Ecommerce in the US will top $1 trillion by the end of the year despite inflation challenges
Despite uncertainties from the lingering pandemic and a tense geopolitical landscape, US chain retail sales increased by 7.6% in 2021, with positive momentum expected through 2026. Indeed, the United States is the world’s second-largest ecommerce market after China. Already the largest channel, we expect online to account for 30.5% of chain retail sales by 2026, and grow faster than any store-based channel.
Amazon expected to be US retail leader in two years
Despite the billions of dollars Walmart has spent on developing digital capabilities, Amazon will overtake the store-based retail giant to become the market leader by 2024. Amazon is focused on international expansion, with moves in the US foreshadowing the global moves they'll make. With this in mind, it's critical for brands to understand not only Amazon's commerce operations, but also the broader services it offers.
For instance, Amazon, the world’s leading retail media business, is now realizing more than $31 billion annually in advertising revenue, which is one of its fastest-growing segments. This changing landscape creates new opportunities for brands, as well as new investment decisions.
As ecommerce and online traffic grows, retailers are steadily expanding their advertising capabilities. Despite a 2022 slow down in digital retail media spend, it's projected to grow $10 billion this year and reach $52.5billion by 2023, up 66% since 2021. As retailer platforms aggregate shoppers, media and advertising will be used to monetize that traffic across retail. Amazon has driven most of retail media’s growth to date, but now nearly every major global retailer has a retailer media network.
Brands must tap into these emerging retailer advertising services to drive visibility, sales, and conversion online to stay ahead of the curve in a digital-first era of shopping.
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The shakeup: Market Fulfillment Centers
As customer expectations soar, offering choice and speed in the last mile has become tablestakes. With 4700 stores located within 10 miles of 90% of the U.S. population, Walmart is leveraging its expansive bricks-and-mortar network to develop click-and-collect capabilities that differentiate itself from online pureplayers. Curbside and instore pickup is less of a cost burden than home delivery and Walmart is now seeing the high capital investment in technology, supply chain, and store remodeling finally pay off.
During the past year, Walmart increased the number of orders coming from its stores by 170%, which the retail chain has said prompted the next phase of its store evolution: Market Fulfillment Centers (MFC). These are automated fulfillment centers located within a Walmart store. An MFC's inventory is separate from the store’s, allowing Walmart to service for both online and in-store customers.
What does this mean for brands? Click & collect models require different supply chain capabilities and different assortments and pack sizes. This means dealing with a store-based retailer like Walmart is not as straightforward and requires different strategies for its physical shelf and MFC inventory.
New digital sales channels
The US market is also one of the leading innovators when it comes to emerging digital commerce channels such as social commerce and quick commerce. North America accounts for 43% of the total global retail quick commerce market. These include delivery intermediaries like Instacart, and the fairly new, pandemic-born startups and scaleups like Gorillas and GoPuff.
Some US quick commerce players already operate at scale. Instacart has become a dominant player, with more than 700 retail partners to its name. It is by far the largest third-party delivery intermediary focused on retail and grocery delivery, an with annual GMV of $30 billion - almost double the size of its next competitor. European-based startups such as Gorillas and Getir, have also recently entered the US market.
Understanding the size of the US retail and ecommerce market - its unique and emerging trends, its drivers of change, and where its many omnichannel retailers are investing - are all critical enablers of success in this massive market.
Knowing where growth will come from and then investing in those areas represents a great opportunity for brands.
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