Online retail continued to thrive in the third quarter despite reopened stores and the postponement of Amazon.com Inc.’s Prime Day, which pushed the popular sales event into Q4, according to new data released by the U.S. Department of Commerce.
From July to September, consumers spent $199.44 billion online with U.S. retailers, up 37.1% from $145.47 billion for the same quarter the prior year, according to retail figures published Thursday by the Commerce Department. That means nearly $1 in every $5 spent came from orders placed online during Q3.
While this was a slowdown from the record-breaking 44.4% growth in Q2, when ecommerce benefitted from a seismic shift in buying behavior at the height of the pandemic, digital spending remained at dramatically elevated levels. Q3 2020 marked the second-highest year-over-year growth for any recorded third quarter going back to when the agency first started breaking out full-year ecommerce data in 2000. The quarter’s striking performance also was more than double the 18.0% online sales growth registered in Q3 2019 and nearly two-and-a-half times the 14.6% rate in Q1 2020.
Although digital revenue growth tapered off in Q3 2020, the period’s gains are particularly impressive considering the loss of the historical boon from Prime Day. Amazon pushed its annual promotional event typically held in July to mid-October this year due to the pandemic. The move affected the quarterly results of both Amazon and other retailers, which often capitalize on the influx of ecommerce traffic during the sale by running competing promotions and count on the peak summer demand to anchor sales for Q3.
Online penetration remains high
The digital channel’s share of total retail sales has largely risen over time, but pandemic-related online spending sprees in the last two quarters have significantly accelerated online penetration trends, according to a Digital Commerce 360 analysis of Commerce Department retail data.
Q2 skyrocketed to 20.8%—the highest-ever online share of any quarter or year. Q3 penetration ebbed a bit, dipping to 19.3%. But that’s still the highest share of any third quarter and 3.8 percentage points higher than Q3 2019’s 15.5% penetration. Outside of Q2 2020, no other quarter or year has increased this metric by even 2 percentage points year over year, so this is a momentous advancement.
Total sales stage a big comeback
After a rough showing in Q2, total retail sales through all channels rebounded in a big way. Total retail grew a massive 9.9% year over year in Q3, reaching $1.03 trillion compared with $941.01 billion in Q3 last year.
That was the highest rate for any quarter or overall year going back to 1993, the first year for which sales growth data is available. 2020’s Q3 increase was more than double 2019’s 4.8% year-over-year growth and nearly four-and-a-half times faster than Q2 2020’s 2.3%.
Ecommerce was the main driver propelling total retail spending to new heights, with online accounting for more than half—57.7%—of all gains in retail spending during Q3. But it stands in stark contrast to the heavy lifting ecommerce did in Q2. In the second quarter, digital’s stellar performance managed to entirely offset a 5.0% 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 in Q2 and then some.
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.
Spikes in online sales taper off a little in Q3
The surge in digital spending during Q2—which captured the period of time when many states and localities issued stay-at-home orders—made sense as shoppers were forced to turn to the web during the lockdown. Stores were largely closed, and shelves were bare in the essential brick-and-mortar locations that remained open since shoppers were panic buying and stocking up. So consumers looked online in record numbers to buy necessities like toilet paper and cleaning supplies, get groceries delivered, and set up home offices and classrooms.
But once stores reopened and other restrictions were loosened, ecommerce growth tapered off a bit—although online retailers, shipping carriers and others still reported holiday-level demand through Q3. The Commerce Department’s online sales figures align with retail client data from technology companies with insight into ecommerce transactions and shipment volume, which has shown more moderate but still highly elevated online spending for July through September.
Ecommerce had another remarkable quarter, with a 57% year-over-year increase in U.S. online revenue for Q3, according to data from software provider Salesforce.com Inc. That’s nearly five times the 12% growth registered for the same period in 2019 and the highest rate for the third quarter since Salesforce launched its shopping index seven years ago. But it does also represent a notable slowdown from Q2 2020, when digital sales swelled a massive 81% over the same quarter in 2019—a more than tenfold surge from the prior year. 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.
Adobe Analytics, the data insights arm of software company Adobe Inc., reported substantially higher digital revenue last quarter, with U.S. ecommerce sales getting a 46% year-over-year boost for the period. But monthly growth steadily declined from June’s dramatic 76% year-over-year increase, dropping to 55% in July before leveling off in the low 40% range for August and September.
Adobe’s data is based on transactions from more than 1 trillion anonymous online visits to retail sites, including 80 of the top 100 retailers in the Digital Commerce 360 Top 1000, and covers more than 100 million SKUs. Data is based on a variety of product categories including apparel, electronics, home, grocery, appliance, personal care, office supplies, books, jewelry, furniture and toys, among others.
A number of big retailers with an outsized impact on the overall market also announced continued spikes in digital revenue for the period, although growth has decelerated and tempered the ecommerce landscape from Q2.
Online sales for Target Corp. (No. 12 in the Top 1000) grew 153.9% year over year in the retail chain’s fiscal Q3, which ended Oct. 31 and doesn’t entirely align with the July-September period as defined by the Commerce Department. The explosive growth was propelled by omnichannel programs as shoppers relied heavily on curbside pickup and buy online pick up in store during the lingering pandemic. Web purchases accounted for 15.7% of total sales for the period—more than double the 7.5% share in Q3 2019, which is an unprecedented advancement of online penetration in a short timeframe. But the enormous gains for the period are still a dropoff from 195% growth in its Q2.
Walmart Inc. (No. 3) had a similar story. U.S. ecommerce sales jumped 79% year over year in its fiscal third quarter, which also ended Oct. 31. But while that rapid growth is incredibly impressive for a retailer of its size, it was still slower than the 97% registered in its Q2 when grocery delivery and omnichannel services soared. The Home Depot Inc. (No. 5) also reported sales through its digital platforms during its Q3, which ended Nov. 1, grew about 80% from the same period in 2019, down from about a 100% year-over-year uptick in Q2. Executives say the home improvement chain has benefitted from consumers consolidating their shopping among a smaller number of retailers during the pandemic and higher demand in omnichannel purchases as consumers tackle home projects while confined to their houses.
Amazon accounts for a quarter of US ecommerce
As always, Amazon (No. 1) had a disproportionate pull on the performance of the overall ecommerce market. For the third quarter, the web giant reported a “continuation of demand trends” from Q2 that prompted a 39.2% year-over-year jump in North American revenue. That was up substantially from 24.1% growth in Q3 2019 but a slight slowdown from a 43.4% year-over-year uptick in Q2 2020.
Amazon’s first-party U.S. sales reached $50.28 billion for the quarter, up 42.6% from $35.27 billion in Q3 2019, according to Digital Commerce 360 estimates. First-party sales are goods Amazon owns and sells rather than goods sold by marketplace sellers. Figures include subscription services as well as commissions and fees for third-party marketplace sales. This means Amazon first-party sales alone accounted for more than a quarter—25.2%—of all U.S. ecommerce in Q3 and is responsible for more than a quarter—27.8%—of ecommerce growth from July through September.
A sizable chunk of Amazon’s surge came from the food and beverage category and other consumables. Online grocery sales tripled year over year for Amazon in Q2, and senior vice president and chief financial officer Brian Olsavsky said the category growth continued to accelerate in Q3 during an earnings call. The company is reaching more customers with its grocery offerings and adding more convenient online order pickup options, which are now available through all Whole Foods Market stores.
Members of Amazon’s popular Prime membership program that offers free two-day shipping and other perks are still shopping with greater frequency and across more categories than pre-pandemic, Olsavsky also noted.
Ecommerce balloons through the first nine months of 2020
Through the first three quarters of 2020, consumers spent $546.62 billion online, up 32.6% year over year from $412.32 billion for the same period in 2019, according to Commerce Department figures. The nine-month growth for 2020 is the highest-ever recorded rate for the period in the nearly two decades for which ecommerce growth is available.
With Q2 and Q3’s elevated penetration, online’s share of total retail sales during the first three quarters of 2020 ballooned to 18.8%. The 3.8 percentage-point bump over the same time frame in 2019 is the largest gain for any nine-month period on record. No other first three quarters have increased this metric by even 1.5 percentage points year over year.
Total retail sales through all channels hit $2.90 trillion in the first nine months of the year, up from $2.74 trillion for the same period in 2019. Notably, the 6.1% growth is substantially higher than the 3.9% rate registered in the first three quarters of 2019, and offline sales still grew 1.4% year to date despite store closures and consumer anxiety surrounding brick-and-mortar shopping. Ecommerce accounted for 81.0% of all gains in the retail market for the period.
Percentage changes may not align exactly with dollar figures due to rounding.