What happened to online retailing in the US?

There has been a lot of discussion around the growth and share of online retailing the US after the pandemic. Pandemic induced big spike in the online sales. Some to assumed that the growth during this exceptional time would carry on after the pandemic.

As the societies opened up and llife became more normal, also the online growth normalised. Also the online share of all retailing normalised. This led some to say that there is a reversal of online retailing.

This is what Shopify argued as they announced big layoffs right before the Q2/2022 results.

It is true that the gorwht in the share of online has stopped and even declined slightly Year on Year (YoY) comparisons. But that is not the full picture.

How about the absolute online revenues?

The share of online is a relative number, which consists of the onlines revenues and the offline (stores) revenues.

Despite the growth in the overall share going through online, the online has in fact grown, quite significantly. During the three years from the Q2/2019 online revenues have almost doubled (+90%). The previous growth of +90% growth in revenues (prior to Q2/2019) took five years.

Thus, online growth has accelerated even after the pandemic induced online spend has moved to offline stores.

Why is online share then declining?

Growth of store based retailing in the US

The other side of the retailing coin is the performance of the stores. Many store based retailers suffered severly during the lockdowns of the Covid-era. However, since then the store retailers ahve really seen different kinds of times. Since Q1/2021 offline retailing has grown at an unprecedented pace.

Normally store based retailing grows modestly, at about 2-5% rate. Previous record for quarterly growth for offline retailing has been +7,7% in Q3/2011. From Q1/2021 store retailing has grown between +11% and +30% for five quarters straight.

There is no other period that comes even close as a comparison period to the current growth.

If store retailing returns to low single digit growth and online returns to high single or low double digit growth, the share of online will probably return to growth again.

Therefore, one can quite confidently say that the big generational wave of retailing moving to the online channel will continue its march onwards.