Amazon Prime Day hoists overall U.S. online sales

Amazon’s annual Prime Day sales event, which kicked off Monday, stands to give a sizable boost to online retail sales growth this year, according to FTI Consulting.

U.S. online retail sales are projected to hit $865 billion in 2021, up 13.5% from 2020, when the COVID-19 pandemic fueled a 32% uptick to $762 billion, according to FTI’s 2021 U.S. Online Retail Forecast. One impetus behind that gain: Nearly two-thirds of Amazon Prime Day shoppers polled said they plan to spend more during this year’s event than in 2020. Prime Day runs June 21 to 22 in 2021, compared with Oct. 13 and 14 last year, when Amazon pushed back the event due to COVID-19.

In an FTI survey of 1,000 U.S. consumers who made a purchase during Prime Day in 2020, 62% said they aim to spend more this year on Prime Day, with 36% reporting that they plan to spend significantly more. Just 9% of respondents said they expect to spend less on Prime Day this year.

By product category, Prime Day shoppers said they’re looking to buy apparel and accessories (72%), Amazon electronics (58%), household goods (54%) and footwear (51%). FTI noted that these spending preferences reflect pent-up demand for discretionary items after months of stay-at-home living and the return to work at the office.

Related:Amazon Prime Day reels in CPG market share

“As Americans begin to emerge from COVID-related restrictions, many have been converted to online shoppers as their confidence in online shopping increased the past year, particularly in the grocery category,” Christa Hart, senior managing director in the Retail & Consumer Products practice at FTI Consulting, said in a statement. “While malls and other shopping centers are seeing a return of shoppers in 2021, it is hard to imagine that they will be the same as we remember them. Those retailers who have spent years positioning themselves for omnichannel success will be rewarded most.”

How much do you intend to spend on Amazon during this Prime Day compared to 2020?

Nonfood and general merchandise categories will drive online retail sales growth this year, but online spending on grocery and household products are expected to remain elevated after taking the largest share of online sales gains in 2020, according to FTI. The report said online grocery sales more than doubled in 2020, and the category is now close to a $100 billion, with a ceiling that has “moved considerably higher” because of the pandemic.

“Depending on how the category is measured in its entirety, we estimate that the online channel now commands a market share of 8% to 11% of grocery-type sales,” FTI said in the study. “Grocery is a last-mover category in the online channel, and it’s hard to project future growth based on 2020’s exceptional results under extraordinary circumstances. People still enjoy aspects of grocery shopping, and it’s possible the category will backslide a bit online once shoppers are freely roaming stores again. We don’t know exactly where this is going. Online grocery’s potential market share has a lower ceiling than most other product categories, but it’s certainly higher than we once thought possible.”

Related:Amazon’s physical store sales drop despite booming first quarter

Annual online retail sales growth (year-over-year)

With consumers zeroing in on discretionary product categories, Amazon highlighted few grocery deals for Prime Day this year. Last week, the company said its Whole Foods Market subsidiary offered deals throughout the store from June 16 to 22 on new seasonal items, such as Whole Foods Summer Sunset Pie (25% off) and Heirloom Caprese Pizza ($10), Butterfly Berry Lemonade ($1) plus single-serve mochi (buy one, get one free), beef rib steaks ($11.99/lb.), Chilean sea bass (25% off) and reusable water bottles (30% off).

Rivals Walmart and Target also are countering with their now-annual online sales events, with Walmart’s Deals for Days running June 20 to 23 and Target’s Deal Days running June 20 to 22, both including food and groceries.

FTI’s survey of Prime Day shoppers revealed that more consumers will continue to shop online versus pre-pandemic, with 41% expecting to shop online as often as they did during the pandemic and 25% shopping online less than in 2020 but more than in 2019. Sixteen percent of respondents said they missed in-store shopping and will return to pre-pandemic shopping habits, whereas 18% still favored in-store shopping for certain products.

“There will be no return to pre-pandemic shopping habits for a large majority of consumers, and this will tend to benefit large online and omnichannel sellers, most of whom are general merchandise retailers,” according to J.D. Wichser, leader of FTI’s Retail & Consumer Products practice.

U.S. online retail sales

Amazon’s share of U.S. online retail sales climbed to 43% in 2020 from 40.5% in 2019 and could top 50% by the end of the decade, FTI projected in the report. The company’s retail sales soared 41% in 2020 and 45% in the first quarter of 2021, the study said. Walmart reported that its U.S. e-commerce sales surged by 78% to $43 billion in 2020 and represented 11.6% of its total U.S. sales, compared with 7% in 2019. Likewise, Target reported its online-originated sales jumped by 145% to $17 billion in 2020 and accounted for 18% of its total sales, double its online share in 2019.

“Amazon Prime continues to help fortify a large and loyal customer base, and it is getting harder to conceive of a scenario where Amazon relinquishes market share in the years ahead,” FTI observed in the report. “Online market share gains by Walmart, Target and others are likely coming at the expense of stores — their own and others — not from Amazon.”

FTI pointed out that its 2021 forecast shows incremental online sales of $121 billion more than its pre-pandemic outlook. The consultancy forecasts the online channel to grow to 20.5% of U.S. retail sales (excluding automobiles and gasoline) in 2021, compared with 19% in 2020 and 15.4% in 2019. Looking further ahead, FTI predicts U.S. online retail sales surpassing the $1 trillion mark in mid-2023 and then topping $1.9 trillion by 2030, with total online market share nearing 33% by 2030 from 20% currently. That sales growth would represent a compound annual growth rate (CAGR) of almost 10% over the next decade.

“As we reflect on the e-commerce growth of the past 12 months, it goes without saying that consumers have embraced online shopping to a new extent,” Wichser added. “We do not foresee a drastic shift or reversal in these behaviors as the economy fully reopens. Successful retailers will diligently review their real estate portfolio as they determine how to adjust their strategy to best align with this new normal.”