E-Commerce Sales Top $1 Trillion

Online shopping is far from dead.

(You’ll find the text version below this embedded video)

The holiday shopping season is in full swing, and this year most people are comfortable going back to physical stores to buy gifts for their loved ones— as well as themselves.

But at the same time that consumers flock to their favorite stores, online shopping continues to thrive. In fact, we just hit a milestone when it comes to e-commerce here in the U.S.

Online sales topped $1 trillion for the first time ever on a trailing 12 month basis. That’s a gain of 9% over last year.

Now, there are a couple of interesting things about that $1 trillion number.

One is that it’s way above the $820 billion that e-commerce sales would have been had they stuck to their pre-pandemic trend.

Before the pandemic, online sales were growing at a 14% to 15% clip, but that massively accelerated when everyone was forced to stay at home in 2020.

As you would expect, growth has slowed down this year, but online sales are still growing solidly off that higher base.

The second interesting thing is that e-commerce sales as a percentage of total retail sales—a number that is called e-commerce penetration— is back to the pre-pandemic trendline.

Even without the pandemic, we would have expected e-commerce to account for 14% of total retail sales today, which is close to the share that it has.

The reason that e-commerce penetration is back to the trendline, while e-commerce sales are well above the trendline is because sales at physical stores have also surged— to $6 trillion over the past 12 months.

What does this all mean? Well, it means that e-commerce is continuing to grow and it’s continuing to gradually take share from physical stores. But the pandemic didn’t accelerate the shift from physical commerce to online commerce.

You might remember that back in July, Shopify laid off 10% of its workforce because the company erroneously assumed that e-commerce penetration had permanently jumped ahead by 5 or 10 years.

Yes, we did see a temporary acceleration of e-commerce adoption during the pandemic, but today e-commerce penetration is well below the high point set in 2020 and it’s probably going to take a few years to get back to that level.

That said, the outlook for e-commerce is still pretty bright.

Today, e-commerce makes up 14.8% of total retail sales. Even if you strip out sales of things like cars and fuel, which people typically don’t buy online, then e-commerce penetration is only a little over 20%.

We’ll see where that number ends up going long-term, but I’m betting that it eventually tops 50%. If that’s the case, then e-commerce sales can continue to grow strongly even from where they are today.