• by Jack Loechner , Staff Writer @mp_research, May 25, 2016

According to Forrester Research, by Sucharita Mulpuru, US online retail is expected to reach to reach $373 billion in 2016. That figure will grow to more than $500 billion by 2020. The study explores the drivers of online retail sales growth in the US and the challenges the industry faces in the years to come.

US online retail sales topped $100 billion only in 2006, but by 2020, Forrester expects online retail sales will have grown five-fold, exceeding half a trillion dollars. Amazon is estimated to captured $23 billion more in US eCommerce sales in 2015 than in 2014 (including its third-party marketplace). That  accounts for approximately 60% of the total growth in US online sales in 2015, says the report.

American online consumers stand to benefit from shopping online with foreign merchants because goods are less expensive, says the report. By the same token, American online merchants dependent on foreign shoppers will experience a slowdown because US goods are more expensive abroad.

In 2016, Forrester expects online retail sales to total $373 billion, and are expected to grow thanks to:

• Better programs by web merchants. Merchants surveyed in the most recent version of the survey said that two of their top priorities in 2015 were online marketing and merchandising. Retailers noted that they were focusing on longstanding elements of retail success like customer relationship management (CRM), personalization, loyalty programs, and improved site content to drive more engagement with existing shoppers
• More omnichannel efforts. Omnichannel efforts like endless aisle, ship-from-store, and in-store pickup programs have supported eCommerce by enabling merchants to transform slow-turning or “trapped” inventory into incremental sales. Merchants report that these services improve customer satisfaction and directly facilitate faster delivery of products to shoppers. Already, more than $1.5 trillion of total US retail sales are web-impacted
• An improved US economy. Given relatively low unemployment and steady consumer confidence, the report expects consumer spending to be relatively strong this year. The National Retail Foundation (NRF) forecasts that “retail industry sales will grow 3.1% in 2016, or higher than the 10-year average of 2.7%.” The web is a natural beneficiary of that lift as consumers find broader assortments online than in stores

Online sales grew 15.1% in Q1 and accounted for 11.1% of retail sales when factoring out items not normally bought online. That’s the highest e-commerce penetration in history, as web sales totaled $86.3 billion for the period ended March 31, according to non-adjusted estimates released by the U.S. Department of Commerce.

Although most eCommerce merchants continue to grow, many merchants face a number of obstacles that will continue to be challenges in the future, says the report, including:

• Mobile device usage. 78% of consumers say they have been frustrated by purchasing on their mobile phones due to factors like the download time and size of the screen. Consumers are more likely to use their phones to research and purchase, but mobile is still largely a challenge, rather than a catalyst, for sales for most retailers.
• Significant competition. Amazon is a dominant force in online retail, but it is not the only merchant that is challenging traditional retailers. Numerous small merchants have emerged in recent years to compete with larger traditional retailers because online retail has virtually no barriers to entry. 
• Increased costs of doing business. As eCommerce has grown, variable costs have also increased, particularly in the race to acquire customers. In particular, customers expect packages to arrive faster, so any economies of scale that may have come from volume discounts from carriers quickly vanish when retailers must pay to expedite orders.
• A weaker global economy. American merchants with strong cross-border offerings receive double-digit percentages of their online sales from foreign shoppers, but a stronger US dollar makes shopping more expensive for foreigners. While the economic situation in the US is relatively strong, the rest of the world (particularly Brazil, China, and Europe) is more economically vulnerable

For additional information from Forrester, please access the report here.https://www.forrester.com/report/Brief+US+Online+Retail+Forecast+2015+To+2020/-/E-RES122904