Ecommerce was growing fast before COVID-19 hit. But the pandemic pushed even more U.S. consumers online, contributing an additional $105 billion in U.S. online revenue in 2020 and accelerating ecommerce by two years, Digital Commerce 360 estimates.
Ecommerce thrived in 2020 because of store closures and shoppers’ fear of contracting the coronavirus in public. But the foundation was set for online retail years before the pandemic hit. Ecommerce has been growing consistently and accounting for a large share of retail sales for years. Over the last decade, U.S. online sales have grown between 13% and 18% each year. This compares with growth offline (mostly in stores) that hasn’t been higher than 4% since 2005, according to Digital Commerce 360’s analysis of U.S. Department of Commerce data.
Therefore, by the start of 2020, retailers had already made substantial investments in marketplaces, mobile and omnichannel strategies. When COVID-19 became widespread in the U.S. and shoppers turned to the web, ecommerce was ripe for success.
Ecommerce sales hit $791.70 billion in 2020, up 32.4% from $598.02 billion in the prior year, according to Commerce Department figures. That’s the highest annual online sales growth of any year for which data is available and also more than double the 15.1% year-over-year jump reported by the Commerce Department in 2019.
What’s more, ecommerce accounted for 19.6% of total U.S. retail sales last year, Digital Commerce 360 estimates. That’s up from 15.8% in 2019 and 14.3% in 2018. The nearly four percentage-point annual gain in ecommerce penetration during 2020 is by far the largest in U.S. retail ever recorded. Without the pandemic’s impact, online penetration wouldn’t have reached that level until 2022.
Total sales, which includes shopping through other channels, such as stores and catalogs, grew 6.9% in 2020 to reach $4.04 trillion, up from $3.78 trillion in 2019, according to Digital Commerce 360’s analysis of Commerce Department data. The 6.9% jump was the highest annual growth since 1999, and ecommerce accounted for the majority—74.6%—total retail sales gains in 2020.
Digital Commerce 360 studies non-seasonally adjusted Commerce Department data and excludes spending in segments that aren’t typically sold online, such as restaurants, bars, automobile dealers, gas stations and fuel dealers.
Offline sales (total retail sales less ecommerce) grew slower than all of retail, recording a 2.1% year-over-year gain in 2020, according to Digital Commerce 360’s analysis of Commerce Department figures. Still, it’s surprising offline retail would grow at all during a pandemic. It likely means at least some of consumers’ travel and entertainment budgets shifted to product purchases online and in stores.
Take travel, for example. According to estimates from the U.S. Travel Association, spending on travel suffered an unprecedented 42% annual decline in 2020 from 2019, incurring losses of nearly $500 billion year over year. Since March 2020, the pandemic caused a daily loss of roughly $1.6 billion through the end of the year, U.S. Travel Association data shows. Some of those dollars were likely spent on goods, such as a backyard pool (instead of a beach vacation) or a video game console (instead of a trip with friends) or home renovation (instead of a vacation overseas).
Additionally, of the top seven retail chains—all of which brought in more than $25 billion in offline revenue in 2020—only one didn’t grow offline sales. Other than Best Buy Inc. Co., whose offline sales fell 21%, according to Digital Commerce 360 estimates, the remaining six saw gains. In fact, The Home Depot Co. and Lowe’s Cos. Inc.’s offline sales grew 13% and 19%, respectively, Digital Commerce 360 estimates. Therefore, shoppers did refrain from shopping in many stores in 2020, but still ventured to mass merchants (like Walmart and Target), grocery stores (Kroger and Costco) and home improvement shops.
It’s also important to note these stores were deemed essential businesses and remained open throughout the pandemic. Conversely, Best Buy’s stores were closed from mid-March to early May, when it began allowing customers in stores with an appointment.
There are few surprises when looking at gains by merchandise category last year. Food, toys, electronics, hardware and sporting goods advanced the most online in 2020—and this reflects how the pandemic impacted our lives.
For example, online sales of food and grocery retailers jumped 100% year over year, based on Digital Commerce 360’s analysis of the Top 2000 online retailers in North America. That makes sense, as stay-at-home mandates drove millions of shoppers online—often for the first time—to order groceries for curbside pickup and delivery. 17% of shoppers made their first online grocery purchase in 2020, according to a Digital Commerce 360 and Bizrate Insights survey of 1,000 U.S. online shoppers in May 2020.
Toys and hobbies online retailers, which includes everything from puzzles to video game consoles and musical instruments, jumped 63.1% year over year, Digital Commerce 360 estimates. Video game retailer GameStop is one toys/hobbies retailer that benefited from pandemic-related buying shifts. The merchant grew online sales more than 500% in 2020 to cross $1 billion in ecommerce sales, Digital Commerce 360 estimates. In the six weeks following store closures at the onset of the pandemic, ecommerce sales spiked 1,000%, the company says.
Sporting goods retailers’ sales increased 46% year over year as consumers purchased exercise equipment and items for outdoor activities, such as bicycles and rollerblades, when gyms shut down. For example, ecommerce sales increased 102% in 2020 for Dick’s Sporting Goods. Online sales accounted for 30% of total revenue for the retail chain last year, up from 16% in in 2019. Much of its online sales growth stemmed from its omnichannel services, the company says, including its curbside service. In fact, stores fulfilled more than 70% of Dick’s Sporting Goods’ online sales in its fiscal Q4 ended Jan. 30, which includes curbside pickup, buy online pick up in store and ship from store. Dick’s launched curbside pickup in less than 48 hours, the retailer told Digital Commerce 360 in a 2020 interview, and made the service available to shoppers on March 18.
Home improvement retailers and home goods retailers got a boost from consumers investing in renovating or decorating their homes. Plus, retailers selling hardware and home improvement products thrive especially when many consumers are moving to new homes, which has been the case in 2020. As of January, sales of existing homes grew year over year for the seventh-straight month, according to data from the National Association of Realtors. In the months from September through January, sales of existing homes grew more than 20% year over year compared with the corresponding months in 2019. Online sales of hardware retailers jumped 52% in 2020, Digital Commerce 360 estimates.
Categories that grew slower than the 32.4% growth in the overall market include jewelry, apparel, flowers and automotive parts. These categories include nonessential items and products that don’t directly correlate with the shift in consumers’ activities and habits during the pandemic, so the slower growth makes sense.
With the unpredictable rollercoaster ride the last year has been, it’s challenging to predict what 2021 and the coming years will look like in retail. One thing is for sure: Consumers’ shift to ecommerce will last beyond the pandemic. Shoppers are now more comfortable shopping for certain products online that they may not have been prior to 2020, like groceries. But they won’t abandon stores quite yet. After all, 80% of purchases still occurred in stores last year. That’s why omnichannel features like curbside pickup and buy online pick up in store will remain key for retailers.