Online holiday sales grow a more muted 10% in 2021

Although U.S. online holiday sales in 2021 surpassed the $200 billion mark for the first time, growth during the peak season was muted compared to 2020, when online retailers struggled to keep up with unprecedented demand during the first pandemic holiday period.

U.S. shoppers spent $211.41 billion online during the 2021 holiday season, up 10.0% from $192.19 billion the prior year, Digital Commerce 360 estimates. While that was a significant slowdown from the 2020 holiday period, when digital revenue ballooned by 40.8%, the fact that retailers were able to maintain and even grow massive ecommerce gains early in the pandemic is noteworthy. 2021’s online sales for the season still represent a 54.9% increase over 2019, the last pre-COVID-19 period.

Nearly $1 in every $4 spent on retail purchases during the 2021 holidays came from online orders. While digital’s share of total retail sales for November-December didn’t snap back to pre-pandemic levels, it did lose ground. In 2021, ecommerce accounted for 24.1% of all holiday spending, a dip from 24.9% during the 2020 season. But online penetration in 2021 was still elevated over the 19.2% registered in 2019.

Holiday sales through all channels reached $878.89 billion, a 14.0% lift from $771.06 billion in 2020, according to a Digital Commerce 360 analysis of U.S. Department of Commerce data. This past season’s growth in total retail sales was the highest recorded rate in several decades. The agency’s retail data is available dating back to 1992, so the first year for which year-over-year comparisons can be made is 1993. The 14.0% jump in 2021 is more than 1.5 times higher than the next-highest holiday growth at 8.6% for the November-December period in 1999 as well as the prior season’s 8.4% uptick.

Store sales rebounded in a big way, surging 15.3% over the holidays after a relatively flat 2020 season, Digital Commerce 360 estimates. The brick-and-mortar channel propelled total retail growth for the holiday period, accounting for 82.2% of overall gains.

Digital Commerce 360 studies non-seasonally adjusted Commerce Department data and excludes spending in segments that don’t typically sell online, such as restaurants, bars, automobile dealers, gas stations and fuel dealers.

Here are five reasons why Digital Commerce 360 landed on our market estimates for the holidays:

1. Earlier Q4 online sales cut into holiday spending

Retailers urged consumers to order early with pre-season messaging to combat product availability issues that were expected to plague the industry during the height of gift buying. In a Digital Commerce 360 survey of 100 merchants during Q3, nearly 6 in 10 retailers—59%—said they planned to start seasonal marketing before November. More than a quarter of respondents said they would begin campaigns in October, 16% expected to do so in September, and another 16% talked about starting holiday marketing as early as July or August.

And consumers were receptive, heeding warnings as inventory shortages dominated headlines and not waiting around for discounts on big shopping days like Black Friday or Cyber Monday. Shoppers got a jump on holiday buying to avoid missing out on coveted items, and that earlier spending pulled dollars historically reserved for November-December into October.

Nearly half—49%—of shoppers said they took advantage of early holiday sales or promotions before Thanksgiving in 2021, according to data from the National Retail Federation and Prosper Insights & Analytics based on a survey of 5,759 U.S. adult consumers from Nov. 24-Nov. 29. That was mainly due to consumer awareness of supply chain disruptions, NRF says. Retailers did a good job of communicating the overall retail environment, creating incentives and encouraging shoppers to get a head start, the trade group says.

Numerator data showed more dramatic early shopping trends, with nearly two-thirds—63%—of shoppers reporting taking advantage of pre-Thanksgiving sales, up from 52% in 2020. The consumer insights and technology company surveyed 4,048 verified buyers during the Cyber 5 period.

October’s retail figures support this trend, bolstering survey results. U.S. ecommerce sales increased 8% in October over the same month in 2020, according to Adobe Analytics data.

2. Cyber 5 sales dip vs. 2020 season

In 2021, holiday buying during the ultimate peak on the retail calendar—the five days from Thanksgiving to Cyber Monday—was just shy of the record online sales in a pandemic-fueled 2020. U.S. consumers spent $33.90 billion online during the industry-dubbed Cyber 5 period in 2021, a 1.4% year-over-year dip from the $34.36 billion in digital revenue during the same long weekend the prior year, according to data from Adobe Analytics.

Despite the slight decline, 2021’s Cyber 5 still marked a healthy 19.0% jump over the more normal pre-pandemic spending levels in 2019.

Even so, the dominance of the five-day period has diminished in recent years. In a pre-pandemic 2019, Cyber 5’s share of total online spending for the season was 20.9%, Digital Commerce 360 estimates. That dropped to 17.9% in 2020 and fell again to 16.0% in 2021 as gains in ecommerce spread out more in the period and stemmed from less-marketed days of the season or crept into October.

3. Inventory scarcity, higher prices and weaker discounts impact spending

The pervasive challenge for many retailers this last season was getting enough merchandise into their warehouses, and that issue stunted ecommerce growth. A raw material shortage made it problematic to manufacture goods. Shipping containers were scarce, forcing some big retail chains to charter their own dedicated cargo ships to take greater control of their supply chains during the chaos. And massive bottlenecks left ports practically paralyzed.

The fallout can be traced to the prevalence of out-of-stock notices on retail websites, which surged 253% during the 2021 holiday season when compared with the same period in pre-pandemic 2019, according to Adobe data. From November-December 2021, consumers saw more than 6 billion out-of-stock messages online, which marked a 10% year-over-year increase from the same two months in 2020, when retailers were already grappling with severe supply chain issues, Adobe says.

Most online holiday shoppers noticed the inventory shortage, according to a Digital Commerce 360 and Bizrate Insights survey of 1,033 online shoppers in January. 25% of consumers said they came across many products that were out of stock, and 37% said they found at least some.

30% of shoppers also reported that they encountered more out-of-stock messages this year compared with the 2020 holiday season, according to the survey.

Inventory scarcity coupled with soaring costs for retailers—on everything from materials and labor to freight and last-mile shipping—meant consumers didn’t get the same holiday deals in 2021 as in prior years and paid more for gifts. December marked the 19th consecutive month of online inflation, with 12 of 18 tracked categories experiencing year-over-year price increases, according to the Adobe Digital Price Index. And technology vendor Salesforce Inc. says prices were up 25% year over year in the U.S. during the season.

Merchants didn’t slash prices on products as deeply during the 2021 holiday season compared with the prior year, according to Adobe data. Online retailers offered weaker discounts in five out of eight tracked merchandise categories. That was largely because of the increased competition among consumers for limited quantities, which meant merchants didn’t need to offer heavy promotions to sell products, and items were left at full price for longer or not marked down as much.

Roughly seven in 10 online shoppers in the Digital Commerce 360 and Bizrate Insights survey thought holiday promotions were more limited in 2021, and 18% of all respondents reported paying full price for more products during the season as a result. 17% of consumers surveyed also said they bought less merchandise given the higher prices.

4. Store traffic rebounded while online traffic declined

In-store traffic took a big hit during a pre-vaccine 2020 holiday season as spikes in COVID-19 cases caused consumers to avoid stores and buy online. But many consumers returned to brick-and-mortar shopping in 2021, with a large swath of the country vaccinated and weary consumers longing to revisit holiday traditions. Foot traffic in the U.S. increased 18.9% over the prior year, according to a Sensormatic Solutions analysis of the six weeks spanning Nov. 21, which was the Sunday before Thanksgiving, through Jan. 1. While physical stores still saw 19.5% fewer shoppers than in pre-pandemic 2019, it was a marked improvement over 2020, when holiday traffic plunged 33.1% year over year, Sensormatic says.

In fact, more consumers shopped in stores each month in Q4 2021 vs. the prior year, according to Sensormatic. Foot traffic in October rose 14.1% year over year, November jumped 20.9% and December climbed 16.6%.

Sensormatic is a unit of Johnson Controls that tracks store visitors using traffic counting devices at entrances and throughout the store to identify insights on consumer behaviors. The company’s data covers more than 2,100 global brands.

Meanwhile, online retailers received less traffic to their ecommerce sites during the November-December season than the prior year. Website visits to the online stores of merchants ranked in the 2021 Digital Commerce 360 Top 1000 decreased 12.7% year over year during the holidays, according to a Digital Commerce 360 analysis of data from website traffic insights firm Similarweb.

A dual traffic analysis of Cyber 5 revealed similar trends over retail’s biggest holiday period. More consumers shopped at physical locations each day during the five-day stretch than in 2020, according to NRF and Prosper data. During Cyber 5, around 104.9 million shoppers visited stores, up from 92.3 million—a gain of 12.6 million people, representing a 13.7% lift. The uptick corresponded with a 12.1% decrease in consumers shopping on the web during the same period—127.8 million shoppers vs. 145.4 million in 2020, according to NRF.

This all suggests consumers invested more time—and likely dollars—in in-store shopping than in 2020, which drove a higher jump in brick-and-mortar sales.

5. Other ecommerce sales data points to more moderate growth

Digital Commerce 360’s estimated 10.0% digital revenue growth for the 2021 season is in line with numbers released by payment companies and technology providers that amass transaction-level data. All have reported modest increases in online holiday sales.

U.S. ecommerce received an 11.0% boost this season, according to data from Mastercard SpendingPulse, which defines the holiday period as Nov. 1-Dec. 24 and captures traditional retail as well as food services in its analysis. Yet that still represented a 61.4% surge vs. 2019’s online holiday sales. SpendingPulse bases its reports on aggregate sales activity in the Mastercard payments network plus survey-based estimates for purchases made with other payment forms.

Others noted even slower year-over-year seasonal growth. Online spending in the U.S. rose 8.6% during November-December compared with the same two months in 2020, according to Adobe Analytics data. Adobe’s analysis is based on more than 1 trillion visits to more than 4,500 U.S. retail sites and covers 100 million SKUs in 18 product categories. The firm says it measures transactions from 80 of the top 100 online retailers ranked in the Digital Commerce 360 Top 1000.

Salesforce estimated an 8.9% year-over-year jump in digital revenue over the holidays in the U.S. The company aggregates data from the activity of more than 1 billion shoppers flowing through its platform and extrapolates its clients’ findings to the broader retail industry. Salesforce says it captures transactions from 24 of the top 30 U.S. online retailers.

Percentage changes may not align exactly with dollar figures due to rounding.

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