E-commerce still has room to grow despite pandemic-induced growth

While we wait to see if the Federal Open Market Committee will cut interest rates by a quarter or half a percentage point, Tuesday brought new data on the health of one of the economy’s main engines: consumers. Consumer spending drives about 70% of the economy and remains strong. Retail sales rose in August, though only slightly — up just 0.1% from July and 2.1% from a year earlier.

Interestingly, online spending, at non-store retailers, was up 7.8% year-over-year. E-commerce has grown significantly in the past few years since the pandemic began, but there’s still plenty of room for it to grow even more.

Take a moment to consider what percentage of all sales now take place online.

It’s almost 20%, which is less than I thought. But Gregory Daco, chief economist at EY, said that 20% is actually a lot because there are things you can’t buy online.

“Gas station sales … grocery store sales, furniture store sales, building materials,” he said. “For the most part, people still prefer to go to the store to make those purchases.”

Still, online sales are growing rapidly, says Arun Sundaram, senior equity research analyst at CFRA Research.

“E-commerce is one of the few categories that has shown steady growth since the beginning of the pandemic,” he said.

At the beginning of the pandemic, online sales skyrocketed—largely out of necessity. But now?

“We’re not seeing the same kind of growth that we saw in the early days of the pandemic, but it’s still there. And that shows that consumers want to shop online, that shows that retailers are investing in their e-commerce business, that shows that consumers are also becoming more tech-savvy,” Sundaram said.

It’s becoming increasingly difficult to distinguish between online and in-store purchases, says Mark Mathews, research director at the National Retail Federation.

“That’s because the growth in e-commerce that we’re seeing right now tends to be in the mixed-commerce space. So it’s buy online, pick up in store, curbside pickup,” he said.

He added that it is increasingly important for companies to do everything at the same time.

“You have to be able to offer the consumer what they want, when they want it and how they want it. I can buy the same thing one week, buy it online and have it delivered to my home,” he said. “The next week I can just go to the store.”

Choose what is more convenient for you.