U.S. Retail Shifts Online: A Gradual Transformation in Consumer Habits

The ongoing shift toward online retail continues to reshape the U.S. market, though the pace has moderated compared to the pandemic surge. According to UBS, eCommerce penetration is expected to rise from 23% in 2024 to 26% by 2028, driven by evolving consumer preferences and a balanced approach to shopping.

Slower Growth but Steady Transition

UBS analysts forecast a 6.1% compound annual growth rate (CAGR) in online sales over the next four years—a slight adjustment from their previous 6.9% projection. This more modest growth reflects a broader trend: while digital shopping is here to stay, many U.S. consumers still value the in-person shopping experience. Survey data collected from over 2,300 U.S. adults indicate that even as younger shoppers embrace online channels, a significant portion of the population continues to appreciate the tactile, social elements of brick-and-mortar retail.

Impact on Physical Stores

The gradual migration of retail sales online is expected to have a noticeable impact on traditional stores:

• Store Closures: The trend will likely accelerate store closures, as brick-and-mortar sales are forecasted to grow at about 2% annually—outpaced by an overall U.S. retail sales CAGR of 3%.

• Omni-Channel Strategies: With increasing pressure on margins, more retailers are likely to adopt omni-channel strategies. By integrating online and offline experiences, they hope to retain customers who value both convenience and the in-store experience.

For investors seeking to understand how these shifts affect retailer performance, insights can be found in the Key Metrics (TTM) endpoint, which offers a detailed look at the financial health and performance trends of leading companies.

Sector Leaders and Challengers

Certain sectors are positioned to drive the shift in online sales by dollar volume:

• Top Contributors: Grocery, home improvement, and apparel & footwear sectors are expected to lead the transition.

• Rapid Growth Areas: Categories that have historically lagged in digital adoption—such as auto parts and sporting goods—could see faster online sales growth as they modernize their distribution channels.

Among the companies likely to benefit from rising eCommerce penetration are:

• Amazon.com Inc (NASDAQ:AMZN)

• Walmart Inc (NYSE:WMT)

• Deckers Outdoor Corp (NYSE:DECK)

Conversely, traditional retailers like Macy's Inc, Ollie's Bargain Outlet Holdings Inc, and Simon Property Group Inc (NYSE:SPG) may face growing challenges as online sales continue to chip away at their physical store revenue.

Looking Ahead

While the momentum behind online sales is undeniable, the U.S. retail landscape is evolving into a more balanced ecosystem. Consumers are blending digital convenience with the desire for in-person experiences, prompting retailers to rethink their strategies. The gradual yet steady increase in eCommerce penetration suggests that the future of retail will likely be defined by those who can seamlessly integrate both online and offline channels.