As the spread of the coronavirus in the United States picked up steam and signs of a growing global health and economic crisis surfaced, consumers spent $146.47 billion online with U.S. retailers in the first quarter, up 14.5% from $127.89 billion for the same period the prior year, according to retail data released Tuesday by the U.S. Department of Commerce.
While analysts have anticipated a notable boost in ecommerce revenue for months as widespread stay-at-home orders and store closures have left consumers turning to the web to shop, the latest figures are typical for Q1. Although the Commerce Department’s data doesn’t yet show signs of shifting shopping behavior amid the pandemic, the 3-month January-March period captures just 2-and-a-half weeks’ worth of retail spending after President Donald Trump declared a state of national emergency on March 13.
The quarter’s 14.5% year-over-year growth is higher than the 11.5% registered in Q1 2019 but right in the ballpark of the 14.6% median of first-quarter growth over the last decade.
Online’s share of total retail sales has steadily been on the rise–with ecommerce penetration hitting 16.2% in Q1, according to a Digital Commerce 360 analysis of Commerce Department retail data. That was up from 15.0% for the same period in 2019 and marks the second-highest online share for any quarter in history, after 17.8% in Q4 2019. The holiday period historically sees higher ecommerce penetration.
Ecommerce accounted for just over a third–36.8%–of all gains in the retail market last quarter, significantly less than the 57.9% share of growth in Q1 2019.
Overall, retail performed well in Q1. Total retail sales through all channels grew a healthy 5.9% year over year, reaching $903.32 billion versus $852.81 billion in Q1 last year. The quarterly growth represents the largest uptick in Q1 total sales since 2012, when retail sales increased 7.0%; plus, it’s more than double 2019’s 2.7% increase. These figures are based on a Digital Commerce 360 analysis of non-seasonally adjusted Commerce Department data and exclude sales in segments that don’t typically sell items online such as restaurants, bars, automobile dealers, gas stations and fuel dealers.
What to expect in Q2
Total retail sales in the United States didn’t take an immediate hit as COVID-19 concerns ramped up in late February and March, leaving some analysts surprised at the industry’s strong showing in a tumultuous period. But April was a different story. Overall spending plummeted 9.0%, marking the biggest-ever year-over-year drop for any recorded month in Commerce Department history, according to advance monthly retail data.
During the same period, a reverse trend was afoot in ecommerce. Nonstore sales–which are mainly online but include other sales such as orders through call centers, catalogs, door-to-door visits and vending machines–saw significant spikes. The Commerce Department’s nonstore numbers don’t align perfectly with spending captured in the agency’s pure ecommerce figures that are released quarterly, but they often are used as a proxy measure.
Once ecommerce data catches up with total retail sales data, Q2 is likely to show a very different landscape. Spending on nonessential categories continues to decline while many consumers grapple with unemployment and market uncertainty, so total retail sales are not likely to recover. Conversely, dollars that used to be spent in stores on groceries and household staples are now being spent on the web.
Consumers also have reported changes to their online shopping habits in the age of COVID-19. According to a Digital Commerce 360/Bizrate Insights survey of 1,064 shoppers during the week of April 6, more than half–55.0%–said they have placed more online orders due to the coronavirus. That’s up from just 26.0% three weeks prior.
Since March, the retail industry has been “turned on its head,” according to Colin Sebastian, managing director of equity research at Robert W. Baird & Co. He anticipates future quarterly ecommerce data from the Commerce Department will show a hefty jump in penetration as online sales abruptly shot up in April.
“The question we need to ask is how much of the incremental ecommerce market share is sustainable and how much local and in-store shopping consumers will resume once economies reopen,” Sebastian said. “Not all of the ecommerce market share gains will be retained, but we think a lot of it will be.”
Online sales see usual upticks in Q1 but big April-May surges
Software provider Salesforce.com Inc. reported an 18.0% year-over-year increase in U.S. online revenue for Q1, up from 11.0% for the same period in 2019. However, there was a 41.0% spike in digital revenue during the last 15 days of March. Online sales soared 90.0% year over year in April–up tenfold from 9.0% for the same month last year–when analyzing sales over time on the same ecommerce sites. Salesforce aggregates data from the activity of more than 1 billion global shoppers flowing through its Commerce Cloud platform.
Researchers at the company expect ecommerce demand to rise as brick-and-mortar traffic flatlines.
According to fulfillment data from Convey, a last-mile technology vendor, retailers’ shipment volume was up only 11.3% year over year for the quarter overall. But while shipments from Jan. 1 through March 12, the day before a national state of emergency was announced, grew just 8.1% from the same timeframe in 2019, data from the full-blown COVID-19 period tells a different story. From March 13 through the end of the quarter, shipment volume growth nearly tripled to 22.9%. And from April 1-May 17, the year-over-year increase in shipments swelled to 54.4%.
Convey’s data is based on tens of millions of packages shipped from more than 500,000 U.S. locations across the company’s client base. Analysis excludes shipments from Amazon.com Inc. The vendor has 130 retail clients in many merchandise categories, including retailers The Home Depot Inc. No. 5 in the 2020 Digital Commerce 360 Top 1000; Neiman Marcus, No. 41; and Eddie Bauer LLC, No. 136.
CommerceHub, an ecommerce software provider, reported a more robust 32.0% year-over-year increase in order volume for its retail clients in Q1, but growth jumped to 61.0% for the March 13-31 period and continued to grow fast at 50.0% in April. While data amassed from more than 12,000 brands and suppliers using CommerceHub’s platform represents global volume, numbers primarily reflect activity in the United States.
As always, Amazon (No. 1) has continued to take market share during the transitional retail period. Consumers increasingly shopped online for household necessities like toilet paper and cleaning products because those items were out-of-stock at local stores. And the leading mass merchant has been scrambling to keep up with demand.
Amazon reported rapidly growing sales in Q1. The company’s first-party U.S. sales reached $38.08 billion for the quarter, up 29.7% from $29.37 billion in Q1 2019, according to Digital Commerce 360 estimates. Figures include subscription services as well as commissions and fulfillment fees for third-party marketplace sales. This means Amazon-owned sales alone accounted for more than a quarter of all U.S. ecommerce in Q1 and is responsible for nearly a half of ecommerce growth from January through March. And that’s largely before the online spending sprees of later spring kicked in.