E-Commerce Is Still a Minority of US Retail Sales

The US Census Bureau recently published its quarterly report on US e-commerce sales. It offers an official and particularly useful look at how the market for online retail is developing in the US.

For some younger shoppers, it’s probably easy to overestimate the size of the e-commerce market. But despite the visible disruption online sales are causing, they are still a fraction of total retail sales. The real change is only just beginning.

During the first quarter of 2017, retail e-commerce sales in the US reached more than $98 billion, up almost 15 percent over the same quarter of 2016, compared with total retail growth of less than 4 percent. Online sales accounted for more than 8 percent of total retail sales. About 92 percent of retail sales in the US still take place through traditional channels such as big-box retailers Walmart and Costco, but there is a sense of foreboding here, as if certain storefronts are possible anachronisms. This percentage offers no comfort for traditional retailers given the long-term trend: online sales in the US have been consistently expanding year-on-year.

The growing slice of online sales has changed the retail landscape. Stores are closing, major retailers are slimming down and some are simply disappearing. Classic US names such as Macy’s and Sears have struggled to adjust to change. Many others are simply gone.

According to PWC, more than 10 percent of retail space in the US is at risk of either being repurposed or revalued downward. The question now is if the digital and physical worlds will combine, creating a new type of retail ecosystem that offers customers a new level of convenience.

We’ve noted in the past how this shift is occurring. For example, as mega retailer Walmart builds up its online presence, Amazon is opening storefronts and could become a major force in the market for groceries by proposing a new type of cross-pollinated shopping experience (see An Amazon on Every Corner).

The US e-commerce market is set to surpass 10 percent of the total retail market in the coming quarters and it’s hard to see anything derailing this pace of change. Traditional retailers will need to make hard decisions in the coming years, countering online rivals by offering innovative on-site customer experiences and new efficiencies. This disruption is much closer to the beginning than the end.