The analysts of Armada Corporate Intelligence are getting questions frequently when travelling around the country: people want to know how big a deal the e- commerce component of retail sales is. There’s really two pieces to the answer.
The first is the phenomenal growth rate it has experienced. Generally, the e-commerce sector of retail has been growing between 10% and 14% annually since the end of the Great Recession. And when we look at the incredible growth rates of companies like Amazon.com (22.37% revenue growth YOY and a 5 year annualized growth rate of 23.12%), we could easily start to jump on the bandwagon and tell all of you that e-commerce is the only future for retail.
As you would expect, that’s not the case. But, let’s start by looking at the competitive divergence in the online retail sector.
Here’s the first stat that we need to digest. Amazon accounted for 43% of all US online retail sales and dominated growth with more than 53% of the annual growth in dollars. Everybody else split the remaining 47% of the market’s growth in dollars. We don’t have all of the data assembled for 2016 yet, but at the end of 2015, Amazon had sales of $79 billion in online sales and it would take the following 19 largest online retailers to compile that much revenue (Walmart the next highest at $13 billion).
The reason why we even brought this story up today is that we got new data from the Census Bureau from 2016 that showed e-commerce sales growth still pushed it to only account for 8.1% of total retail (up from 7.3% in 2015).
Some analysts believe that it can only get to about 25% of total retail sales by sometime in the mid- 2020’s.
Is the trend in e-commerce critical? Of course, absolutely. It’s changing the competitive landscape, pushing massive amounts of private investment, and will push many companies out of business. To look at e-commerce market-share of just 8.1% and suggest that it isn’t important would be a career killer for any of us.
But, is it the entire retail picture? No. Not by a long shot based on today’s market share growth rates. We tend to overlook brick-and-mortar retailers that are making a difference by creating destination-like experiences and blending brick-and-mortar with e-commerce, creating value at a local level.
Source: Armada Corporate Intelligence