E-commerce will reach $6.8 trillion by 2028, but physical commerce will dominate

A new study by research firm Forrester predicts that e-commerce will grow from $4.4 trillion in 2023 to $6.8 trillion by 2028. This means that online sales will account for 24% of global retail and will be crucial for brands , but another sales channel will dominate: physical stores. $21.9 trillion of the $28.7 trillion in global retail sales in 2028 is expected to still be offline, highlighting the continued importance of investing in physical retail.

In the US, online retail sales are expected to reach $1.6 trillion by 2028, accounting for 28% of total US retail sales. Online retail sales in Canada will reach $83 billion, while in the six largest Latin American countries – Brazil, Mexico, Argentina, Colombia, Peru and Chile – online retail sales will grow to $192 billion by 2028. In Western Europe, sales are expected online retail will grow from $508 billion in 2023 to $773 billion in 2028. “The growth of online marketplaces, social commerce, live selling and direct-to-consumer commerce will accelerate the growth of global online retail sales over the next five years,” Jitender said Miglani, principal forecast analyst at Forrester.

Retail is undergoing significant change due to the changing needs and behaviors of younger shoppers, expectations for seamless and unique shopping experiences, and the competitive landscape resulting from new sales channels, including social commerce. Weekly headlines highlight the difficulties facing historic retailers like Macy’s, while many brands have filed for bankruptcy or are closing stores, including Ted Baker USA, Outdoor Voices, Rue21, The Body Shop and many others. According to a UBS report, as many as 45,000 retail stores may be closed in the US, with retailers of clothing and accessories, consumer electronics and home furnishings having to reduce their presence the most.

Despite store closures and the rise of online marketplaces, social commerce, online grocery shopping and click and collect services, physical retail will not become obsolete and will in many ways be forced to face new challenges while remaining the most popular retail channel in the world. This highlights the importance of retailers having solid omnichannel strategies, which is still not a given for many, which probably explains why many are struggling to stay connected with shoppers.

The truly sustainable retailers in 2024 are those who understand the importance of having a presence across online and physical channels, while also offering consumers seamless, enjoyable brand touchpoints that deliver immediate value and engagement. Sephora is a great example of a retailer that has managed to evolve with its shoppers and meet the needs of younger audiences and customers looking for an enjoyable and personalized shopping experience. In addition to an efficient online store and loyalty app that fit perfectly into the entire store ecosystem (click and collect services, loyalty points to use in store, etc.), the cosmetics retailer ensures that it has well adjusted its store footprint to reflect current trends cosmetics and offers exclusive brands that are very popular. Additionally, it leverages its physical footprint to host in-store beauty sessions and brand tutorials and hosts annual beauty events – two types of activations that make shoppers want to come to a Sephora location and enjoy their visit.

While the headlines may focus on the continued growth of e-commerce, the key takeaway should not be to emphasize the importance of a strong online presence alone, but rather to take a holistic approach to retail by creating complementary online and physical brand experiences and strengthen the retailer ecosystem by ensuring while providing the most hassle-free customer service. Most retailers closing stores or locations often have one thing in common: they are not integrating digital services into their operations, while at the same time failing to serve younger consumers looking for unique shopping experiences that can be personalized, engaging and relevant through upscale merchandising and brand activation, as well as smooth purchase path.