Supply Side: Total U.S. online sales total $550 billion, up 7.5% through July

Online retail sales in the U.S. rose 7.5% year-over-year in the first seven months of the year, according to data from the U.S. Census Bureau.

According to a recent report by Publicis Commerce, online sales totaled $550 billion, or about 22% of retail revenue, excluding cars, gasoline and restaurants. That compares to a 3.1% increase in retail sales as a whole. The report said e-commerce accounts for half of retail sales growth this calendar year.

The COVID-19 pandemic has accelerated online sales by at least three years in just a few months. This growth was highly concentrated in 2020, when total online sales rose 41.7% to $807.1 billion. Online sales remained strong in 2021, increasing 17.8% to $950.5 billion. Online sales totaled $1 trillion in 2022, up 6.5% to $1.1 trillion last year, an 8.9% increase. For the full year, online e-commerce sales are forecast to grow 10.95% to $1.12 trillion.

Jason Goldberg, chief commercial strategy officer at Publicis Groupe, said the growth of e-commerce has become a key driver for all retail in 2024. Online sales in 2024 are expected to be twice as large as in 2019, increasing by 117% compared to the first six months of 2019.

Goldberg said the real story is the widening divide between retail’s winners and losers. While overall retail trade grew 3.1% in the first half of 2024, the two largest U.S. retailers — Walmart and Amazon — saw much higher growth. Walmart reported that U.S. online sales rose 22% in the first six months of the year. Amazon’s e-commerce sales rose an estimated 10.5%.

Goldberg said Amazon controlled about 16% of the online market share through July, while Walmart had 15%. Three emerging retailers, Temu, Shein and TikTok Marketplace, are also taking a significant share of U.S. online retail dollars. He said TikTok Marketplace has about 13% of the share, Temu has 4% and Shein 3%. The five retailers accounted for 51% of the dollars spent online in the first half of this year. He said that leaves just 49% for all other retailers, regardless of size. The e-marketer says there are more than 13 million e-commerce sites in the U.S.

“There’s a fracturing of retail going on, with a few giants getting bigger and many others losing market share this year,” Goldberg said in an interview.

WALMART GROWTH
Walmart’s massive grocery business accounts for more than 58% of total U.S. sales, and online grocery is a major reason for Walmart’s steady online growth when many other categories are seeing sluggish sales. Walmart’s online grocery sales totaled about $8.51 billion in the second quarter, up from $7.82 billion in the same period a year earlier, accounting for 37% of the market share.

“E-commerce is gaining momentum as we increase pickup and delivery as delivery speeds improve,” said Walmart CEO Doug McMillon, commenting on the company’s latest second-quarter financial results.

He said the online retail market, membership model and advertising business, which grew 26% globally, helped diversify profits. Walmart Chief Financial Officer John David Rainey said Walmart US saw e-commerce sales grow 22% in the second quarter, and weekly active customers rose 20%.

“In addition to the great progress we’re making in our fulfillment centers, the proximity of our stores to our customers has also unlocked new capabilities and enabled faster delivery times. In-store delivery increased by about 50% in the second quarter as customers increasingly choose and pay to have their e-commerce orders delivered in less than one hour or less than three hours,” Rainey said.

Walmart US comparable-store sales rose 4.2% in the quarter, with e-commerce contributing 3% of that total. Walmart US CEO John Furner said the retailer has been working for several quarters to integrate technologies like generative artificial intelligence (GenAI) into search, which is having a positive impact on sales.

“Using GenAI is about 100 times more productive than working with humans on every page that displays a product,” Furner said. “And that’s really important in the context of a market where we’ve had such a large expansion in terms of the number of sellers and the number of assortments—the number of items in the assortment.”

Sam’s Club saw e-commerce sales grow 22% in the last quarter and 18% in the first quarter of this year. Sam’s Club’s e-commerce business is also cash flow positive.

While McMillon acknowledged that Walmart has room to improve its e-commerce business through intuitive search, he said, “the progress we’ve made in e-commerce experience across businesses, across markets, puts us in a position where we can play more offensively and be more aggressive with respect to marketing. So whether it’s that or capital investment in supply chain, what you’re seeing is that we’re playing offensively.”

OTHER ONLINE GROWTH
Target said online sales rose 8.7% in the second quarter, more than four times the pace of total comparable sales, which rose 2% year over year. Online sales accounted for about 20% of all sales in the quarter. Like Walmart, Target is deriving more of its online sales from stores. In the latest quarter, 97.9% of its online sales were from stores.

Goldberg said Target’s online catalog closely mirrors what you can buy in brick-and-mortar stores, so it doesn’t have as much growth potential as Walmart, which has invested heavily in online inventory and created a huge marketplace for third-party sellers.

Costco’s digital growth in 2024 increased by 20.7% in the latest quarter. Costco reports that online sales increased by an average of 15.6% over the past year.

Best Buy has a significant online business, accounting for about 31% of the retailer’s total sales in 2024. While electronics categories are more challenging, the retailer said it continues to improve the speed and efficiency of online deliveries, with 60% of packages being delivered or picked up within a day and 40% of digital sales being picked up in stores by customers.

Other retailers that continue to accept online orders and account for a significant share of overall sales include Nordstrom, which saw digital sales grow 6.2% in the latest quarter, accounting for 34% of total revenue.

Abercrombie & Fitch also saw improved traffic in stores and online. Hollister stores reported that 30% of sales came from digital orders in the latest quarter. Goldberg said that since digital orders account for 20% to 30% of total sales, sales are also outpacing growth in stores. He said e-commerce has become a key growth driver for many retailers and there’s no turning back.

Editor’s Note: Supply Side Section Talk Business & Politics focuses on the companies, organizations, issues and people involved in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Fire Spell.

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