparel brands. When those labels for men and women — Tommy Hilfiger, Prada, Juicy Couture among them — go on sale, the users are notified. Clicking on the photo sends them to the store’s sale site.

“Right now, it’s making sure the customer has a really good experience when they get that e-mail from us,” Graham said of the 100,000 subscribers. “As the technology advances, it will allow us to do more.”

Graham’s service takes some users to tobi.com, an online shopping portal cofounded by Catherine Chow, who also owns popular San Francisco boutique Azalea. Among the personal services the Web site provides is an online stylist.

“Our basic philosophy is to give customers a boutique shopping experience online,” she said.

Yet to show a profit

While experts agree that customization keeps a user interested, it’s not a sure thing, and many sites have yet to show a profit. Red Envelope, one of the best-known sites for finding girlie gifts, filed for Chapter 11 protection in April after 11 years in business.

“Very few pure e-commerce sites will be successful over the long term,” said Greg Sterling of Sterling Market Intelligence, a Bay Area consulting and research firm. “But it’s smart for brands and retailers to go the way of the Internet to engage their customers.”

Violet.com is a gift concierge of sorts in that the site helps users narrow down a choice by recipient (mom, husband), occasion (wedding, birthday) and category (home, travel).

Co-founder Bonnie Cohen launched the startup in 1999, but when venture-capital funding disappeared, so did the site. It relaunched last year with more focus and fewer employees.

“We recast the store to appeal more to the emotional component of shopping,” she said of Violet’s concept of steering people from a traditional search by object and price. Instead, a click on “occasion,” for instance, will lead to gift ideas for birthdays, weddings, and other present-giving events.

Cohen is thinking ahead. Her side project is a Facebook application called Finders Keepers that “scouts the Web for cool stuff” and lets you recommend a gift, hint to your social-network pals that you’d like it, or buy it yourself. Some of the gifts, obviously, come from Violet.com.