Is E-commerce losing ground to offline retail?

US consumer is spending close to $1 trillion dollars annually through e-commerce on run rate basis, despite slight increase in market share. E-commerce sales have almost doubled in the past three years. According to the US Department of Commerce, total e-commerce sales during the past twelve months reached almost $975 billion. This number was $518 billion only 3 years ago. And it took 7 years to double the amount last time.

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If the pandemic didn’t happen, e-commerce would have been able to grow at a rate of 14% annually, which would have put the total run rate at around $780 billion. This means that e-commerce is 25% bigger than it would have been had the pandemic not occurred.

The e-commerce industry grew at a slower rate of 6.7% in the first quarter of 2022. This is the lowest growth rate since the financial crisis of 2008. It’s also compared to the same period in 2021, which was the peak of e-commerce’s growth. This makes the slowdown not looking to bad overall.

In the first quarter of 2022, e-commerce accouts for 14% of consumer spending. Excluding categories that don’t typically compete with e-commerce, such as restaurants and gas stations, e-commerce’s share reached 21% of retail.

Despite the slowdown in e-commerce’s growth, it still has a significant market share. In 2021, online shopping lost its market share due to offline retail’s faster-than-e-commerce growth after the pandemic. Online shopping’s boost from the pandemic started to subside.

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Online retail’s share of total spending remained flat during the first quarter of 2022. Despite the slowdown in e-commerce’s growth, net e-commerce spending is still above pre-pandemic levels.

Overall, for the past 3 years, e-commerce was not boosted by the pandemic as we anticipated. It’s also possible that the industry is losing its relevance as more people are shopping in physical stores and interacting with them through various digital experiences.

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