U.S. ecommerce growth continued to slow during the first quarter as in-store spending remained strong, according to a Digital Commerce 360 analysis of U.S. Department of Commerce figures released Thursday. It remains noteworthy that retailers retained the massive bump in online sales they received earlier in the pandemic and increased it by another 6.7% during the last three-month period. But part of the gain is attributable to rising prices that continue to plague shoppers.
Online sales hit $231.35 billion in the first quarter, up a modest 6.7% from $216.74 billion for the same period the prior year. That’s another deceleration from the 9% to 10% quarterly ecommerce growth registered in the last half of 2021. That last half already marked a significant drop from the 45%-plus spikes each quarter during the first 12 months of the pandemic, according to Commerce Department data.
This year’s performance is contrasted with Q1 2021 when quarterly ecommerce sales grew a massive 46.9% year over year. But that’s because the January-to-March comparison period in 2020 captured just two and a half weeks of consumer spending after former President Donald Trump declared a state of national emergency with the initial spread of COVID-19 in the U.S.
Q1 2022’s digital sales growth of 6.7% was the lowest increase for any quarter since Q3 2009, when it was 3.0%, according to Commerce Department data. But ecommerce revenue was still 56.8% higher than in Q1 2020 and a giant 88.7% leap over the same quarter in a pre-pandemic 2019.
What percentage of US sales is ecommerce?
More than $1 in every $5 spent on retail purchases still came from online orders in the first quarter as consumers continued to buy on the web in big numbers, according to a Digital Commerce 360 analysis of Commerce Department data. Online’s share of total retail sales dipped down to 21.0% in Q1 2022 from 21.2% during the same time last year. That average digital penetration for each quarter has hovered in the 20% to 23% range since COVID-19 took hold in the U.S.
In the years leading up to 2020, digital’s share of total retail sales had grown incrementally each year as shoppers got more comfortable purchasing items online and retailers made improvements to their ecommerce operations — many of which helped them deliver goods faster. But the pandemic accelerated that trend in a big way. Temporary store closures and then lingering consumer anxiety over being in crowded spaces during a global pandemic pushed many to shop on the web. And that gave a sizable boost to online penetration.
How do you calculate ecommerce penetration?
Digital Commerce 360 studies non-seasonally adjusted Commerce Department data and exclude spending in segments that don’t typically sell online, such as restaurants, bars, automobile dealers, gas stations and fuel dealers. That way, ecommerce penetration reflects the share of dollars that consumers could potentially spend online.
US total retail sales growth slows in Q1 2022
Following six consecutive quarters of double-digit jumps in total retail sales, growth in overall spending slowed to a single-digit increase in Q1. According to Commerce Department data, sales through all channels reached $1.10 trillion last quarter, up from $1.02 trillion in Q1 2021. But that 7.9% increase is still a higher rate than any pre-pandemic quarter since Q1 2004 when total retail sales grew 8.3%.
Offline sales for the first quarter rose right in the ballpark of online sales, with an 8.2% year-over-year uptick. That’s a slowdown from the double-digit growth in in-store spending for the last three quarters in 2021 but still quite elevated from pre-pandemic times, when offline growth was typically under 5%.
One way to measure online’s impact on the overall industry is to look at the ecommerce share of total growth in retail spending. Sometimes, ecommerce performs well enough to entirely offset declines in brick-and-mortar sales, as in Q2 2020, when many stores were shuttered during lockdowns and after. Other times, offline channels pick up, and digital has less influence — which has been the case starting in Q2 2021, when vaccines were rolled out and consumers returned to physical stores. Ecommerce has accounted for less than a quarter of all retail gains since then. Last quarter, online represented 18.1% of the quarterly boost.
Inflation impacts ecommerce
Technology vendor Salesforce Inc., which reported online sales in the U.S. grew 5% year over year in the first quarter, noted an 11% spike in prices during the same period. That also corresponded with a 6% decline in order growth, according to the company’s Q1 Shopping Index.
“Inflation has finally caught up to bullish spending, with consumers buying fewer items from fewer retailers,” says Rob Garf, vice president and general manager of retail at Salesforce.
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.
Data from the Adobe Digital Price Index also indicates consumers and retailers were battling inflation throughout Q1. March marked the 22nd consecutive month of rising online prices. Of the $83.1 billion consumers spent in March alone, higher price tags drove $2.8 billion, according to Adobe Analytics. That means shoppers paid $2.8 billion more for the same number of goods.
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.
Percentage changes may not align exactly with dollar figures due to rounding.
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