In a second quarter plagued by the coronavirus that caused widespread store closures and stay-at-home orders, retail flourished online with record growth in purchases through ecommerce sites, according to new data released by the U.S. Department of Commerce.
During the height of the COVID-19 pandemic, consumers spent $200.72 billion online with U.S. retailers, up 44.4% from $138.96 billion for the same quarter the prior year, according to retail figures published Tuesday by the Commerce Department. That means more than $1 in every $5 spent came from orders placed on the web during the April-June period.
Q2 2020 marked the highest year-over-year growth for any recorded second quarter and the second-highest rate of any quarter or year overall going back to when the agency first started breaking out ecommerce data in Q4 1999. The only period in which growth surpassed last quarter’s 44.4% was Q4 2000, when the rate reached 73.7%. That was the first period for which year-over-year comparisons were available and came at a time when online spending was relatively low, making growth easier to achieve. Q2 2020’s striking performance also was more than triple the ecommerce growth registered in Q2 2019 as well as Q1 2020.
Online penetration skyrockets during Q2
The digital channel’s share of total retail sales has largely risen over time, but Q2 got a big jolt from online spending sprees during the period. Second-quarter gains blew all other periods out of the water, according to a Digital Commerce 360 analysis of Commerce Department retail data.
Ecommerce penetration hit 20.8% in Q2, up 41.4% or 6.1 percentage points from 14.7% for the same period in 2019. No other quarter or year has increased this metric by even 2 percentage points year over year. And the 20.8% penetration in Q2 2020 was a sizable uptick from 16.2% in Q1 2020. The first quarter of the year captured only 2.5 weeks of retail spending after President Donald Trump declared a state of national emergency on March 13, whereas Q2 captured a full 3-month period of shopping behavior during COVID-19.
“This all makes sense. Ecommerce penetration was pulled forward 2-3 years, and trends that already were here are being magnified,” says Eric Roth, managing director at investment firm MidOcean Partners.
Total sales slow but hang in there
Ecommerce’s stellar Q2 performance managed to entirely offset a $41.23 billion decline in offline spending–the only recorded instance in which the online channel staved off an overall drop in retail when in-store buying declined. That means online accounted for all gains in the retail market last quarter and then some.
Overall, retail performed better than anticipated in the second quarter despite sales taking a massive plunge in April. Total retail sales through all channels grew 2.2% year over year, reaching $964.47 billion versus $943.94 billion in Q2 last year.
The quarterly growth was low, marking the third-slowest Q2 rate going back to 1993, the first year for which sales growth data is available. The only slower second quarters came during the Great Recession–in 2009, when total retail dropped 4.4%, and in 2008, when total retail remained relatively flat at 1.8%. 2019’s Q2 increase–4.1%–was nearly double 2020’s. When looking at all historical quarterly growth, Q2 2020 was the slowest quarter since Q1 2017, when total retail registered just a 1.8% uptick in sales.
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.
Online sales surge to holiday-season levels
Despite bricks-and-mortar stores reopening in May, consumers still turned to the web in unrivaled numbers during Q2. And when shoppers did opt to visit a physical location, they turned to buy online pick up in store or curbside pickup options in droves to minimize contact with others as nerve-racking infection rates persisted.
The Commerce Department’s ecommerce figures align with the major spikes in web sales many retail vendors and firms that track digital transactions have reported during COVID-19.
Ecommerce had a banner quarter, with an “unprecedented” 73% year-over-year increase in U.S. online revenue for Q2, a more than tenfold surge from 7% for the same period in 2019, according to software provider Salesforce.com Inc. The company aggregates data from the activity of more than 1 billion global shoppers flowing through its Commerce Cloud platform and extrapolates its clients’ findings to the broader retail industry.
All verticals experienced the largest gains in digital revenue since Salesforce began tracking sales performance, says Rob Garf, vice president of industry strategy and insights.
“The growth in digital shopping that we’ve seen since the pandemic started has set a new baseline, and consumer habits won’t snap back to pre-pandemic ways,” Garf says. He expects current buying behavior will result in 30% of all retail revenue coming from online purchases by the holiday season.
CommerceHub, another ecommerce software provider, reported an even higher 109.9% year-over-year increase in online order volume for its retail clients in the second quarter. 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.
“All commerce is becoming ecommerce,” says Frank Poore, founder and CEO of CommerceHub. “The way consumers shop has officially shifted.”
Retailers in the company’s network have seen order volumes on par with peak holiday season for the last six months, and Poore anticipates numbers will swell even more approaching November and December.
According to fulfillment data from Convey, a last-mile technology vendor, retailers’ shipment volume was up 44.2% year over year during the second quarter. April saw the largest number of shipments sent–19.0 million–as well the highest year-over-year growth–59.6%–of any month through the first half of the year. It also beat out peak holiday months last year in terms of volume and growth. Although May and June decelerated, shipment volume for that period still fared more like peak season, with year-over-year increases at 30.0% or above. Comparatively, Cyber Week 2019 surges in online sales resulted in a 27.3% jump in shipments.
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. 139.
Amazon accounts for a quarter of US ecommerce
Online grocery sales tripled year over year for Amazon (No. 1) in Q2, propelling the web giant’s 43.4% jump in North American revenue. The company’s first-party U.S. sales reached $47.27 billion for the quarter, up 48.8% from $31.76 billion in Q2 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 nearly a quarter of all U.S. ecommerce in Q2 and is responsible for just over a quarter of ecommerce growth from April through June.
Additionally, CEO Jeff Bezos announced that sales by outside merchants on Amazon’s worldwide marketplaces grew even faster than the company’s sales of merchandise it owns. Chief financial officer Brian Olsavsky also said demand remained “super high,” driven largely by members of Amazon Prime buying more frequently and spending more each time they buy.
Online sales soar in first half of 2020
When looking at the overall U.S. ecommerce landscape, the huge jump in online sales during the second quarter had a big impact on year-to-date numbers given that digital revenue only grew by 14.6% in Q1. Through the first half of the year, consumers spent $347.26 billion online, up 30.1% year over year from $266.84 billion in 2019. The 6-month growth rate for 2020 was topped only in 2001, when the first half of the year grew by 35.5%.
With the Q2 boost to Q1’s 16.2% penetration, online’s share of total retail sales during the first six months of 2020 ballooned to 18.6%. The 3.7 percentage-point bump over the first half of 2019 is the largest gain for any 6-month period on record. No other half has increased this metric by even 2 percentage points year over year.
Total retail sales through all channels hit $1.87 trillion in the first half of the year, up from $1.80 trillion for the same period in 2019. Notably, the 4.0% growth is higher than the 3.4% rate registered in the first 6 months of 2019.
Like in Q2, online spending more than made up for the decline in offline sales for the first half of 2020, so ecommerce accounted for all gains in the retail market for the period.
Percentage changes may not align exactly with dollar figures due to rounding.