Online and Amazon to grow more dominant over the next decade




Consumers will continue to make more purchases online while cutting back on in-store purchases over the next decade, according to a report by FTI Consulting, which forecasts total online spending in the U.S. to surpass $1 trillion by 2027.
Online sales, which now account for roughly 12 percent of total retail sales, excluding auto and gas, will grow to 22 percent over the next 10 years, according to the estimates.
“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 FTI’s retail & consumer products practice, in a statement. “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 biggest beneficiary of the shift from stores to online will be Amazon.com, according to FTI. The e-tailer, which currently accounts for 34.2 percent of online sales, will see its share grow to more than 50 percent of the market by 2027, the firm estimates.
One area where Amazon may find a tougher go moving sales from stores to online is in grocery. FTI puts current market penetration for online at only two percent of grocery’s total and forecasts online growing to somewhere between mid- and high-single digits by 2027.
“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 at FTI. “Tens of billions of dollars in sales migration to online are at stake in this category, so efforts and investment by Amazon, Walmart 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.”
- FTI Consulting Projects U.S. Online Retail Sales to Top $1 Trillion by 2027 – FTI Consulting
- U.S. online retail sales likely to surpass $1 trillion by 2027: FTI – Reuters
DISCUSSION QUESTIONS: Do you expect the pace of online sales growth to remain at high year-over-year levels over the next decade? Do you see specific product categories currently being sold primarily in stores migrating to online by 2027? What categories will be most resistant to the shift?
Join the Discussion!
17 Comments on "Online and Amazon to grow more dominant over the next decade"
You must be logged in to post a comment.
You must be logged in to post a comment.
Founder and CEO, CrunchGrowth Revenue Acceleration Agency
E-commerce will continue to grow at its present 15 to 20 percent year-over-year rate. When you look at the categories that have less than 50 percent e-commerce penetration, you can see where the opportunities are. Although fashion, travel, books and music are all well-established e-commerce categories with over 50 percent penetration; home decor, furniture, consumer electronics, beauty and personal care, household cleaning and health are all underdeveloped online categories.
Food is, by far, one of the most underdeveloped categories and the most difficult. Packaged goods will have an easier time to transition because a branded box or can is the same no matter what channel it is sold in. Cost-effective shipping is the challenge due to the weight and bulk.
Perishable products will be the most resistant to e-commerce. Consumers still want to choose what fresh products they buy. Everyone has a preference when it comes to the type of meat, fruits, vegetables and other fresh products they purchase.
Senior Vice President, Dechert-Hampe (retired)
You can’t fight statistics — so the pace of online sales growth in the highest penetration categories (hard/dry goods) will slow percentage-wise but still represent the bulk of the dollar growth in online sales. In CPG, the online penetration of HBC is already in the 20s as well, so food is likely to be the highest percentage gainer. Our own estimates show FTI may be a bit conservative in forecasting total food penetration to stay in the single digits. Growth in the non-perishable center store categories will lead the way to what we think will be the 10 percent-plus range by 2022. That expectation is based on the acceleration curve of adoption rates in online grocery versus the early trend lines for more developed categories now. Could be right, could be wrong — it’s not a “statistic” until it happens.
Consultant, Strategist, Tech Innovator, UX Evangelist
“The biggest beneficiary of the shift from stores to online will be Amazon.com” Excuse me: do I look surprised?
“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.” Omnichannel is a given and (listen-up retailers) just a mechanism to enable what you must do to be profitable: meet (exceed really) customers’ wants/needs. The how and why is irrelevant to shoppers who want what they want or will go wherever the least friction to get it exists.
Grocery growth? The same was said about e-commerce in the late-’90s. This time around though, when the tipping point comes, the growth will be significantly faster.
Vice President of Marketing, OrderDynamics
No doubt online sales will continue to grow over the next decade. But given that Millennials like in-store shopping, omnichannel retail will become increasingly important. Today only 29.1 percent of U.S. and 23.5 percent of Canadian retailers have in-store pickup capabilities (OrderDynamics, Oct 2017) — but that is going to change fast. That means as online grows, so will the opportunity for consumers to pick up their products right away, directly from the store while doing errands. So retailers, make sure your retail technology is up-to-date. This is more than just a passing trend.
President, Integrated Marketing Solutions
Senior Marketing Manager, RW3
Great point Chris, the only other stat I would add is acquisitions as there are a lot of baby bears running around that could be a catalyst for digital innovation.
Professor of Food Marketing, Haub School of Business, Saint Joseph's University
President, Protonik
I’m always cautious about these kinds of predictions. Business history shows that they are always wrong — what’s not known is exactly how they will be wrong.
More concerning is the suggestions that Amazon will account for half of online sales. This wouldn’t be surprising — the internet tends toward monopoly because of the incredibly high cost to establish and maintain advantage.
This follows the online advertising trend: Google and Facebook account for 80 percent of advertising dollars online. And there’s the new Scott Galloway book about the four (Google, Apple, Facebook and Amazon) that dominate the web.
Managing Director, GlobalData
I don’t doubt that online penetration will increase, however, I am far more skeptical of the Amazon prediction. It’s perfectly possible that Amazon will have half the market, but given it is impossible to predict competitive dynamics so far ahead it is also quite possible that it won’t! Indeed, there are already quite a number of retailers seeing faster online growth than Amazon in the U.S.
What these stats also fail to show is how much of these online sales are supported by stores — browsing in stores first, picking up from stores, returning items to stores, etc. That’s not to say stores won’t be affected, but the impact is more nuanced than the binary online/physical split.
Co-founder, CART
I think it’s time we start to look at businesses more holistically than simply by channel. Yes, online sales will continue to grow. Yes, there’s an impact of that in-store. And how those channels can work together to drive value for the consumer is much more powerful than a single channel alone. As an industry, we’ve spent the better part of a century finding the exact right places to put stores to be around the people that buy stuff. This is really about how we can use those stores, integrated with online technologies, to better serve the customer.
Co-Founder and CMO, Seeonic, Inc.
Online sales will continue to grow as consumers get more comfortable with the process. With time at a premium in today’s busy society, online sales will grow to help ease the time pressure.
Groceries will be a lagging category in online sales. Many people, me included, like to see and feel produce before purchasing. The same is true for breads, milk and other perishable products. While non-perishables might be more readily purchased online the challenge of buying perishables online will slow the grow of online non-perishables as they are most times purchased in the same basket.
Senior Marketing Manager, RW3
As baby boomers begin to retire/shop from home and Gen Z starts to have more buying power, I see online sales growing. But I have noticed recently some issues with online ordering, such as ordering 2 or 3-day shipping but the product isn’t prepared for 3 or 4 days, making the entire process take over a week. Other issues I have seen are poor product descriptions or misleading marketing and having to return an item. If these issues continue to grow along with the demand, I could see online sales slow until they get worked out.
Regarding product migration, I’ve always been fascinated by big bulky items and where those will live. Ideally, if a company could deliver those to the consumer’s door, that would be a major win for convenience. However, those also cost the most (dimensions and weight) and sound like a nightmare from a logistics point of view. Can’t wait to see how those play out.
Global Retail & CPG Sales Strategist, IBM
Food may indeed be the final frontier for online shopping. Online grocery shopping has been around for almost 30 years now, with Peapod starting the effort. I know this category is gaining online interest, however, people take food very personally, as they should. Perhaps when we have taste and smell-sensory technologies available online, then the breakthrough may finally happen.
Retail Transformation Thought Leader, Advisor, & Strategist
Chief Amazement Officer, Shepard Presentations, LLC
Yes, online will continue to grow and evolve as companies like Amazon find new ways to deliver value and convenience to the customer. Almost everything will be available online with some type of delivery or pickup option. But what about traditional brick-and-mortar? Well, it’s not dead. Even Amazon knows this as they start to move into physical locations.
Does eBay get the kind of friendly treatment that Amazon gets? If not what’s the reason? After today’s earnings results eBay is down 5%.
VP, Marketing at Nicejob