The Covid-19 pandemic has driven scores of shoppers online this year, and now one consulting firm is anticipating that digital sales will climb as much as 25 percent year over year in the U.S. to $748 billion. That would mark the strongest growth for e-commerce since 2006 and far surpass FTI Consulting’s pre-pandemic forecasts of $677 billion.
FTI’s forecast projects that e-commerce sales will reach $1 trillion by 2023, a year earlier than last year’s outlook. Total online market share is projected to reach 27 percent by 2025 and 33 percent by 2030, compared to 19.2 percent in 2020.
In the long run, FTI projects total online market share to reach 33 percent by 2030 and 39 percent by 2040, with the ultimate ceiling for online market share now approximately 500 basis points (five percentage points) higher than the firm’s pre-Covid model estimate.
Additionally, the FTI forecast projects online’s market share of total retail sales to increase by 350 basis points (3.5 percentage points) in 2020, more than double its annual market share gains in recent years. This market share pickup represents an incremental gain of nearly 220 basis points (2.2 percentage points) in 2020 compared to FTI’s pre-Covid model.
Online market share gains had consistently ranged from 125 to 140 basis points annually for the past few years, so 2020 represents an outlier year, representing nearly three years of market share gains in a single year.
Overall, 80 percent of shoppers said they more likely to shop online this year relative to last year, according to FTI’s Holiday Gift Giving Survey. Moreover, consumers plan to spend a larger percentage of their overall holiday shopping budget online compared to prior years.
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“Covid-19 has impacted our everyday lives in profound ways, and it has accelerated trends already in place,” said Christa Hart, a senior managing director in the retail and consumer products practice at FTI Consulting. “This year, we have seen a surge in online commerce and a quickened pace of retail store closings throughout the country due mostly to forced adoption or further adoption of online shopping by housebound consumers. Even when Covid-19 subsides and more normal lifestyles can resume, this historic event likely has permanently changed the ways in which we choose to shop for various goods.”
EMarketer has offered more conservative, but still notable 2020 U.S. e-commerce growth projections, with anticipated jumps of 18 percent to $709.8 billion, while the firm anticipates that brick-and-mortar retail sales will experience a historically significant decline of 14 percent to $4.2 trillion. Total retail sales will not rebound to 2019 levels until 2022 and estimates throughout the forecast period will be lower than previously predicted, eMarketer said. The company’s latest forecast on U.S. retail sales, which does include automotive and fuel, indicated that total retail sales will drop by 10.5 percent this year to $4.89 trillion. On a similar note, Forrester Research expects online retail to grow by 18.5 percent in North America throughout the year, but its total sales decline projections weren’t as negative, reaching 2.5 percent for the full year.
Either way, the increase in online spending will spark back-end fulfillment investments, particularly as warehouses continue to feel the heat of blossoming e-commerce sales, which are expected to surge throughout the holiday season. Robotics company Kindred, which reports that its installed fleet of its AI-powered Sort robots has picked 100 million retail units since launching in 2017, said fourth quarter 2020 AI data shows its e-commerce customers have increased the unit volume they process with Sort picking robots by 244 percent year-over-year. Throughout 2020, the pick-and-place robots have increased picked units by 50 percent quarter-over-quarter, demonstrating the substantial momentum e-commerce retailers have gained since the beginning of the Covid-19 pandemic.
Both Gap and American Eagle are among apparel retailers that have heavily increased their adoption of the robots this year.
J.D. Wichser, leader of the retail and consumer products practice at FTI Consulting, noted that the pandemic created a new “marginal consumer,” whose shopping habits have been transformed by access constraints and safety concerns. Wichser predicted that the industry will continue to see shoppers opting out of traditional brick-and-mortar retail and pivoting to online.
However, FTI predicts that annual sales growth similar to 2020 is highly unlikely going forward. Annual online retail sales growth will decelerate to low double-digit rates over the next several years, according to the forecast. Annual online sales growth will fall sharply next year to 11.5 percent given the challenging comparisons to 2020, and thereafter will revert towards a pre-pandemic sales growth trajectory.
The pandemic is expected to significantly alter the traditional holiday shopping season this year, starting with Amazon’s Prime Day, with more consumers anticipated to start their peak shopping earlier. In fact, a Listrak survey indicated that as many as 35 percent of shoppers said would start as early as October, with that number jumping to nearly 50 percent, according to Affirm.