Every analytics firm has its prediction on how much online retail sales will grow. For example, a recent report from FTI Consulting forecasts U.S. online retail to double by 2023. Over the next decade, FTI expects online sales volume will have an annual growth rate of 9%.
Based on that rate, U.S. e-commerce sales could surpass $1 trillion in 2027. This year online sales are expected to be $445 billion, according to the FTI report. Through the first half of this year, U.S. online retail sales increased 15.5% from the same period last year. FTI notes online retail accounts for 12.2% of total U.S. retail sales, excluding automobiles and fuel. Analysts with FTI expect online to comprise 22% of the overall U.S. retail market over the next decade.
“You know the future has arrived when life starts to resemble an episode of the Jetsons,” authors Christa Hart, Khaled Haram and John Yozzo noted in the report.
The report references recent headlines about Wal-Mart Stores, Amazon and Google securing patents for airborne blimp-like distribution centers for drones making final mile delivery of online orders. While this is a concept only, researchers said “online retailing has become a mainstay in consumers’ lives and continues to extend its reach in all sorts of ways, some unimaginable until now.”
FTI estimates Amazon will continue growing market share, and by 2027 the online behemoth is expected to have 53% of first and third party e-commerce sales. The report also notes Wal-Mart is aggressively scaling up its online business and will grow online share to 6% over the next five years. FTI notes if Wal-Mart and Amazon — the two largest online players — continue to grow market share, it will likely spell more trouble for other retailers.
“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,” wrote Hart, a senior managing director in the Retail & Consumer Products practice at FTI Consulting. “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.
“The frustration for many retailers is that even building a complex and expensive omnichannel enterprise has just kept them in the game instead of leading to renewed profitability.”
Grocery is one sector that continues to challenge online retailers seeking to expand market share. Online market penetration is less than 2%, despite grocery and home meal solutions being a $750 billion category. FTI expects grocery’s online market share may reach the mid-to high single digits in the next five years.
“Grocery is the current obsession of many online retailers, but U.S. consumers have still not embraced online grocery shopping and appear to prefer to shop for their food in-store,” wrote Haram, senior managing director in the Retail & Consumer Products practice at FTI Consulting.
“Tens of billions of dollars in sales migration to online are at stake in this [grocery] category, so efforts and investment by Amazon, Wal-Mart and others will attempt to break down these barriers to adoption in the next few years,” Haram added. “It is increasingly clear that physical stores will play a role in that effort to get more shoppers buying their groceries online.”