CONTEXT
U.S Ecommerce Market has experienced rapid growth since its humble beginnings with e-commerce sales projected to grow to 599.2 billion USD by 2024. The COVID-19 outbreak saw e-commerce sales spike 25% in March 2020 alone.
One of the most popular e-commerce website platforms that allow merchants to sell online with the most outstanding features is Shopify. There are Shopify merchants in 175 countries worldwide. Half of all Shopify merchants are based in the United States, which accounts for 874,500 sellers. 3.76 million live websites use Shopify. The majority of domains (69.67%) are registered in the United States (according to backlinko.com). Therefore, the U.S Ecommerce Market will have a massive influence on E Commerce Market Global as a whole and today we will dig deep into the U.S eCommerce market.
The power of e-commerce should not be underestimated as it continues to pervade everyday life and present significant opportunities for small, medium, and large brands and merchants. Obviously, you -as a merchant, is the one who see through the potential of e-commerce businesses. But ecommerce is also the most competitive market, too. Therefore, to stand out from the crowd, merchants need to update the latest information about Ecommerce trends to adjust the tactics on time and get ready for building business strategy in the future.
Below we will examine The Growth of Ecommerce U.S market through Statistics data updated in Q2, 2022 and the latest trends are bursting out in the market nowadays.
These insights can help merchants to:
- Discover market trends that can lead to new business opportunities that may be otherwise overlooked
- Get data-driven insights and expert tips to improve eCommerce performance
Part I. U.S Ecommerce Market grows 7.3% in Q2 2022
U.S. ecommerce spending in Q2 marked its fourth straight quarter of single-digit growth following the 45%-50% jumps during the first year of the pandemic, according to Digital Commerce 360 analysis report. But the year-over-year increase in online sales also outpaced that of stores for the first time since early 2021.
U.S Ecommerce Market is growing fast
Digital revenue hit $252.14 billion in the second quarter, up a modest 7.3% from $234.89 billion for the same period the prior year, according to Commerce Department data. That was less than half of the 15.4% U.S. ecommerce growth registered in Q2 2021 and nowhere near the 53.4% surge during the lockdowns and store closures in Q2 2020.
But it’s still notable that retailers could grow online revenue during the three months, given the massive — and some speculated, unsustainable — bump in web sales they received as COVID-19 raged and Americans shopped from home. The U.S. ecommerce market has managed to maintain and even build upon those early pandemic shifts in consumer buying behavior.
Additionally, Q2 2022’s performance was more muted since Amazon.com Inc., No. 1 in the 2022 Digital Commerce 360 Top 1000 rankings, moved its popular Prime Day sale from June to July this year. That meant the big spike in online retail spending for Amazon and competitors around the two-day event shifted to Q3, and U.S. ecommerce grew 7.3% year over year last quarter despite the loss of Prime Day dollars.
US sales’s Share in ecommerce industry
More than $1 in every $5 spent on retail purchases still came from online orders in the second quarter. Online’s share of total retail sales was roughly the same in Q2 2022 as it was for the same period the prior year — 20.6% vs. 20.4%. But penetration greatly accelerated from the 14.3% digital penetration in a pre-pandemic Q2 2019. Since COVID-19 took hold in the U.S., online’s quarterly share of all retail spending has hovered in the 20%-23% range.
In the years leading up to 2020, digital’s share of total retail sales reached the mid-teens, having grown each year incrementally. That happened organically as shoppers got increasingly comfortable purchasing items online and retailers made improvements to their eCommerce operations. But the pandemic accelerated that trend in a big way. Temporary store closures and lingering consumer anxiety over being in crowded spaces during a global pandemic prompted many to shop on the web, boosting online penetration.
Total retail sales growth sees big slowdown in Q2
Sales through all channels reached $1.22 trillion last quarter, up from $1.15 trillion in Q2 2021. The 6.2% increase is a far cry from the massive 20.5% swell in total retail sales for Q2 2021, which was spurred by pent-up demand from newly vaccinated shoppers eager to return to in-store shopping. That period marked the highest growth of any quarter or year in at least the last three decades for which data is available.
Additionally, although the 6.2% jump in combined online and in-store sales was less than a third of what it was during the same three months of 2021, it was still significantly higher than the usual performance of total retail before COVID-19 hit. The typical year-over-year increase for the five years pre-pandemic was just 3.5%.
At 5.9%, sales through stores and other offline channels grew more slowly in the April-June quarter than the online segment. That hasn’t happened since Q1 2021, the last period before widespread vaccinations brought shoppers back to in-person shopping. Because of that, ecommerce’s share of total retail gains increased to 24.1% — the highest quarterly share since Q1 2021.
The retail industry in first half of 2022 summary in numbers
Here’s how the retail industry performed through the first half of the year:
- U.S. eCommerce hit $483.46 billion, up 7.0% from $451.63 billion in the first two quarters of 2021.
- Online penetration reached 20.8%, flat vs. the same period last year.
- Offline sales increased 7.0% year over year.
- Total retail sales reached $2.32 trillion, up 7.0% from $2.17 trillion in the first half of 2021.
- Digital sales accounted for 20.9% of gains in retail spending across all channels.
Part 2: E-Commerce Trends 2022
Staying on top of e-commerce trends is not an option — it's a necessity. For e-commerce merchants, keeping abreast of industry trends is particularly important for merchants to stay competitive and identify new opportunities. Below are the top 3 trends that were emerging in the first half of 2022, according to Forbes.
The U.S Ecommerce Market landscape is getting more and more competitive than ever
According to the above industry report, U.S Ecommerce Market accounts for 20.4% of global retail sales, up from only 10% five years ago. In other words, the e-commerce space is becoming more crowded.
The rapid growth of U.S Ecommerce Market can be attributed to many reasons — Covid-19 being a major one. In times of uncertainty, fears of the virus and stay-at-home policies have driven changes in consumer behavior, bringing offline footfall to online stores as we pointed out before. Large numbers of e-commerce businesses emerge as the times require.
E-commerce incumbents and new entrants are racing to gain consumers' attention. The result is increased costs of advertising and reduced return on ad spend (ROAS). Advertising on Facebook, for example, already costs 47% more than the year before.
But the matter does not end here. Following Apple's privacy updates in iOS 14.5, cross-app data sharing is prohibited unless users choose to opt-in. Ramifications of the policy are major and immediate: Advertising across Facebook and Instagram has become much less effective than before.
Against this backdrop, e-commerce companies have started exploring new and unsaturated marketing channels. Snapchat and TikTok are popular options to this end.
Along that way, focusing on customer retention may be another way out of this difficult situation. As customer acquisition costs continue to rise, maximizing customer lifetime value helps maintain profitable margins for your business.
More e-commerce businesses go global to overcome growth bottlenecks.
Total addressable market (TAM) is a common limiting factor of growth. As businesses reach their growth limits in the domestic environment, the world will see more e-commerce brands expand into the global stage. The go-global movement is echoed by consumers. In fact, a recent survey revealed that 76% of online shoppers have made purchases on a site outside their own countries.
The path of international business expansion will not be frictionless. Inadequacy of funding, for one, would limit growth opportunities. Besides, competition and talent acquisition in an unfamiliar market would pose challenges to the management. Cross-border supply chains could be tricky to manage, too.
There are many ways to grow a business. Apart from internationalization, you as a merchant,could also work on product development and market penetration. Regardless of the route you take, some considerations are pertinent: When will you expand? How will you do it? What resources will you need? These are serious questions to ponder.
Conventional financing methods will be cut out.
Alternative financing is gaining popularity among e-commerce companies. Instead of taking out loans or trading equity for investors' money, many businesses now prefer other means of cash injection, such as revenue-based financing (RBF) and inventory financing.
The paradigm shift didn't happen for no reason. When asked about why they switched from loans to revenue-based financing, here the following views was shared:
- Bank loans are time-consuming to apply for.
- They don’t have eligible assets (e.g., cars or property) to pledge as collateral for loans.
- Loan repayments in fixed installments would put pressure on their companies' cash flow.
Equity dilution is also a common concern among founders who didn't opt for angel investments or venture capital. After all, giving away equity is expensive. A broad range of financial instruments, tailored for the needs of new-age businesses, have emerged over the past decade. E-commerce merchants will need some time to familiarize themselves with these financing solutions.
For instance, in revenue-based financing, funding is not repaid in fixed installments. Rather, RBF platforms will share a fixed percentage of your company's revenue until the sum is fully repaid. There are both pros and cons to this approach. On the plus side, repayment is flexible. Yet, your business must have recurring revenue in order to use revenue-based financing. These are some aspects to consider before choosing a financing solution for your company.
Market research showed that in 2021 Q2 alone, funding acquired by e-commerce companies worldwide totaled US$16.8 billion. That is a five-time increase compared to the same period in the prior year. Evidently, e-commerce companies are poised for growth and challenges ahead. As traditional forms of financing cannot aptly address these companies' needs, alternative financing is here to stay.
CONCLUSION
The way online shoppers behave is evolving and U.S Ecommerce Market trends are changing, which means merchants need to adapt quickly to maximize opportunities. To keep up, eCommerce merchants must anticipate changes in marketing using reliable data and analysis insights, especially as we head into a post-pandemic world where it’s more important than ever to understand the new needs of online shoppers and hopefully take advantage of these opportunities. This summary informative article from Sobooster may help you to catch the opportunity in time and dream up your business in the future.
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