E-Commerce Lost Market Share in 2021

U.S. e-commerce penetration decreased in 2021 because offline retail grew faster than e-commerce for the first time in history, and the online shopping boost from the Covid-19 pandemic cooled off.

According to the Department of Commerce, e-commerce represented 13.2% of total retail spending in 2021. Down from 13.6% in 2020. Despite online shopping increasing to $870 billion from $762 billion, e-commerce market share instead decreased because offline retail sales grew faster. That never happened before.

Total retail sales reached $6.6 trillion in 2021, up a staggering 17.9% year-over-year. That growth was the fastest in decades (which wasn’t because the previous year’s - 2020 - growth was slow; even facing lockdown headwinds, retail spending was up that year). Retail spending grew by $1 trillion in a year. It took from 2013 to 2020 to grow by a trillion before that.

U.S. E-commerce Share of Retail Sales

The lockdowns of 2020 led to a lot of forced e-commerce and online grocery adoption, and a lot of growth was pulled forward. While initially, that growth looked like a step-change, it is now settling back to a trend line it was on for over a decade - U.S. e-commerce penetration is currently at levels it would have reached even if the pandemic didn’t happen.

E-commerce sales in 2021 would have potentially reached $762 billion if the pandemic didn’t happen, and online spending would have continued on the ten-year 14.8% growth trend line. The actual $870 billion sales it reached were up 14.2% from that trend line. Thus shoppers were still spending more online than historical trends would have suggested, but they were also spending more in physical stores.

E-commerce grew more than four times in ten years - from $200 billion in 2011 to $870 billion in 2021. As a share of retail, the past two years were flat. In terms of dollars, the pandemic pulled it forward by one year. E-commerce sales will approach $1 trillion in 2022.

U.S. E-commerce Sales

Invisible in those numbers are varying changes in different categories. For example, online grocery did have a step-change. But even Walmart, one of the major players in online grocery, only grew e-commerce by 11% in 2021. However, adoption of online grocery, changing habits, remote work, and others might end up rewiring shopping patterns long-term.

Covid-19 didn’t become a watershed moment for e-commerce like SARS in 2003 was for China because, in the U.S. (and most of the other countries in the West), e-commerce solves for convenience. It’s a matter of preference rather than the need to use it. That’s why every year, e-commerce will continue to get a little bigger but won’t get to China’s 50% market share any time soon.

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Juozas Kaziuk─Śnas

Founder of Marketplace Pulse, Juozas wears multiple hats in the management of Marketplace Pulse, including writing most of the articles. Based in New York City. Advisor to other startups and entrepreneurs. Occasional speaker at conferences.

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