U.S. online spending is experiencing a notable rebound, driven by high gas prices, convenient delivery options, and an influx of deals following a brief post-pandemic slump. According to major U.S. retailers, Americans are returning to online shopping, a trend initially sparked by store closures and limited traffic during the pandemic. However, the sustainability of these gains hinges on continued high gas prices and consumers' ability to maintain subscriptions that offer free delivery.
E-commerce sales accounted for 15.9% of total U.S. retail sales in the first quarter, the highest level since peaking at 16.4% during the height of the pandemic in the second quarter of 2020, according to Department of Commerce data. Target (TGT) reported a return to online sales growth in the first quarter ended May 4, after more than a year of declines, attributed to an expanded product range online and the popularity of same-day delivery. Walmart (WMT) reported a 22% surge in U.S. online sales last week, surpassing the 17% growth recorded during the typically strong holiday season.
Market Overview:- U.S. online retail sales experience a resurgence fueled by high gas prices, delivery options, and promotions.
- Target and Walmart report online sales growth after a pandemic-induced slowdown.
- Consumers prioritize affordability and convenience, with delivery a significant draw.
- Retailers leverage subscriptions and promotions to maintain customer engagement.
- The sustainability of online sales growth hinges on gas prices and subscription adoption.
- Retailers need to convert free trials into paying memberships for long-term benefits.
- The competition for online retail dominance continues to intensify.
Lowe's (LOW) also benefited from expanded same-day delivery partnerships with DoorDash and Shipt, which helped offset a slowdown in big-ticket projects. High gas prices are discouraging Americans from driving to stores, further boosting online sales. Target reported a 4.8% decline in store-originated comparable sales in the first quarter, while online-originated sales rose by 1.4%. Walmart noted that consumers of all income levels, particularly low-income shoppers, are prioritizing price, with higher-income shoppers gravitating to Walmart.com for its wide array of merchandise through its third-party marketplace.
Both retailers have heavily invested in their online businesses, offering perks like streaming subscriptions, discounts on fuel, and various delivery options. Walmart's Walmart+ subscription offers unlimited free deliveries for $98 per year, while Target's Target Circle 360, launched in April, offers unlimited same-day deliveries for $99 a year with a $35 basket minimum. These investments, coupled with spring sales events and promotions, have driven significant online sales growth. Consumers spent $331.6 billion online from January 1 to April 30, 2024, a 7% increase from the previous year, according to Adobe. Target's digital sales growth has been bolstered by heavy promotion of Target Circle 360 with free trials, while Walmart attributed its growth to a 45% increase in rollback deals on food and grocery products.
