As we wait to find out whether the Federal Open Market Committee is cutting interest rates by a quarter or half percentage point, Tuesday brought new data on the state of one of the economy’s main engines: consumers. Consumer spending drives about 70% of the economy, and it’s holding strong. Retail sales rose in August, though only slightly — up just 0.1% from July and 2.1% from a year ago.
Notably, spending online, at non-store retailers, was up 7.8% over last year. E-commerce has grown a lot in the last few years since the pandemic began, but there’s still plenty of room for it to grow even more.
Take a second and guess what percentage of all sales do you think are happening online these days.
It’s almost 20%, which is less than I would’ve guessed. But Gregory Daco, chief economist at EY, said 20% is actually a lot, because there are some things you can’t buy online.
“Gasoline station sales… grocery store sales, furniture store sales, building materials,” he said. “In most cases, people still favor going to the store to do these purchases.”
Even so, Arun Sundaram, senior equity research analyst at CFRA Research, said online sales are growing fast.
“E-commerce has been one of the few categories to show consistent growth since the pandemic began,” he said.
In the early months of the pandemic, online sales spiked way up — largely out of necessity. But now?
“We’re not seeing the same kind of growth that we saw in the initial days of the pandemic, but it’s still there. And it shows that consumers want to shop online, it shows that retailers are investing in their e-commerce business, it shows that consumers are also getting more tech savvy,” Sundaram said.
It’s also getting harder to distinguish between online and in-store purchases, said Mark Mathews, executive director of research at the National Retail Federation.
“That is because the growth in e-commerce we see these days tends to be in the blended commerce space. So it’s buy online, pick up in store, it’s curbside pickup,” he said.
And, he said, it’s increasingly important for businesses to be doing it all.
“You need to be able to offer the consumer what they want, when they want, how they want it. I might buy the same thing, one week, I buy it online and have it delivered to the house,” he said. “The next week, I might just go to the store.”
Whichever is more convenient.
