How Big Can Online Retail Get?

In Q2 US GDP dropped an estimated 35.5% (for context in 1932 GDP contracted “only” 12.9%)

meanwhile online retail stocks continue to soar higher.

Of course, Amazon has other business units that contribute to revenue growth (AWS, Ads) but it makes you wonder, is it even possible for these companies to live up to these growth expectations? 

Or from a brand owner’s perspective, can I expect demand to grow forever? or like I stated in the title..

How Big Can Online Retail Get?

Before COVID, it was expected that e-commerce would make up 22% of total global retail sales by 2023, which would represent a ~57% jump from 2019.

For a benchmark, of the 10% of US retail done online, Amazon-owned roughly 40% of the pie. During COVID we got to see an acceleration of progress.

The CEO of Microsoft said, “Microsoft has seen 2 years of digital transformation in 2 months.”

Our habits were forced to change. 

It wasn’t just that online shopping was easier, in many cases it wasn’t possible or safe to go to the store for the things you needed. Nowhere was this more apparent than grocery.

For example, Benedict Evans reports that UK online food sales spiked 80% from February to April.

Another way to look at this chart is double the expected progress of 3 years happened in 3 months. I’m not suggesting that online retail will make the same 80% jump to 25.2% of global retail sales but coincidentally that is exactly where China is already operating and they seem to be a look into the future this year.

Of course, no one knows exactly what the future will hold but given retail spending trends of the Chinese and how quickly people switched to buying their groceries online it seems inevitable that retail e-commerce in the US will soar beyond the 2019 level of 10.7%

So to answer the question, how big can online retail get? Assuming that logic makes sense to you, I don’t think it’s unreasonable to expect your US-based Amazon demand to double (conservatively by 2023) just from consumers switching their buying habits online.