U.S. online retail sales are expected to soar in 2020 as the pandemic shifts consumer spending to the internet.
According to the new 2020 U.S. Online Retail Forecast from global business advisory firm FTI Consulting Inc., U.S. online retail sales will experience a $71 billion windfall in 2020 as a direct result of the impact of COVID-19 on consumer shopping habits.
The study predicts U.S. online retail sales will reach $748 billion in 2020, compared to $598 billion in 2019 and its pre-pandemic 2020 forecast of $677 billion. This implies a 25% increase over 2019, the strongest growth year recorded by FTI for online retail sales since 2006, when the channel was still emerging. FTI also projects online market share of total retail sales will increase by 3.5 percentage points in 2020, more than double its annual market share gains in recent years.
FTI also surveyed consumers about their holiday gift-giving plans for 2020. Overall, 80% of respondents answered yes when asked if they were more likely to shop online this year relative to last. Moreover, respondents plan to spend a larger percentage of their overall holiday shopping budget online compared to prior years.
While FTI expects that many consumers who were forced to use the online channel for purchases due to the pandemic will continue to do so in the future, annual sales growth similar to 2020 is highly unlikely going forward. Annual online retail sales growth will decelerate to low double-digit rates over the next several years, according to the study.
Looking ahead, the study projects that online retail sales now will reach $1 trillion by 2023, a year earlier than projected in 2019. Total online market share is projected to reach 27% by 2025 and 33% by 2030, compared to 19.2% in 2020.
“No forecast model could have ever anticipated what transpired in 2020,” said J.D. Wischer, leader of the retail & consumer products practice at FTI Consulting. “The shutdown necessitated the shift online and simultaneously created a new ‘marginal consumer,’ with shopping habits having been transformed by access constraints and safety concerns. We will continue to see shoppers opting out of traditional brick and mortar retail and pivoting to online, further accelerating already strong growth drivers.”