U.S. ecommerce growth continued to taper during the third quarter, again outpaced by jumps in consumers’ offline spending, according to a Digital Commerce 360 analysis of U.S. Department of Commerce figures released Thursday. Yet online retailers managed to not only sustain the massive gains they made in the digital sales channel since early 2020 but actually grow them year over year—no small feat given the unprecedented ecommerce demand during the pandemic that spurred shifts in shopping behavior.
Online sales hit $204.62 billion in the third quarter, up a modest 6.8% from $191.57 billion for the same period the prior year. That’s another slowdown from 9.2% year-over-year growth in Q2 2021, which already marked a significant drop from the 30%-40% spikes registered in the previous four quarters, according to Commerce Department data. But Q2 and Q3 2021 were the first periods that could be benchmarked against other COVID-19-impacted quarters, so the deceleration was expected.
When comparing Q3 2021 to the pre-pandemic Q3 2019, ecommerce surged 45.6%. In fact, this year, the third quarter benefitted from an additional $19.11 billion boost in digital revenue thanks to COVID-19 spending patterns, Digital Commerce 360 estimates. If online sales had continued to advance at a pace similar to pre-pandemic years, ecommerce would have instead hit $185.50 billion in the third quarter of this year, and current levels wouldn’t have been reached until 2022.
Online penetration dips but remains high
Digital orders accounted for more than $1 in every $6 spent on retail purchases in the third quarter, according to a Digital Commerce 360 analysis of Commerce Department data. Online’s share of total retail sales dipped—down to 18.1% in Q3 2021 from 18.8% during the same time last year—marking the lowest digital penetration since COVID-19 took hold in the U.S. But the web’s share of spending through all channels was still higher in Q3 2021 than pre-pandemic quarters, including the 15.2% penetration registered in Q3 2019.
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—some for the first time, many in new categories and nearly all more frequently. And that gave a sizable boost to online penetration.
While online’s share of sales through all channels hasn’t again surpassed 20.0% so far in 2021, it’s notable that penetration hasn’t immediately receded to 2019 levels even with vaccination rates and other factors encouraging a return to in-store shopping.
Offline sales for the third quarter jumped 11.5% this year—the second highest-ever recorded growth for the channel behind Q2 2021’s enormous 22.3% spike—as consumers still visited physical stores. And because offline retail increased by more than 1.5 times the rate of ecommerce in Q3 2021, penetration dropped accordingly.
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.
US total retail sales still see elevated growth in Q3
Following a record-breaking 19.6% year-over-year jump in total retail sales during the second quarter, growth in overall spending slowed in Q3. Sales through all channels reached $1.13 trillion last quarter, up from $1.02 trillion in Q3 2020. But that 10.6% increase is still the third-highest year-over-year lift for any quarter or year dating back to at least 1993, which is the first year for which growth is available through Commerce Department data. Q3 2021 marks just the fourth recorded time total retail growth reached double digits—with the other three periods also coming during the pandemic.
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—like Q2 2021, when ecommerce accounted for just 9.5% of all retail gains. With less of a discrepancy between online and in-store growth in the third quarter vs. second quarter this year, ecommerce increased its share of retail gains, representing 12.0% of the quarterly boost.
First three quarters of 2021 build on pandemic gains
Here’s how the retail industry performed through the first nine months of the year. It’s important to keep in mind that the 2020 comparison includes one quarter of largely pre-pandemic spending levels.
- Ecommerce reached $612.86 billion, up 16.4% from $526.72 billion in the first three quarters of 2020.
- Online penetration hit 18.7%, up from 18.4% for the same period last year.
- Offline sales increased 14.1% year over year, up significantly from 1.9% for the first nine months of 2020.
- Total retail sales reached $3.28 trillion, up 14.5% from $2.87 trillion in the first three quarters last year.
- Digital sales accounted for 20.7% of all gains in retail spending across all channels, down from 74.0% for the same period in 2020.
Percentage changes may not align exactly with dollar figures due to rounding.