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.
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.
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.