Is the growth dividend from the pandemic exhausted? 2023 US e-commerce research report

It is learned that recently, FTI Consulting released the "2023 US Online Retail Report", which explored the changes in the US e-commerce market after the epidemic, and made predictions on the 2023 Prime Day promotion and annual sales.

Reviewing the impact of the epidemic on US e-commerce

Overall, the COVID-19 pandemic has had a greater positive impact on the entire U.S. retail market. From 2020 to 2022, the total sales of the U.S. retail market will be $1.4 trillion higher than the pre-pandemic forecast, with an average annual growth rate of about 12%. Before the pandemic, the annual growth rate of U.S. retail sales had been hovering between 4.0% and 4.5%.

However, much of this growth has been driven by inflation, with U.S. consumer price inflation averaging 6.9% since mid-2021, compared with just 2.2% in the two decades before the pandemic.

The e-commerce market has benefited even more from the pandemic stay-at-home economy. From 2020 to 2022, cumulative e-commerce sales in the United States are $610 billion higher than pre-pandemic forecasts. It is estimated that over the three-year period, e-commerce sales accounted for 44% of U.S. retail growth and accounted for about 21% of the U.S. retail market.

It is worth noting that the share of US e-commerce increased from 15.3% to 20.3% in 2020, and the increase in 2021-2022 was much smaller (Figure 3). This is mainly due to the fact that the growth rate of physical store sales in the last two years has caught up with e-commerce sales. According to reports, the current share of US e-commerce sales is approaching the level predicted before the epidemic.

Despite market share remaining stable, e-commerce sales are still much higher than pre-pandemic forecasts, and the sales comparison base is still growing. According to the report, U.S. e-commerce sales growth and market share gains have accelerated in the past three quarters and are expected to continue for the rest of the year.

Changes in the U.S. e-commerce market in the post-epidemic period

As the U.S. begins to emerge from the shackles of the COVID-19 pandemic in 2021, the primary question facing the retail industry is whether the rapid growth in e-commerce sales and market share gains can continue once Americans return to their pre-pandemic lifestyles and shopping habits. So far, the growth brought about by the pandemic to e-commerce has slowed, but it has not completely disappeared.

Although the pandemic has driven a significant increase in U.S. e-commerce sales, the share of e-commerce sales in the U.S. retail market has remained largely unchanged for most of the past two years, but is still higher than its share in 2019, according to the report.

However, in some categories where e-commerce sales originally accounted for a large proportion, the market share has slightly declined from the peak during the epidemic, such as clothing and sporting goods, and consumers have returned to offline purchases more.

In 2020 and early 2021, many people were forced to turn to online shopping, and the wave of working from home also increased the sales growth of some home-related products. However, in the post-epidemic period, online shopping has become more of a preference rather than a necessity, and some expenditures during the epidemic period are advance purchases of goods needed in the next few years. Therefore, the growth rate of e-commerce sales has slowed down significantly.

So far, Americans have largely resumed their pre-pandemic lifestyles. However, compared to airplanes, hotels, gyms, and concert venues, offline shopping malls appear to be relatively deserted. After showing a strong growth momentum from mid-2021 to mid-2022, Americans' enthusiasm for physical stores has faded again since the third quarter of 2022, and e-commerce channels have regained their advantages.

2023 US e-commerce sales forecast: Prime Day is not optimistic

The epidemic not only boosted the growth of e-commerce sales in the United States, but also changed the development trajectory of the U.S. e-commerce market in the next few years.

The report predicts U.S. e-commerce sales and market share based on a logistic growth model (or S-curve), and estimates that U.S. e-commerce sales will reach $1.14 trillion in 2023, a year-on-year increase of 10%, which is basically consistent with the growth rate predicted before the epidemic.

As for market share, the report predicts that in the next three years, the US e-commerce market share is expected to grow by an average of 90 basis points per year, while the growth in 2021 and 2022 will only be 65 basis points and 10 basis points. As physical store sales cool again, the growth rate of US e-commerce sales will remain twice that of physical store sales before 2025.

The report also pointed out that during Prime Day 2023, the sales performance of US e-commerce was not optimistic.

According to past records, as long as Prime Day sales exceed previous years, no matter how small the increase is, it will be defined as a record. From the perspective of inflation alone, it is not difficult to break a record, but it may be difficult to achieve last year's increase. The report predicts that this year's Prime Day may be the most mediocre in recent years.

First, American consumers have purchased a large number of luxury goods during the three years of the pandemic, and their shopping desires have been satisfied. They may shift more spending to other experiential consumption such as travel. Second, consumers are wary of slowing economic growth and the widely predicted recession, while savings are decreasing; finally, Prime Day competition is fierce, and consumers are facing discount fatigue.

However, Amazon has regained its growth momentum after experiencing a dark moment in 2022. From the end of 2021 to mid-2022, Amazon's retail sales growth rate dropped sharply, and compared with other e-commerce platforms, Amazon's performance was not satisfactory.

But since mid-2022, Amazon's retail sales growth has gained momentum again, and its share of the US e-commerce market recently exceeded 40%, with strong third-party merchandise sales expected to account for nearly 70% of its total sales.

Overall, as the pandemic ends, Americans are gradually returning to their pre-pandemic lifestyles, with areas such as travel and accommodation almost returning to 2019 levels. However, in other areas of the economy, such as shopping mall occupancy rates, they are still far below pre-pandemic standards. The study also shows that since 2021, EBITDA margins and return on investment (ROIC) have been on a downward trend for almost all major physical stores in the United States.

This means that Americans' interest in shopping in physical stores is declining, and e-commerce and other emerging shopping methods and technologies are becoming more and more popular. The growth dividend brought by the epidemic has not completely disappeared, but continues to play a role in a subtle way.

Editor✎ Ashley/

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