Online retail sales in the U.S. are expected to surge past $1 trillion in 2027, up from an anticipated $445 billion in 2017, translating to a compounded annual growth rate of 9% over the next decade, according to the 2017 U.S. Online Retail Forecast from FTI Consulting.
Furthermore, Amazon is expected to account for more than half of that $1 trillion figure, FTI predicts. The e-commerce giant’s current share of online sales is estimated to be about 34.2%, according to a previous FTI report.
The online channel now accounts for 12.2% of total U.S. retail sales, excluding auto and gas, a number that is expected to reach 22% by 2027, FTI said. The online channel also accounted for 50% of total retail sales growth over the last year.
One trillion of anything is very hard to envision, but with the suggestion that the U.S. online retail market needs only a single-digit CAGR to reach that number in the next decade, perhaps it shouldn’t be so hard to envision $1 trillion in online retail sales.
Who is going to do all of that buying? A recent report from the National Retail Federation suggested that a minority of shoppers — just 21% — are responsible for about half of all purchases made online. FTI Consulting, too, expects future growth in online shopping will come from existing online shoppers buying more frequently and across more product categories than they do currently.
The report points out that grocery could be one of those new product categories for many retailers, a point on which many agree. An IGD study recently said this segment alone will grow at a rate of more than 18% per year through 2022.
This certainly hasn’t escaped the attention of companies like Amazon, which acquired Whole Foods this year, and Walmart, which continues to invest in grocery innovations like in-store pick-up of online orders. They still have a lot of work to do, but that also means a lot of room for growth. FTI noted that online grocery market penetration now stands at less than 2%.
Another figures worth noting from this report: U.S. online retail sales increased 15.5% year-over-year through the second quarter of 2017, slightly higher than the 14.9% growth reported for the same period in 2016. With sales growing at this rate, brick-and-mortar will keep feeling more of what has caused many of those retailers to shut down stores.
As Christa Hart, a senior managing director in the retail and consumer products practice at FTI Consulting noted in the report, "The impact of accelerating online sales growth has been evident in the past two years, with elevated levels of retail bankruptcies and announced store closures amid a non-recessionary environment. If online sales double by 2023, as we expect, stores will have to contend with the prospect of losing the same amount of sales to the online channel in the next six years as they did in the previous 16."