Today’s Topics

Hello,

Today we have 3 charts for you, all of them exploring the US-Ecommerce Industry.

• E-Commerce Sales: Growth story is intact

• E-Commerce Penetration: Back to its pre-pandemic long-term trend

• Comparison with China: Lots of headroom for future growth

The performance of e-Commerce stocks has been disastrous this year. Popular stocks like Shopify, Etsy and Chewy are down 50-80% in the last 1 year.

Even Amazon’s e-Commerce sales are struggling, down 4% in Q2-22 - the stock has fared better compared to other e-Commerce companies, due to its very impressive AWS Cloud business.

So, is the long-term e-Commerce growth story dead? My answer is No.

Its no secret that e-Commerce saw an unprecedented increase during Covid-lockdown times. Looking at the above chart, in US, e-Commerce retail sales jumped from $160B in Q1-20 to $211B in Q2-20, a 32% jump in one quarter.

Over the last 2 years, even as lockdown conditions eased, total e-Commerce sales has continued to grow, @~10.4% annualized, even from the higher base in Q2-20.

Its unrealistic to expect e-Commerce to maintain growth figures from 2020 (which was an exceptional year), but the long-term growth story is very much intact - the charts below, explore this in further detail.

In Q2-20, during peak lock-down, many stores were shut and people shopped a lot online, given a huge boost to e-Commerce. As offline retail sales dwindled, e-Commerce surged resulting in e-Commerce penetration (defined as e-Commerce retail sales as a % of total retail sales) increased from 11.9% in Q1-20 to 16.4% in Q2-20.

Since then, in the last 2 years, as stores re-opened slowly, and e-Commerce sales growth reduced, penetration has come down, expectedly.

However, as penetration comes down, its reverting to its long-term pre-pandemic trendline (possibly even a bit higher than that, depending on how next few quarters play out)

Comparing with other large e-Commerce markets, US e-Commerce still has a lot of runway left.

US e-Commerce retail sales in the last 12-months ending Q2-22 is ~$1T - making it the 2nd largest e-Commerce market in the world after China (~$2.9T in annual sales)

However, e-Commerce penetration in US (@14.5%) is still 3x lower than China, where ~45% of all retail sales happens online.

US e-Commerce penetration may never reach 45%, but even if it reaches as high as UK’s (@~36%), US e-Commerce sales can reach ~$2.5T annually (At current total retail sales level). That’s an addition of ~$1.5T to its current base of ~$1T/ year.

US e-Commerce industry has been one of the strongest growth industry in the last 2 decades and the 20’s decade should be no different.

P.S. There was a pause in publishing in the last few weeks, due to my annual leave. This newsletter is back to its weekly publishing cycle now.