US E-commerce sales cross $1 Trillion, as digital consumption among consumer recovers
By Gopi Vikranth
Offline sales have started to recover to pre-pandemic levels; This caused an initial fall back on ecommerce sales, but they are now back to growing at a steady pace in US.
As the pandemic dust settles, and consumers partly return to offline modes of purchasing, E-commerce continues to grow at a steady rate and as of November E-commerce sales crossed a trillion (as of Thanksgiving).
While not all categories are growing at the same rate, ecommerce sales continue to grow rapidly in some categories. For example, sales in F&B saw highest growth of 219.45% in Q2 2022 compared to pre-pandemic levels (Q2 2019). Similarly, clothing and accessories grew more than 60% in Q2 2022 as compared to Q2 2019, and by 7.5% in the first half of 2022 compared to the same time last year.
US ecommerce sales reached half a trillion dollars in the first half of 2022 and crossed a trillion in November (as of Thanksgiving).
While the percentage figures shown above might show that ecommerce has slightly declined compared to 2020, the actual sales values show that ecommerce is still growing at a steady rate. US ecommerce sales have already reached $507B in the first half of 2022, an increase of approximately 87% during the same time period compared to pre-pandemic levels in 2019, and an increase of 37% and 7% from 2020 and 2021 respectively.
US consumers are continuing to shop online, with online grocery sales reaching $24.1B in Q3 2022.
The pandemic has not only dramatically increased online spend on grocery purchases for most Americans, but it has made ecommerce a preferred channel for grocery shopping. As consumers migrated rapidly to online channels, retailers have quickly adjusted their offerings and operations to meet evolving consumer demand. Grocery is one of the fastest-growing segments of ecommerce in the US. Q3 2022 US online grocery sales totaled $24.1B.
Digital influenced sales in the US are expected to grow by more than 40% in 2027.
Digital-influenced offline retail sales are purchases from consumers who research products online but then buy them physically, at the store.
US digital-influenced retail sales (including both offline and online retail sales) are expected to grow from $2.7T in 2022 to $3.8T in 2027. And digital-influenced retail sales’ share of total US retail sales will rise to 70% in 2027, given the lower prices, greater product selection, faster delivery, and increased transaction convenience online shopping offers to consumers.
Even while Shopify seems to be facing multiple macroeconomic headwinds, its rising GMV still holds high, indicating growing ecommerce sales.
Shopify saw its gross merchandise volume (GMV) outpacing the growth of the broader US online and offline retail markets as consumers shopped across more platforms. Q2 2022 GMV was $46.9B, a three-year compound annual growth rate of 50% and an increase of $4.7B, or 11% over the second quarter of 2021. They had a record Thanksgiving holiday sales at $3.36B (17% YoY).
A few major trends to watch out for in 2022 and beyond
Retailers/ brands like Nike continue to invest in direct to customer ecommerce.
The last two years has seen brands coming up with new ways to reach consumers as they shop, and one such medium to engage consumers is the D2C ecommerce channel. For example, Nike’s online sales have grown 23% to reach digital’s highest net revenue quarter ever in Q1 2023. And its online revenue tripled since fiscal 2019 majorly due to a focus on direct-to-consumer sales.
The company’s personalization tool also contributed to the increase in sales. The membership tools create 1:1 connections at scale by delivering personalized consumer journeys and experiences, which in turn drive first purchases and increased loyalty. Its app had its highest single-quarter traffic during the first fiscal quarter of 2023.
The future of internet — Metaverse is expected to reach multi-trillion market size by 2030. And investments in the first five months of 2022 have already reached more than a hundred billion.
Metaverse is supposed to be the next big frontier of digital world and opens a plethora of potential opportunity for different industries and consumers alike.
As the popularity of blockchain and digital assets continues to grow, more brands are tapping onto new opportunities to unveil a new phase of digital consumerism by engaging customers and drive loyalty.
Starbucks plans to launch an NFT powered loyalty program ‘Starbucks Odyssey’ by end of year, powered by Web3 technology to offer its loyalty members and employees in the US an opportunity to earn digital collectible assets. Starbucks Odyssey will be an extension of the Starbucks Rewards program, while introducing new methods of customer engagement and expansion of its digital third place community.
And with luxury brands like Gucci, Nike, Burberry and others already having a presence on metaverse platforms like Roblox and Fortnite, we only expect to see more such examples as metaverse matures and consumers become more familiar with it.
With personalization driving double digit revenue growth — it is no longer a choice but a necessity.
The shift to digital during COVID-19 has raised consumer expectations in terms of personalization. From web to mobile and in-person interactions, consumers now view personalization as the default standard for engagement. 49% of consumers are likely to become a repeat buyer after a personalized shopping experience with a retailer.
To meet the ever-evolving consumer expectations, 42% of brands plan to offer personalized product recommendations in 2022. While AI driven personalization efforts have yielded positive results in the past, 70% of companies using AI-driven personalization achieving an ROI of 200% or more; 75% of companies are expected to shift from piloting to operationalizing AI.
BNPL usage will continue to increase as consumers turn towards low to no interest options.
Rising inflation is persuading consumers to increasingly turn to buy now, pay later payment options due to a variety of reasons like lower APR (annual percentage rate) and its ease and convenience of being integrated into online shopping channels. BNPL is expected to reach $3.3T by 2030.
The future of retail is Phygital.
As we have entered in a world of “phygital”- cohesion of physical and digital at the same time — is now an accepted and expected experience consumers want.
~54% of consumers are likely to look at a product online and buy in-store and vice versa, look at a product in-store and buy online. And 57% consumers would switch retailers if they did not offer fast and flexible delivery options such as click-and-collect and curbside pickup. Consumer demand for omnichannel purchase is growing strong, and to meet this, 44% of brands are planning to prioritize BOPIS in 2022. Social and live commerce is also gaining traction, with 49% and 81% brands planning to increase their investment in social commerce and live commerce in 2022.
About the Author:
Gopi Vikranth is a principal at ZS and leads Personalization and Customer Experience Analytics.
Gopi, along with Arun Shastri, hosts a podcast called “Reinventing Customer Experience”. Gopi and Arun chat with digital, analytics, technology and customer experience leaders from various industries and organizations to understand how they are engaging their customers. The podcast is available on Apple and Spotify.
