Shopping online e-commerce

In FTI Consulting’s latest online retail forecast report, the firm is expecting U.S. online sales to reach $1 trillion by 2027, which compares to about $445 billion this year. The gain reflects a compound annual growth rate of about 9 percent over that time frame.

The forecast also implies further challenges for traditional retailers. Christa Hart, a senior managing director in the retail and consumer products practice at FTI, said 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.”

“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,” Hart said. “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.”

FTI said through the second quarter of this year, on a year-over-year basis, online sales grew 15.5 percent, “extending online sales growth from 2016, which reached 14.9 percent year-over-year.”

“The online channel now accounts for 12.2 percent of total U.S. retail sales, excluding auto and gas, a number that is expected to reach 22 percent by 2027,” authors of the report said adding that “will account for more than half of U.S. online sales by 2027, compared to the current share of 34.2 percent.”

Researchers at the firm said online shopping “accounted for nearly 50 percent” of total retail sales growth over 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,” the consultants stated.

Regarding challenges in the online market, FTI cited the grocery sector as facing the most hurdles. “Current online market penetration is less than 2 percent, despite grocery and home meal solutions being a $750 billion category,” FTI said adding that it’s forecast “projects grocery’s online market share may only reach the mid- to high-single digits.”

The forecast follows the acquisition of Whole Foods by Amazon this past August, which disrupted the sector from Wall Street’s perspective as investors pondered how the deal would impact online grocery shopping as well as physical stores.

Khaled Haram, a senior managing director at FTI, said the grocery sector “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.”

“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,” Haram said. “It is increasingly clear that physical stores will play a role in that effort to get more shoppers buying their groceries online.”

For More Business News From WWD, See:

Amazon, Wal-Mart and Apple Top List of Biggest E-commerce Retailers

Consumer Preferences Reshaping Retail Landscape

As IoT Grows, AT&T Sees Broad Deployment of Connected Devices and Products

How Malls Can Satiate Consumer Desires for Experiences

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