Ecommerce sales grow 10.8% in Q3, outpacing overall retail

The latest US Commerce Department data hints at a "normalization" to pre-pandemic trends during the Prime Day quarter, said GlobalData's Neil Saunders.

​A hand holding a credit card next to a laptop.

US ecommerce sales gained share and outpaced the growth of overall retail in the third quarter. Yet the modest size of the upticks leave an open question as to whether the Prime Day quarter represented the emergence of any new trends.

For the third quarter of 2022, ecommerce sales rose 3% over the prior quarter to reach $265.9 billion on an adjusted basis for seasonal variation, the US Commerce Department reported. On an annual basis, ecommerce sales rose 10.8% from the third quarter of 2021.

The gains outpaced the growth of total retail sales, which rose 0.7% for the quarter and 9.1% year-over-year.

For the third quarter, ecommerce sales accounted for 14.8% of all retail sales. That’s a slight tick up from the shares reported in each of the prior quarters of the last year, and the highest reading in that period.

The return to double-digit annual growth of 10.8% for the first time this year is “solid,” said Neil Saunders, managing director of retail at analytics and consulting company GlobalData. Saunders added that it was “significant” to see ecommerce outpace overall retail sales. Starting in the second quarter of 2021, overall retail began to outpace ecommerce for the first time in 20 years, and it remained that way in each of the following four quarters.

Quarterly ecommerce sales, 2018-present. (Courtesy of FRED)

The shift could raise hopes of a rebalancing between online and offline shopping following swings that saw people shift spending online en masse, then return to stores in droves. But it’s worth keeping in mind that Q3 could also prove to be an outlier, especially given that it featured Amazon Prime Day and the surrounding halo activities from other retailers, and that Prime Day 2021 was held in Q2. One quarter does not a trend make.

The growth gain "represents a normalization to previous pre-pandemic patterns when online would consistently outpace stores,” Saunders said. “However, the differential between online and store growth is very small so it remains to be seen whether online can significantly outpace stores in the final quarter or whether it just keeps making fractional gains.”

Overall, the quarter-to-quarter growth has slowed from 2020 and 2021, when pandemic closures and stimulus payments combined to drive up spending on goods, and led many people to turn online as they sought safety and convenience. The question looming over 2022 has been whether those pandemic gains in share would be permanent, or there would be more lasting reversion to a growth trajectory that hued closer to the curve of 2019. In recent weeks, tech CEOs indicated their forecasts showed their forecasts showed the latter as they cited ecommerce in letters sharing news of mass layoffs, and now the Commerce Department offers another data point that the “pull forward” will not be permanent.

Ecommerce sales as a share of oveall retail, 2018-present. (Courtesy of FRED)

"Ecommerce is growing but the pace of growth has slowed in both absolute terms and as a proportion of overall retail," Saunders said. "The uplift in third quarter online penetration is fractional compared to the same period in 2021. This is not surprising given the extensive gains of the past couple of years, but it puts pay to the idea that some had during the pandemic that online would grow exponentially even once the pandemic was over."

Yet even a deceleration is bringing gains for digital commerce. US ecommerce sales remain on pace to reach $1 trillion for the year in 2022 for the first time, as many forecasts have predicted. Saunders said it now appears “certain” that ecommerce will hit that 12-figure milestone. Sales for the year currently total north of $774 billion, so it is well on pace to cross the trillion-dollar mark, with the holiday quarter still to go.

“Even if ecommerce shrank a bit in the final quarter – which it won’t – ecommerce would still hit $1 trillion,” Saunders said.

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Check out the calendar of events, economic indicators and earnings for May 22-26.

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