E-Commerce Market to Gain $355 Billion by 2025 But Still Smaller vs. Retail

Credit: StockSnap

Following the strong showing of the ecommerce market amid COVID-19, ecommerce logistics is poised to earn big in the next three years. In a recent report by Technavio, it was revealed that the ecommerce logistics market is expected to grow by $355 billion from 2020 to 2025, at an annual rate of 20.44%. The market also experienced a 16.4% growth year-over-year in 2021. This signals that, despite more people flocking to physical stores now that most economies are recovering from the pandemic, ecommerce is still a profitable avenue.

Just like ecommerce, a huge factor instrumental to the remarkable gains of ecommerce logistics is globalization. The increase in cross-border activities has opened doors to new markets, as the industry penetrates more regions. As such, the biggest growth in the industry originates from the Asia-Pacific, accounting for 57%, with China being a global retail powerhouse.

For the ecommerce logistics market to be valued this much, its adjacent market, ecommerce, must also have significant gains. And true enough, a 2022 report by eMarketer forecasts the global ecommerce market to expand from $4.25 trillion in 2020 to $5.54 trillion this year, eventually reaching $7.39 trillion by 2027. In addition, ecommerce is steadily increasing its share of total retail sales at a time when COVID has become less of a threat than it was in 2020. Currently, its share stands at 20.3%, projected to grow to 23.6% by 2027.

Now, the question is how do ecommerce and ecommerce logistics fare against their brick-and-mortar counterparts post-pandemic?

eCommerce vs. Brick-and-Mortar

Despite the massive growth of ecommerce during the pandemic, brick-and-mortar stores maintain a sizable lead when it comes to total retail shares. Compared to ecommerce’s $5.54 trillion in 2022, brick-and-mortar’s 2021 market size was $19.1 trillion. Even during the lockdowns, people were still buying goods outside the house, especially basic necessities.

In 2021, when most economies have reopened, physical store sales (18.5%) outgrew ecommerce sales (14.2%) for the first time since the onset of COVID-19. And the trend would likely persist through this year. After all, a lot of people are excited with the prospect of going out and enjoying the tactility of the non-virtual world after being on lockdown for a good part of the past two years.

However, the ecommerce market continues to gain ground on the physical market, albeit slightly. It might not overtake brick-and-mortar retail anytime soon, but it continues to carry countless opportunities for brands. Ecommerce software and companies like Amazon and Shopify have brought the physical market over to mobile devices for a more convenient shopping experience than what brick-and-mortar retail has on offer.

A lot of companies have gained success from selling online, which is why many brands worldwide leverage ecommerce and physical retail. In fact, during the pandemic in 2020, according to a report by IBISWorld, the percentage of business conducted online jumped from 24.1% to 30.8% and it has stabilized at 29.7% in 2022. Of course, with more commerce online comes the reported increase in the market value of ecommerce logistics.

Moreover, ecommerce presents fewer barriers to entry for new players, which is why a lot of new businesses opened during the pandemic period. In fact, the number of online stores jumped from 9.7 million to 26 million in 2022. This means ecommerce, along with ecommerce logistics, will continue to be a viable alternative to the physical market in the long run.