E-commerce Retail Sales to Top $1T

E-commerce growth is moderating compared to last year’s surge, but it remains strong enough to reach a long-awaited milestone much sooner than anyone predicted: online retail sales will top $1 trillion this year.

A new report from FTI Consulting projects that e-commerce will hit the $1T mark in Q3 of 2022, three years earlier than the firm predicted it would before the pandemic hit.

FTI’s new report says the e-commerce share of retail sale will hit 22.1% this year, up from 20.8% in 2021 and 15.2% in 2019. After four quarters of what FTI calls “hypergrowth” in 2021, the company says e-commerce sales—which have doubled in the past four years—still are brisk but are moderating.

“The rocket-like growth of online retail during COVID-19 certainly will moderate. Online sales in the past two years were driven by necessity—due to stay-at-home living and work conditions—as well as more discretionary income due to government stimulus, a speedy jobs recovery and increased savings,” said J.D. Wichser, who heads the retail practice at FTI, in a statement.

“This will modulate over time, exacerbated by recent inflationary pressure, which is expected to slow total retail spending over the second half of 2022 and is quickly become the primary source of stress for consumers, who don’t know how long it will persist,” Wichser said.

That stress is likely to get worse: with the latest CPI notching a 9.1% inflation rate this week, more 75 bps rate hikes are expected from the Federal Reserve, dashing hopes for a “soft landing” and raising the worst-case scenario of a return to the “stagflation” last seen in the US 40 years ago.

Despite the unsettling short-term economic picture, FTI remains bullish on the long-term outlook for e-commerce: the consulting firm projects that online retail sales will double again to $2T by 2030, when it says e-commerce will grab a 31% share of retail.

That doesn’t mean that bricks-and-mortar retail will start to wither away: a survey of leading retailers conducted by Ipsos for Publicis Sapient and Salesforce found that 44% of online-only retailers are not profitable.

The new projection of a moderating growth rate for e-commerce, compared to last year’s unprecedented surge, confirms what Amazon cited as the primary reason for its $4B loss in Q1 2022, the first quarterly loss for the e-commerce giant since 2015.

Amazon, which doubled the size of distribution network in the past two years—initiating projects for new fulfillment centers across the US and accumulating a 370M SF portfolio of leased industrial space—disclosed in a Q1 earning call that it overestimated the growth of online retail and now has too many warehouses.

The company has spent the past three months notifying city managers and local economic development agencies in multiple locations that it is postponing the opening of new warehouses slated to cut the ribbon this year for up to two years in multiple locations, GlobeSt.com reported.

The e-commerce titan, which binged on land purchases totaling more than 4,000 acres during the pandemic, also has abruptly canceled several fulfillment center projects that have yet to break ground.