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Ecommerce is powering US retail growth.
Despite supply chain challenges, inflation and dips in top retailers' ecommerce sales as shoppers head back out to stores, the data and market research provider’s 2022 United States Retail Landscape and Go-to-Market Planning Report concludes that ecommerce will be the primary force in retail over the next several years.
“Inflationary pressures continue to cut into retailer margins, both in the US and abroad, while rising labor rates, increased material costs and higher fuel prices across all supply chains impact suppliers, retailers and consumers,” said Deren Baker, CEO, Edge by Ascential, in a statement. “Despite these challenges, data from Edge by Ascential shows that ecommerce will continue to be the largest driver of retail growth over the next few years in the US and worldwide.”
With this, the report makes a few projections:
- Ecommerce will reach $1 trillion GMV in the US in 2022, up from $907.7 billion in 2021.
- Amazon will overtake Walmart as the leading US retailer by 2024
- Ecommerce will account for 30.5% of total retail sales by 2026, up from 24.6% in 2021.
Amazon keeps rising
When it comes to Amazon, the report projects that the ecommerce giant will add $294 billion in US sales between 2021 and 2026. By 2026, Edge by Ascential forecasts that Amazon will have 14.9% of US retail market share on its own.
“Amazon has always taken advantage of its head start as a digital-first platform and has been a pioneer of almost all the growth levers associated with platform-based retail from ‘subscribe and save’ through Prime membership to the evolving media and marketing services Amazon offers to brands,” Baker said. “Therefore, it’s not a huge surprise that by gross merchandise value (GMV) sales, our AI-powered forecasting software on Edge Retail Insight anticipates Amazon to overtake Walmart as the largest retailer in the US by 2024.”
With Amazon’s rise, the report projects that Walmart’s share of retail will be 12.7% by 2026, down from 13.1% in 2021. To be sure, Walmart will be working to change that dynamic. The company is making a big digital push and building out a fulfillment network that works together with its stores. Per the report, the other top retailers will be Costco (4.4% by 2026) and The Home Depot (3.9% share by 2026).
Grocery is gaining
The report also hones in on a growing area of ecommerce: Grocery. Online shopping initially keyed in on items that could be boxed up and shipped, but the rise of quick commerce services like Instacart and the adoption of curbside pickup and express delivery by major grocers in the pandemic has made online food shopping a a more viable option.
That's playing out in Edge by Ascential's numbers: In 2021, online edible grocery sales in the US – which refers to ambient, chilled, fresh and frozen food, soft drinks and alcohol – reached $54.8 billion, up 117% on 2019. About 50% of this category was attributed to Walmart, Target, Kroger and Costco, as the larger retailers picked up ecommerce operations in the pandemic.
By 2026, Edge by Ascential forecasts online grocery to make up 8.8% of all ecommerce sales.
While these are projections, they collectively point to an important trend: The growth and influence that ecommerce gained in the pandemic will be with us going forward. Sales data and stock prices may tick up or down, but the ecommerce infrastructure that retailers introduced, advances in customer experience, and, most of all, the consumer comfort with shopping digitally – even if it means toggling between online and offline experiences – will still be there.
Trending in Retail Channels
Retail media networks must drive sales incrementality, a new report from the Association of National Advertisers states.
Retail media networks are creating a new layer to the relationship between brands and retailers, and a new report indicates that brands in particular are still navigating the growing pains.
The last two years brought fast growth of retail media networks, as retailers recognized the value of providing advertising opportunities through ecommerce marketplaces that grew rapidly during the pandemic, and the value of the first-party data they possessed in a world where third-party cookies and IDFA are becoming less valuable tools. For a historically low-margin business like retail, digital advertising also presents an opportunity for a high-margin business line of 50-70%.
Brands have proven to be eager adopters as they sought new ways to reach customers in this environment, as well. According to eMarketer, ad revenue from retail media networks will reach $52 billion in 2023 and $61 billion in 2024. Over the next two years, retail media will account for one in five digital ad dollars spent by marketers. The spend is only expected to grow. According to a survey from the Association of National Advertisers (ANA), 73% of brands said they expect to be spending somewhat or significantly more on retail media in the future than they do today.
However, this proliferation has also created “more marketing decisionmaking complexity for advertisers,” ANA CEO Bob Liodice said in a new report.
The need to navigate multiple networks and still-developing tools to maximize the opportunity presented by retail media is leading to a multitude of approaches. Layer on top of that the fact that brands are both selling goods and advertising through retailers, and it’s clear the landscape is being reshaped.
A recent report from the Association of National Advertisers uncovered the areas where fault lines may emerge under the surface:
- Reluctant buyers: 88% believe they are somewhat or heavily influenced by retailers to buy advertising on retail media networks.
- A multitude of players: 56% said they are currently working with five or more different retail media networks.
- Differing goals: Two-thirds of respondents see driving conversion as the most important investment. Only 12% indicated the most important objective was “to invest for future brand growth,” and 7% cited “to drive awareness.”
The results underscore key areas where relationships between brands and retailers can be strengthened.
Sales vs. growth. Retail media must be able to drive both conversions of a single sale in the lower funnel, and brand equity growth in the mid- to upper-funnel.
As one respondent put it, "The jury is still out on if the RMNs are truly driving sales incrementality."
This also has implications for how a brand is budgeting retail media. Some brands are shifting dollars from shopper marketing, brand marketing, and trade spending, which could put the emphasis on short-term sales. But as another respondent put it, "There is concern that while attribution shows RMNs are driving brand sales, they are not necessarily driving brand growth. This is especially concerning where incremental RMN spending is being sourced from brand building budgets."
Standard measurement. Brands want to see an improvement in transparency in measurement. They also want results to be measured in the same ways across platforms. Further, brands believe retail media networks are not fully optimized for their KPIs.
This all leaves room for retailers to show they truly understand what brands are seeking from retail media, and show how they are delivering, all while reducing complexity.
As the report put it, “The next phase of growth for RMNs and value creation for brands will be through RMNs assuming shared responsibility with advertisers for driving brand growth, and demonstrating the ability of their platforms to drive incrementality and positive ROAS for brands. In other words, the next stage of growth will be driven by results versus relationships.”