U.S. online retail sales will surpass $1 trillion by 2027 compared with $445 billion this year, according to a forecast by business advisory firm FTI Consulting Inc, as more Americans move away from brick-and-mortar stores.
Online sales will grow at a compound annual rate of 12 percent through 2020 and at a relatively moderate 9 percent over the next decade, according to the report released on Tuesday.
Purchases made online accounted for 12 percent of total U.S. retail sales and 50 percent of total sales growth in the past year, according to the study.
The FTI study said Amazon.com’s total share of these online sales is likely to increase to 53 percent by 2027 from 34 percent in 2016
FTI said Amazon.com Inc’s total share of these online sales is likely to increase to 53 percent by 2027 from 34 percent in 2016.
This means Amazon’s share would represent nearly 12 percent of U.S. retail sales by 2027 compared with 4 percent at present.
This year, stronger online business is once again expected to boost total sales for the U.S. holiday season, a period which typically accounts for 20 to 40 percent of annual sales for many retailers.
‘The impact of accelerating online sales growth has been evident in the past two years, with elevated levels of retail bankruptcies and announced store closures amid a non-recessionary environment,’ said Christa Hart, a Senior Managing Director in the Retail & Consumer Products practice at FTI Consulting.
‘If online sales double by 2023, as we expect, stores will have to contend with the prospect of losing the same amount of sales to the online channel in the next six years as they did in the previous 16.
‘The frustration for many retailers is that even building a complex and expensive omnichannel enterprise has just kept them in the game instead of leading to renewed profitability.’
The online channel accounted for nearly 50 percent of total retail sales growth in the past year.
With most Americans already shopping online, FTI Consulting expects future growth in online shopping will come from shoppers using the medium to purchase more frequently and across more product categories than they do currently.
Grocery is one sector that continues to challenge online retailers seeking to expand market share.
Current online market penetration is less than 2 percent, despite grocery and home meal solutions being a $750 billion category.
As a result, FTI Consulting’s forecast projects grocery’s online market share may only reach the mid- to high single-digits.
Grocery is one sector that continues to challenge online retailers seeking to expand market share – someone Amazon hopes to change with its recent purchase of Whole Foods
‘Grocery is the current obsession of many online retailers, but U.S. consumers have still not embraced online grocery shopping and appear to prefer to shop for their food in-store,’ said Khaled Haram, a Senior Managing Director in the Retail & Consumer Products practice at FTI Consulting.
‘Tens of billions of dollars in sales migration to online are at stake in this category, so efforts and investment by Amazon, Wal-Mart and others will attempt to break down these barriers to adoption in the next few years.
‘It is increasingly clear that physical stores will play a role in that effort to get more shoppers buying their groceries online.’
U.S. retail industry group the National Retail Federation has forecast nonstore sales, which include online sales, to rise 11 to 15 percent to about $140 billion during the last two months of this year. In 2016, those sales rose 12.6 percent.