Online sales will blow past the $1 trillion mark by 2025, according to business advisory firm FTI Consulting, though non-Amazon retailers will only enjoy about half of those dollars.
Amazon’s dominance in online retail is clear, though how much it controls depends on who’s parsing the data.
This summer, eMarketer published data predicting the Jeff Bezos-founded juggernaut would command 49.1% of domestic e-commerce share by the close of 2018, a departure from FTI’s prediction that the Seattle firm would earn half the market by 2023. Amazon is vacuuming up whatever spoils are to be had in retail; for example, it grabbed 30 percent of all of the growth that happened in overall shopping sales last year, FTI said, and close to two-thirds of 2017’s U.S. online sales expansion. That’s an improvement from 52 percent in 2015 and 58 percent the following year.
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Consumers’ love of shopping online—and the convenience and choice it offers—is expected to power e-commerce to roughly $525 billion in sales this year, according to FTI, which equates to a 15.9% jump compared with 2017’s $452 billion. Of note, 40 percent of all U.S. clothing sales could stem from online sites, FTI estimated, making digital experience investments increasingly important for retailers seeking to capture a greater share of web sales.
What’s troubling for store-based retailers is FTI’s finding that omnichannel investments designed to narrow the chasm between Amazon and everyone else aren’t quite generating the expected returns, though “leaders” are outperforming the rest of the pack. Looking at “exemplary” retailers including Nordstrom and Dick’s Sporting Goods, whose digital sales top $1 billion, represent 10 percent of total sales, and have grown annually at a rate of 10 percent of greater, FTI discovered that return on invested capital (ROIC) dipped over time both for the leaders and for all others—but the latter group experienced a larger drop, roughly 3 percent versus 5 percent.
“The shorthand conclusion we draw from this comparison is that an omni-channel strategy that is well executed and achieves respectable scale, rather than being a driver of ROIC, has allowed the best of the bunch to flounder less than their less online-savvy peers,” FTI said in the report. “That’s discouraging, but it’s not the final word. As the retail shakeout continues, market share gains and improved ROIC eventually should come to those best prepared to take them.”
“For retailers heavily committed to omnichannel, it can’t happen soon enough,” the report noted.
