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

U.S. online retail sales increased 7.5% year over year in the first seven months of the year, according to U.S. Census Bureau data.

According to a recent report from Publicis Commerce, online sales totaled $550 billion, comprising about 22% of core retail sales revenue, excluding automobiles, gasoline and restaurants. This compares to 3.1% growth for core retail as a whole. The report said e-commerce accounts for half of all core retail growth this calendar year.

The COVID-19 pandemic pushed online sales ahead by at least three years in just a few months. That growth was highly concentrated in 2020, when total online sales rose 41.7% to $807.1 billion. Online sales stayed elevated in 2021, up 17.8% to $950.5 billion. Online sales totaled $1 trillion in 2022, growing 6.5% and reaching $1.1 trillion last year, up 8.9%. For the full year, online e-commerce sales are forecast to grow 10.95% to $1.12 trillion.

Jason Goldberg, chief commerce strategy officer at Publicis Groupe, said the growth of e-commerce has become the primary engine for all of retail in 2024. Online sales in 2024 are twice as large as in 2019, up 117% from the first six months of 2019.

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

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

“There is a bifurcation underway in retail with a few giants getting bigger and the many more losing share this year,” Goldberg said in an interview.

WALMART GROWTH
Walmart’s massive grocery business comprises more than 58% of the total U.S. sales, and online grocery is a major reason for Walmart’s consistent online growth when many other categories are seeing sluggish sales. Walmart’s second-quarter online grocery sales totaled roughly $8.51 billion, compared to $7.82 billion in the year-ago period, comprising a 37% market share.

“E-commerce is compounding as we layer pickup and ever faster growth in delivery as our speed improves,” Walmart CEO Doug McMillon said about the recent second-quarter financial results.

He said the retailer’s online marketplace, membership model and ad business, which grew 26% globally, helped to diversify its profits. Walmart Chief Financial Officer John David Rainey said Walmart U.S. saw e-commerce sales up 22% in the second quarter, and weekly active customers increased 20%.

“In addition to the great progress we’re making in our fulfillment centers, the proximity of our stores to customers has also unlocked new capabilities and enabled faster delivery times. Store-fulfilled delivery was up about 50% in the second quarter with customers increasingly choosing and paying for delivery of their e-commerce orders in under one hour or under three hours,” Rainey said.

Walmart U.S. comparable-store sales increased 4.2% in the quarter, and e-commerce contributed 3% to that total. Walmart U.S. CEO John Furner said the retailer has worked for several quarters integrating technology like generative artificial intelligence (GenAI) in search that is having a positive impact on sales.

“It’s about 100 times more productive to use GenAI versus having people work through each product display page,” Furner said. “And that’s really important in the context of the marketplace where we’ve had so much expansion in terms of the number of sellers and the number of assortment — the number of items in the assortment.”

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

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

OTHER ONLINE GROWTH
Target reported online sales grew 8.7% in the second quarter, which was more than quadruple the rate of total comparable sales which grew by 2% year over year. Online sales accounted for around 20% of all sales in the quarter. Like Walmart, Target is fulfilling more of its online sales from stores. In the recent quarter, 97.9% of online sales were filled from stores.

Goldberg said Target’s online catalog closely mirrors what is in stores, so it does not have as much potential for growth as Walmart, which has invested heavily in online inventory and added a massive marketplace for third-party sellers.

Costco’s digital growth in 2024 was up 20.7% in the most recent quarter. Costco reports online sales had an average growth of 15.6% over the past year.

Best Buy has a substantial online business that comprises about 31% of the retailer’s total sales so far in 2024. While the electronics categories are more challenged, the retailer said it continues to improve the speed and efficiency of online delivery, with 60% of packages delivered or picked up within one day and 40% of digital sales picked up in stores by customers.

Other retailers that continue to have online orders make up considerable total sales include Nordstrom which reports digital sales grew by 6.2% in the recent quarter, accounting for 34% of total revenue.

Abercrombie & Fitch also reported improved traffic in stores and online. Its Hollister stores reported that 30% of sales came from digital orders in the past quarter. Goldberg said with digital orders comprising 20% to 30% of total sales, the sales are also outpacing the growth of in-store sales. He said e-commerce has become a crucial growth engine for many retailers, and there is no going back.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Firebend.