The composition of e-commerce sales is changing
E-commerce’s share of retail sales shot higher when the pandemic hit, and is still elevated.
Americans are shopping online like never before. But with the fight for online sales getting ever more intense, retailers’ easy dot-com pickings are long gone.
The Commerce Department on Thursday reported that e-commerce sales rose a seasonally adjusted 3% in the first quarter from the fourth quarter, putting them 8% above their year-earlier level. In contrast, retail sales excluding e-commerce sales were up just 2.9%—not by enough to keep up with inflation. With the latest gain, e-commerce sales accounted for 15.1% of retail sales which, other than the second quarter of 2020 when pandemic lockdowns stuck people in their homes, was the biggest share ever.
Still, the gains in online sales have moderated since the Covid-19 crisis launched them higher: Over the 10 years before the pandemic, they were growing nearly 15% annually. Moreover, the composition of e-commerce sales is changing, with retailers ranging from big box stores to the local bookshop offering in-store pickup for online orders. So traditional online sellers that rely solely, or almost solely, on deliveries haven’t been benefiting as much from e-commerce sales gains as in the past. That includes Amazon.com, which in the first quarter reported that its online store sales were roughly flat in the first quarter from a year earlier.
By the same token, delivery companies aren’t benefiting from e-commerce gains like they used to. Both United Parcel Service and FedEx have experienced weaker shipping volumes, with FedEx earlier this year announcing that it would cut more than 10% of its management staff.
Meanwhile, bricks-and-mortar stalwart Walmart is gaining e-commerce share, helped along by the suite of online shopping options it offers. Thursday it reported that its U.S. e-commerce sales (which includes its fast-growing advertising business) were up 27% in the quarter ended April 30 from a year earlier, with growth in online sales picked up in store or delivered from individual stores up “double digits.” Target, on the other hand, isn’t doing as well despite its in-store options: On Wednesday, it said its comparable-store e-commerce sales fell in its quarter ended April 29 from a year earlier.
The picture that emerges is one where sales tend to grow each year, but at nothing like a viral pace, with different players duking it out for share and winning or losing depending upon how they execute. If that sounds a lot like the business of retail before the advent of online shopping, that is because it is.
