Traditional retailers haven't exactly embraced online sales channels. Sure, they all have websites, and they sell varying amounts of merchandise through them, but they've been slow to tap into the potential. When I was watching the space as an analyst at a major consulting firm (admittedly, back in 2007), many retailers equated a website to a new store opening. Finally, however, this industry is starting to see the potential of this venue, particularly when it comes to tracking consumer behavior.

When the CEO of Macy's (NYSE: M), Terry Lundgren, says that online sales are only good for 6% of last year's total sales, it's a hint. The translation: "We focus on where the revenue is" is much different from "We focus on where the revenue could be." Aeropostale (NYSE: ARO), on the other hand, sees the upside of playing in the online space, which is where it saw revenues spike 85% last year. Aeropostale has seen increases in traditional venues too, but nothing like what it's realized on the web.

So, maybe there's something to this internet, after all.

Shares of online retailer Amazon.com, Inc. (NASDAQ: AMZN) are trading a bit higher this afternoon after being upgraded today by Susquehanna Financial.

Susquehanna Financial analyst Marianne Wolk raised her rating on the stock this morning to a "positive" from a "neutral" rating and put a $100 price target on the company. The stock is currently trading up 1.7% on the day to $76.91, up $1.28.

Amazon (NASDAQ: AMZN), whose competitors include eBay (NASDAQ: EBAY) and Barnes & Noble (NYSE: BKS), is up today after the online retailer released its Q4 numbers yesterday after the bell. And when I say "up", I mean amazingly up. The stock was in the green by well over 17% at the time of this writing. According to Stocks in the News, both revenue and net income beat Wall Street's view. Sales rose 18%, and net income came in at $0.52 per share versus expectations of $0.39 per share. I'd say that was a little better than consensus, wouldn't you?

The good news this holiday season is that online spending for gifts is up. Depending on the source, the rise is somewhere between 4% and 9%.

The missing piece of the story not reflected in those numbers is that people are spending much less per transaction. While activity may be up, retailer profitability may be down, way down.

According to The New York Times, the Chase Paymentech's Cyber Holiday Pulse Index tells a depressing story. "Chase's index, which surveys 25 of the largest 150 retailers on its Internet payment processing network, showed that the average shopper spent $7.19 less per transaction on Cyber Monday this year over last."

Online spending is not likely to be the only place where this is happening. Consumers, under financial pressure due to lack of credit and concerns about their jobs, are probably spending less everywhere they go. That would make sense. Getting overextended financially is much more risky this year than at any time in the recent past, perhaps going back decades. Why shell out a lot of money? Who knows how bad 2009 will be.

Retailers work on narrow margins, sometimes as low as 2%. Discounts can wipe that out. Comparisons with last year's shopping activity can be very deceiving.

Douglas A. McIntyre is an editor at 247wallst.com.

Online data measurement company comScore released on Tuesday October 2008 e-commerce figures, saying it was the slowest growth it has measured since 2001, when it has started tracking the data. After years of solid growth for online retailers (from double digits to single digits recently), October online retail sales grew at a measly 1%. When online retail growth comes to a screeching halt, with all those heavy discounts and free shipping, something's amiss.

Let's take a look at the last five months in online retail sales growth: 11% to 8% to 6% to 5% to 1%. Yikes. ComScore chairman Gian Fulgoni indicated that rising prices and unemployment rates combined with the psychological impact of the global economic situation has consumers frozen on many of their spending. It will be interesting to see what November's growth figure is like, even with the official start of the holiday shopping season.

ComScore's most significant figure was that spending for households that make below $50,000 per year has dropped off significantly, declining 3% in October compared to the month a year-ago. For households making $50,000 to $100,000, spending increased 1% in October, while households making over $100,000 increased spending to the tune of 14% in October. So, according to comScore, growth really did come to an almost complete stop for households earning less than $100,000. Will spending recover for this demographic for the next month and a half? Doubtful.

ChannelAdvisor is an online retailing facilitator, meaning that it fills in the gaps and provides powerful tools that lighten the burden for sellers of larger inventories to place and manage their items for sale. ChannelAdvisor has just bolstered its total received in venture capital to $60 million. CEO Scot Wingo indicates that the intent of this increase in venture capital is to underwrite continued growth. Wingo states that, "Our revenues are growing more than 65% year-over-year so our valuation has reflected that." You may read his insightful commentary regarding the course of retail internet merchandising in this excellent interview on Business 2.0 Beta.

So what has this got to do with eBay (NASDAQ: EBAY)? Quite a lot actually, and the connections are something less than subtle. eBay is a major stakeholder in ChannelAdvisor. You could safely say that the two entities are closely aligned. What poses an odd scenario to me is, wouldn't it appear to the casual observer that eBay is therefore underwriting the success of their closest competitor, especially in light of the fact that ChannelAdvisor is ratcheting the performance of Amazon (NASDAQ: AMZN) above that of rival eBay? I don't get it. Do you?

What occurs to me is that eBay has a vision for itself that it's just not telling us about yet. Does it see itself basing future operations on a different retailing tier than Amazon? Does it plan to make an overture for Amazon at some point down the road? Or does it see itself and Amazon as co-existing within the retail realm with the expectation that there is enough revenue to go around? The fact of the matter is that this is a very strange internet love triangle, and one that could play out in several different ways. I'm open for theories on what this is, why it is, and where it will go. Please share your opinions, won't you?

Amazon.com Inc. (NASDAQ:AMZN) got some help from Santa Claus this year.

Fourth quarter net income was $98 million in the fourth quarter, or 23 cents per share, compared with $199 million, or 47 cents, because of an increase in income tax expenses. Revenue rose 34 percent to $3.99 billion, the Seattle-based company said in a statement.

Analysts had expected earnings of 21 cents on sales of $3.77 billion, according to Thomson Financial. Sales rose in after-hours trading. It also gave bullish guidance.

The company said first quarter sales will be between $2.85 billion to $3 billion, below the $3.77 billion analysts had anticipated. Revenue for the year will be $13 billion to $13.7 billion, above the $10.5 billion forecast by Wall Street.

Amazon's results were surprising considering the poor performance at Barnes & Noble Inc. (NYSE:BKS) and Borders Group Inc. (NYSE:BGP). The company credited Amazon Prime, a program which allows customers to get free two-day shipping for a yearly fee of $75, for helping to drive sales.

Bloomberg News reported that U.S. holiday shoppers spent more money online at Seattle-based Amazon than other retailers, citing data from comScore Networks.

Still, this stock makes investors uneasy. The company has spent lots of money on new initiatives such as Amazon Unbox, an online video download service. Plus, the company has some pretty tough competitors for price-conscious consumers.

That had an impact in the quarter as the company offered deals to help move more digital equipment and popular toys. Gross margins -- always a worry for analysts -- fell to 21.3 percent from 24 percent a year earlier.

Also check out some other earnings reports that we're following, and let us know what you're expecting.