After the giant ecommerce surge brought on by the start of the pandemic, online sales growth slowed significantly for 2021 as many vaccinated and weary consumers returned to stores. Digital spending during the holiday-centric Q4 increased 9.2% year over year, bringing the total jump in ecommerce for 2021 to 14.2%, according to U.S. Department of Commerce figures released Friday.
In preliminary estimates, Digital Commerce 360 expected online sales to rise 14.2% for the year, given the trajectory of the first three quarters of 2021. And the market performed as anticipated. Consumers spent $870.78 billion online with U.S. merchants last year, up from $762.68 billion in 2020, according to Commerce Department data. And while in-store sales spiked, shoppers didn’t snap back to pre-COVID-19 buying tendencies and still shopped with fervor online. Ecommerce’s share of total retail sales remained flat year over year—with roughly $1 in $5 spent coming from digital orders in both 2020 and 2021, according to Digital Commerce 360’s analysis of Commerce Department figures.
Following the swell in online spending in 2020 because of the pandemic, digital growth was bound to decelerate in 2021. While 2021’s ecommerce lift of 14.2% is less than half of the record-breaking 31.8% retailers collectively registered during 2020, it’s on par with pre-pandemic growth levels. In fact, the median online sales growth for the five years leading up to the pandemic was 14.2%, and 2019’s uptick was 14.3%. And when digital revenue in 2021 is compared with 2019, online spending soared by 50.5%. Although last year’s ecommerce landscape initially appears far less impressive than its 2020 counterpart, the fact that online merchants maintained gains—and even grew—is noteworthy.
US ecommerce growth tapers off in recent quarters
Q1 2021 marked the fourth consecutive quarter with 30%-plus ecommerce growth at 39.1%, according to Commerce Department data. But that increase was still elevated because it compared to the last largely pre-pandemic quarter in 2020. Since then, year-over-year increases dropped to single digits—9.2% in Q2, 7.0% in Q3 and 9.2% in Q4, according to Commerce Department data.
Online sales growth during the November-December holiday period was muted, thanks to several factors like supply chain issues that caused the number of out-of-stock notices to soar. Also, price inflation, weaker discounting and the double whammy of rebounding store traffic paired with declines in ecommerce site traffic hurt sales.
Online penetration stabilizes last year
Historically, digital’s share of retail sales through all channels has grown incrementally over time. Penetration numbers inched up as consumers gradually became more comfortable making purchases online and retailers improved their fulfillment operations and could get packages delivered more quickly. But the pandemic gave that trend a jolt—accelerating ecommerce adoption by two years. Before 2020, no year had ever increased digital penetration by even two percentage points from the prior 12-month period. Yet when COVID-19 hit the U.S., online’s share of all spending ballooned by 3.6 percentage points to 19.1% in 2020 from 15.5% in 2019.
Consumers seem to be sticking with their new online shopping habits, even during lulls in the pandemic, according to Digital Commerce 360’s analysis of Commerce Department data. Digital’s share of total retail sales remained at 19.1% in 2021. Despite the deceleration of online sales growth and the recovery of in-store shopping, penetration stayed on par with the height of the pandemic because both ecommerce and offline spending grew at roughly the same rate.
US total retail sales reach $4.55 trillion in 2021
Total retail sales through all channels registered an all-time high growth rate in 2021—with a 14.0% year-over-year bump, according to a Digital Commerce 360 analysis of Commerce Department data. Overall spending reached $4.55 trillion last year, up from $3.99 trillion in 2020. That record year-over-year climb was nearly double the 7.2% growth in 2020 and still far higher than 1999, which claimed the No. 2 spot with 7.3%.
In 2020, retailers sold more as shoppers redirected dollars normally used for travel and entertainment to the purchase of physical goods. But momentum in consumer spending—helped along by inflation trends—allowed 2021 to far surpass the prior year’s performance.
It was offline—mainly in-store—shopping that fueled most of the overall retail growth in 2021. And that’s a big role reversal from 2020. Digital Commerce 360 estimates offline sales grew a record 14.0% last year as public health restrictions loosened, vaccinations picked up, and shoppers wanted to get back to shopping for gifts in person. That’s more than five times the 2.6% uptick in 2020 and nearly 2.5 times higher than the second-place finisher at 5.7% in 2004.
In 2021, offline sales accounted for more than three-quarters, or 80.7%, of the overall gains in retail spending, while ecommerce represented the remaining 19.3%, according to a Digital Commerce 360 analysis of Commerce Department data. Conversely, in 2020, during the earlier days of the pandemic when many stores were closed and lingering consumer anxiety kept shoppers away from physical stores, online spending accounted for the bulk of additional retail dollars spent. Digital revenue comprised more than two-thirds, or 69.1%, of retail gains while offline spending took the other 30.9%.
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.
Amazon accounts for 43.5% of US ecommerce
After a blockbuster 2020, online revenue growth slowed for Amazon.com Inc., No. 1 in the Top 1000. But the web giant still grew its share of the U.S. ecommerce market in 2021. The total value of goods Amazon and its third-party marketplace sellers sold to U.S. consumers, often referred to as gross merchandise value or GMV, increased 18.8% to $378.95 billion last year from $319.10 billion in 2020, Digital Commerce 360 estimates. Meanwhile, online sales in the U.S. grew 14.2%.
As a result of that above-market growth, Amazon and its third-party merchants represented 43.5% of digital spending in the U.S. in 2021 vs. 41.8% in 2020. Additionally, the web giant accounted for more than half—55.4%—of all gains in U.S. ecommerce in 2021, according to Digital Commerce 360.
Q4 2021 highlights
Here’s a recap of the market during Q4 2021.
- Ecommerce sales hit $257.62 billion in Q4, up 9.2% from $235.96 billion for the same period in the prior year, according to Commerce Department data. That’s a slowdown from 31.9% year-over-year growth for the same quarter in 2020.
- Online penetration reached 20.4% in Q4, according to a Digital Commerce 360 analysis of Commerce Department data. That’s a drop from 21.1% for the same quarter in 2020 and 17.4% in Q4 2019.
- Total retail sales reached $1.27 trillion in Q4, up from $1.12 trillion the prior year, according to a Digital Commerce 360 analysis of Commerce Department data. The sizable 13.0% lift is the highest-ever recorded rate for the fourth quarter. Sales through all channels increased 9.3% in Q4 2020.
- Ecommerce accounted for 14.9% of gains in total retail spending in Q4, which is a quarter of the online sector’s 60.1% share of overall growth for the same quarter in 2020.
- Offline sales grew 14.0% in Q4, which was more than three times higher than the 4.5% registered for the same period in the prior year.
Percentage changes may not align exactly with dollar figures due to rounding.
Total e-commerce sales