eCommerce Has Just Jumped Forward by 5 Years

Practical Summary:

  • eCommerce has accelerated amid the COVID-19 pandemic
  • Online sales (excluding restaurants / gas) will represent over 25% of total US retail sales in 2020 versus 16% in 2019
  • Some of the early winners were the established eCommerce brands, notably Amazon, Walmart, Target and eBay
  • More recently, a next leg of growth has kicked in , and it is being driven by 1) new verticals, 2) new consumers coming online, and 3) emerging technologies … this article argues that these three trends will continue well beyond 2020


The coronavirus pandemic has been the most disruptive event to the retail sector in decades. Supply chain interruptions, huge swings in consumer demand, and shifts in retail channel preferences have dramatically altered the complexion of commerce in 2020.

COVID-19 effect

Since March 2020, we have seen a number of major retailers declare bankruptcy — department store Neiman Marcus and JC Penney; New York City-based gourmet foods retailer Dean & Deluca; amusement park operator Apex Parks; New York department store chain Century 21; apparel makers True Religion, Lucky Brands, Ascena, Brooks Brothers and J Crew; fitness chains 24 Hour Fitness and Gold’s Gym; home goods retailer Pier 1 Imports and Tuesday Morning; auto rental market leader Hertz Corp; health retailer General Nutrition Co; and entertainment company Cirque du Soleil.

Indeed, eMarketer forecasts that total US retail spending will decline by 10.5% this year, to $4.894 trillion … that would be the largest annual drop ever recorded. The only drop that’s close came back in 2009, when retail sales (including autos and fuel) fell 8.2%.[1]

2020 will be a record year of retail bankruptcies. Coresight Research predicts U.S. retailers will shutter 20,000 to 25,000 stores this year, with up to 60% of the closures hitting U.S. malls.[2] The forecast was recently ratcheted up from 15,000 closures predicted before the COVID-19 crisis began. The 2020 closures are expected to break last year’s record 9,802 closures tracked by the firm.[3]

Impact on eCommerce

One of the bright spots in this gloomy landscape is eCommerce. The chart below shows where I think eCommerce penetration (the online share of total retail addressable sales) will land in 2020.

eCommerce adoption in the US has just jumped ahead by at least 5 years.

Chart 1: US eCommerce penetration

Source: Historical data is from a Digital Commerce 360 analysis of U.S. Department of Commerce data. 2020 forecast is PVC Analysis of eCommerce in the US, using Department of Commerce data and PVC projections. “Total retail figures” exclude sales of items not normally purchased online such as spending at restaurants, bars, automobile dealers, gas stations and fuel dealers.

Initial Beneficiaries — Established Brands

The COVID-19 didn’t spark the eCommerce flame, but it certainly fanned it. There are going to be several major types of winners as the retail landscape shakes out.

The first-order beneficiaries have been the well-known brands and established retailers. Amazon (NASDAQ: AMZN), the unquestioned market leader , reported a blowout Q2, with North America FX-adjusted net sales were up 44% yoy, and more recently, research firm Piper Sandler estimates that online sales saw a stunning 49% yoy increase in sales on Amazon Prime Day, on October 13–14 … this is Amazon’s annual two-day deals event to kicks off its holiday sales.[4]

eMarketer now expects that Amazon will gain share of the eCommerce market in 2020, despite already holding a dominant position. eMarketer expects that Amazon’s share of eCommerce will be over 38% in 2020, up from 37.3% in 2019. That’s more than twice their nearest three competitors — eBay Inc. (NASDAQ: EBAY) at around 6%, Apple Inc.(NASDAQ: AAPL) and Walmart Inc. (NYSE: WMT) (about 4% each) combined.[5]

More recently, Walmart reported that U.S. ecommerce sales grew 97% in the second quarter of fiscal 2021, which ended July 31.[6] The results at Target Corp (NYSE: TGT) — the other major “big box” retailer — are even more impressive, with reported online sales growth of 195% yoy.[7]

These digital gains are unlikely to be temporary because all of the big retailers are improving their eCommerce offerings, with an eye to continued future growth. For instance, Target has improved its supply chain in Q3 to offer same-day shipping, curbside delivery in most locations, and in-store pickup / ship from store options.

Similarly, Walmart expects e-commerce become more relevant. In June, they announced a partnership to allow Shopify (NASDAQ: SHOP) sellers to use Walmart’s online marketplace, which has over 100 million monthly visitors.[8] Then in August, Walmart teamed up with Instacart to fuel its same-day grocery delivery.[9] These investments and partnerships represent a bet on long term shifts in shopping towards digital sales.

Next Wave Trend #1: New Verticals

Besides Amazon and the “big box retailers,” there will be a slew of other winners in categories that traditionally saw lower eCommerce penetration.

The history of eCommerce can be marked as a series of successful forays into nuanced verticals. The first era of eCommerce was between 1998 and about 2005, and it was led by Amazon and eBay. Most of the early adoption was in easily delivered commodity products with large catalog adoption — books, movies, CDs, and electronics — and in categories characterized by low price points, hard-to-find inventory, and enthusiastic communities of buyers — collectibles, and toys & hobby.

eCommerce slowed dramatically around 2002 /2003, until the next wave of growth hit around 2005. This time it was led by computers & electronics, propelled by Amazon (which introduced free shipping for Prime members that year), the resurgence of Apple and its iPhone (and then the iPad), and leading retailers like Best Buy (NASDAQ: BBY) which began taking offline online.

Online penetration for computers & electronics went from 14% in 2005 to 50% today.[10]

Growth stalled again in 2008–2009, but came back strong beginning in 2010. This time clothing & apparel led the way. Online clothing sales rose from 5% in 2005 to 25% today.[11] This was the first time that goods with low catalogue adoption went online — for years, luxury retailers had resisted common sizes, fits and styles and made catalog adoption and searchability impossible. And consumers resisted buying clothes sight unseen, without first being able to model them in front of a dressing room mirror.

But slowly, the industry has come around. The driving force wasn’t the department stores, but the brands themselves that wanted to go direct to consumers (like Nike and Adidas), and fashion startups like Zara. Today, while department stores like Macy’s, The Gap, and Old Navy struggle, while online shops, vintage stores, and shared economy experiences like Rent the Runway, Bag Romance, My List at Bloomingdales, Armarium and Nuuly proliferate.

eCommerce growth in traditional categories stalled again around 2015. Recently we have seen eCommerce accelerate again, this time by taking significant share of bigger ticket items like furniture, home furnishings and office equipment. This was about the time that we saw the explosion of Wayfair (NYSE: W), mattress startups from Purple (NASDAQ: PRPL) to Casper to Nectar to Leesa to Tuft & Needle, ad infinitum.

Today, eCommerce adoption remains very high in those categories but lags in health care; personal beauty; auto and auto parts; and food and beverage. Those categories represent 44% of all US retail spending … about $1.2 trillion in spend in 1H 2020.[12]

Chart 2: eCommerce Adoption by Category

Source: eMarketer, “US Ecommerce by Category 2020,” by Andrew Lipman, published July 22, 2020.

Now, these laggard categories are driving the eCommerce boom of the pandemic.

Large companies like Amazon and Walmart have invested billions to make grocery shopping easier this year through better catalogs and supply-chain improvements.

We have also seen dozens of small, specialized food and beverage retailers benefit from the closures of physical stores. Examples of these companies are Goldbelly, Bon Bon Bon, Vivino, Di Bruno Brothers, Pilot Coffee Roasters, and Jeni’s. All of these companies are delivering five-star eCommerce experiences, quick processing and delivery, and cater to niche and specialty tastes for coffee, wine, and gourmet ice cream.

Moreover, all of these specialty players seem to be holding onto and expanding on their market share gains even as stores have re-opened.

Another major category experiencing a shift to online is health care, which includes telehealth, prescription and over the counter drugs, and beauty supplies. Global X ETF / Mirae Asset Research is projecting a permanent shift higher in this category, as patients and healthcare providers incorporate digital options and practices into their behavior.

Chart 3: Projected eCommerce Penetration for Health

Source: Global X ETFs, “E-commerce Entering the Next Wave of Growth,” by Pedro Palandrani, Sept 9, 2020.

We’ve also seen a recent eCommerce explosion in the automotive category. This is the largest retail spending category in the U.S. Until recently, the vast majority of new or dealer-certified automobiles were purchased at physical dealers, replete with endless form-filling, pushy sales people who will negotiate the purchase prices, and then offer you a myriad of add-ons (or even a different model than for what you came in) to close the deal.

Research conducted a decade ago by global consulting firm McKinsey found that consumers in America would visit five dealers before making a purchase; by 2014 that had dropped to just 1.6 on average.[13] They also discovered that while 85% of customers still visited dealers, 25% were not happy with the dealer experience. In addition, more than 33% would consider buying a car online.[14]

A lot has changed since that research five years ago. First, Tesla Motors (NYSE: TESLA) circumvented dealers to sell directly to consumers. Second, the pandemic has shifted consumer attitudes so that two-thirds of consumers now say they are likely to buy a vehicle online, according to a Cox Automotive survey.[15]

2020 has been a significant year for companies like Carvana (NYSE: CVNA), which is seeing 55% yoy growth in sales), Vroom (NASDAQ: VRM), which IPO’ed in June, and Shift. Ford for the first time announced that 25% of its sales are online.[16]

Next Wave Trend #2: New Consumers

Another major driver of eCommerce adoption is the flood of new customers into online channels.

It’s not surprising that Millennials (born rough between 1984 and 2000) and to a lesser extent the Baby Boomers / Gen Xers (born roughly from 1946 to 1964, and from 1964 to about 1984, respectively) were already familiar with eCommerce before 2020. 85% of Millennials and 78% of Boomers / Gen Xers had bought at least one item online, and expressed comfort buying again without seeing something for the first time.[17]

But notable in Q2 2020 was the buying behavior of the older generations. While consumers of all generations expressed a preference for digital channels because of convenience, they also listed “fear of infection,” “fear of dying,” and “fear of infecting someone else” as their top pandemic-related worries.

Shoppers of all ages also said they believe that digital channels are critical to avoiding the virus, but older consumers tend to feel a bit more strongly about that. With seniors increasingly utilizing the technology at much higher than expected rates, the trajectory for e-commerce’s growth now looks quite different than it did just a few months ago.[18]

Over 40 percent of seniors and boomers have said that the pandemic has caused them to change their shopping habits, with a majority of those indicating that the shift is likely permanent, and not simply temporary because of the pandemic.[19] This is significant when one considers that Baby Boomers still control over half of US household wealth (approximately 54–57 percent), with Gen X next at about 16–17 percent.[20]

Next Wave Trend #3: New Technologies

Finally, a number of emerging technologies are expected to challenge e-commerce’s status quo and guide the industry toward new growth.

Much of the advance in recent years in buying cars online has been the result of 360-degree photography of the vehicle, plus the inclusion of information about the vehicle’s features, history, and imperfections, into a seamless shopping experience. Many of these changes have been pioneered by Carvana, and other startups are innovating quickly on the shopping experience.

Over the past few years, companies like Shopify and BigCommerce (NASDAQ: BIGC) have emerged to give small merchants all the tools they need to create an online storefront. A seller can now set up a store, integrate a shopping cart and a payment provider in minutes, with no upfront fees, and easily offer up to 100 SKUs. In Q2 2020, Shopify grew revenues by 97% yoy, and saw a 71% increase in new stores created.[21]

Within a few years, the rise of augmented reality and virtual reality could facilitate further eCommerce by offering virtual showrooms and allowing customers to virtually visualize products. A shocking number of online shoppers — by some estimates, over 75% — abandon their shopping carts prior to completing their purchase. If consumers can virtually try on clothes to get the right fit, see the layout of new living room furniture, test drive a car or conduct a damage inspection on a used vehicle, expect shopping cart abandonment to drop.


eCommerce has dramatically accelerated during the pandemic, rising from approximately 16% of total US retail sales in 2019, to over 25% in 2020. While the early winners were the established brands (like Amazon) with large customer bases, more recent (and future) eCommerce gains are being driven by three trends:

1) New verticals — food & beverage, healthcare and auto;

2) New customers — significant numbers of Baby Boomers (aged 55–75) and the older “silent generation” (75+) are shopping online for the first time, and most of those shoppers are saying that those gains are here to stay; and

3) New technologies — an explosion of new eCommerce of both sellers (e.g. shopping cart, payment providers, and storefronts) and buyers (e.g. 360-degree photography, AR) is likely to continue to increase eCommerce adoption.

Aman Verjee, CFA, is a co-founder and General Partner at Practical Venture Capital, a secondary venture capital firm headquartered in Palo Alto, California. He is the former CFO of eBay’s North America business.

DISCLOSURE: The author and his firm, Practical Venture Capital, LLC, are investors in dozens of eCommerce companies including Ipsy, Bark Inc. / BarkBox, Italist, Goldbelly Inc., Mayvenn, and BabyList. Mr. Verjee also has periodic long or short positions in Amazon (NASDAQ: AMZN) and eBay, Inc. (NASDAQ: EBAY).

[1] “US Ecommerce by Category 2020,” by Andrew Lipsman. Retrieved from on July 30, 2020.

[2] “The Supply Side: U.S. retail sales forecast for 2020 plummets 10.5%,” by Kim Souza. Retrieved from Talk Business.Net on July 30, 2020.

[3] Ibid. note 2

[4] Seeking Alpha, “Amazon’s Prime Day Sales Grew 49% YoY — Piper Sandler,” October 19, 2020.

[5] eMarketer, “US Retail Sales to Drop More than 10% in 2020,” June 7, 2020.

[6] James Melton, Digital360, “Walmart’s Online Sales Nearly Double,” Aug 20,2020.

[7] Katie Evans, Bloomberg News, “Target’s Q2 Digital Sales Soar 195% As the Store Chain Reports Record Sales growth,” Aug 18, 2020.

[8] Shopify, “Shopify becomes Walmart’s first-ever commerce platform partner, helping businesses reach shoppers and grow sales,” Jun 15, 2020.

[9] The Verge, “Walmart teams up with Instacart to rival Amazon for same-day grocery delivery,” Aug 11, 2020.

[10] US Census Bureau, “2018 E-commerce Multi-sector Data Tables,” May 13, 2020.

[11] Ibid. note 10

[12] Global X ETFs, “E-commerce Entering the Next Wave of Growth,” by Pedro Palandrani, Sept 9, 2020.

[13] McKinsey & Co, “Innovating Automotive Retail,” Feb. 1, 2014.

[14] Ibid. note 13

[15] S&P Global Market Intelligence, “US automakers accelerate online selling options during COVID-19 pandemic,” Jun 22, 2020.

[16] Ibid. note 15

[17] Ibid. note 15

[18] “Boomers And Seniors Are Shifting To Digital Shopping, Too,” by, July 28, 2020.

[19] Ibid. note 18

[20] MarketWatch, “This Depressing Chart Shows the Wealth Gap Between Millennials and Boomers,” Dec. 28, 2019.

[21] The Motley Fool, “Shopify Doubles Revenues, Crushes Estimates,” .

Former C-suite at PayPal, Sonos, eBay. Now general partner & founder at Practical VC, a secondary venture capital fund.

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