Total retail sales in North America will decrease this year while online sales will experience their fastest growth since 2008.
E-commerce sales will grow 18.5% in 2020, increasing online penetration from 16.6% to 20.2%, according to a report by Forrester, which projected that more than 25% of all retail sales occurring online by 2024. Total retail sales will fall 2.5% this year the report said, with the decrease limited by growth in the grocery category.
North American grocery sales will rise 7.6% in 2020, increasing their overall share of total retail by 5.9%. However, Forrester expects non-essential retail sales to perform poorly, declining by 5.9%.
As online sales grow to historic levels, retailers will feel significant pressure on their margins in 2020 because e-commerce logistics costs increase retailers’ costs, noted Forrester. For example, Urban Outfitters’ expenses during the first quarter primarily increased due to rising delivery costs as its online sales grew.
“These increased costs will force many retailers out of the market, especially as these companies have depended on online sales during the H1 [first quarter) 2020 to offset the losses resulting from shelter-in-place laws and store closings,” the report stated. “As online buying trends remain strong over the next five years, retailers will have to find a balance to help alleviate this pressure on margins.”