Online vs. Brick And Mortar Retail Recovery

April 19, 2021

Online sales grew substantially, while brick-and-mortar contracted slightly. Within online, Amazon continues to reign, but is losing space to other large retailers (such as Target, Walmart). Smaller shops moving online fared better than their peers stuck on the physical space alone. Across sectors, apparel and office supplies suffered the most, while the auto industry, groceries and big box saw a post-pandemic revenue jump. We see brick-and-mortar decline slowed down if Biden’s economic/infrastructure plan can provide a boost to low-income families.

This was not a good year for brick-and-mortar retail, with a 1% revenue drop. Online retail did great, though: up 44% in sales y-o-y, way above its previous results of 2019. Online retail now represents 21.3% of total sales, up from 15.8% and 14.3% in 2019 and 2018, respectively. Customers bought U$ 861 billion 1 in online goods, a figure expected to be achieved only in 2022. Now, Forbes predicts online retail will reach U$ 1 trillion 2 by then. This estimate is based on more than 1 trillion US retail site visits compiled by Adobe. This has been a permanent shift, as sales in the first three months of 2021 have already reached U$ 121 billion, in a 34% y-o-y growth3.

As one can see in the chart above, online retail (in light green) has quickly gained on brick-and-mortar retail (dark green) over the past 3 years. This 5.5% y-o-y growth in market share is unprecedented. Previously, online market share growth rates never tipped above 1.5%. We (partially) agree with Forbes: 4 while Forbes believes this will be the new normal, we expect that the online market share will in fact grow above previous rates, but we see them below peak pandemic levels in the future (i.e., above 1.5%, but below 5.5%).

Online retail is the sole source of retail growth – online retail was responsible for 101% of the overall retail growth last year, which went from U$ 3.78 trillion to U$4.04 trillion. Online retail was responsible for U$ 263 billion 5 of these. Physical retail suffered even when it delivered: buy-online and pick-up curbside grew 67%. 6 But some online businesses grew more than others… Within online growth, an insurrection against Amazon. Amazon revenue grew in 2020 to U$ 296 billion, a 38.6% surge from 2019. This outstanding performance led Amazon to represent a third (31.4%)  of online retail. While this is impressive, it is a declining market share, down from 43.8% in 2019. As one can see in the figure below, these percentages translate as much smaller shares of total retail revenue, which Amazon now holds 6.8%, down from 7% back in 2019:

US Retail Revenue (U$ Billions)

Source: U.S. Department of Commerce data, author’s design


Amazon grew in absolute terms whilst losing in relative terms (online market share) – As one can see from the chart above, Amazon declined while online retail grew from 15.8% to 21.3% of total retail. Which firms were able to gain space over Amazon’? Were they smaller, nimbler, more effective competitors? Or were they larger, big box retailers creeping into the online world?

Big box retailers’ forays into the online world gained market share at Amazon’s expense. The top 100 companies in the world (ex-Amazon) were responsible for 74.9% of that growth, up from 49.4% in 2019. If one looks up to that top 100 ranking to the top 20 firms, which includes the likes of Walmart, Target, Kroger, and BestBuy, their expected online growth reaches 85% for 2020 (compare to Amazon’s 31.4%). This means that even when Amazon reduces its pace of growth as a share of total online retail, the winners are still very large retail giants that ventured into online retail.

The small brick-and-mortar shops, which provide 15 million jobs to the economy, were the great losers of this pandemic, even when you consider their online presence. This might be linked to persistent unemployment and, more importantly, lower adult participation in the job market. Some of the smaller retailers that went online were able to grow during that period. The graph below puts smaller retailers online with their larger counterparts, and compares their growth in the past 3 years:

US Online Retail Growth

Source: U.S. Department of Commerce data

As one can see from the graph above, the huge growth in online retail was mostly dominated by large firms, to the detriment of the largest (Amazon) and the smaller firms, which saw their share of revenue growth come down from 51.4% to 25.1% in a year. Mark Zandi, chief economist at Moody’s Analytics, said it as early as 2019:  Brick-and-mortar retailers are already in a recession (…) They’ve been laying off workers coming up on three years. And this is a time when consumers are out spending aggressively.

If the broader economy goes into a recession, there is going to be blood in the streets.7 . The COVID-19 crisis was unexpected, but brick-and-mortar shops were already doomed even before 2020. This sums up the situation of the growth of online vs. physical stores. But how does one go about analyzing each specific sector of the retail industry?

Going Deeper Across Retail Sectors

The pandemic ushered a new trend in retail: insolvencies 8 Department stores and clothing stores 9 suffered the most, but the impact was widespread in brick-and-mortar shops across the spectrum. From January to August, more than 10,000 stores shut down (an unfortunate record). Six thousand of those actually went bankrupt. Iconic chains such as Brooks Brothers and J.C. Penny struggled to pay rent, vendors, and personnel. As local shops could not stay open, 35 large chains filed for Chapter 11.

Although the pace of store closures slowed down to 4,950 in the second half of 2020, this is still far from over. A recent survey from BDO showed that 40% of retail CFOs are re-evaluating their store footprint.


Apparel was the biggest loser. In the table above apparel giants such as Inditex (Zara) Children’s place, Macy and Guess were hurt the most. Physical stores selling office and electronic supplies also severely suffered in terms of bankruptcies. The pre-pandemic trend accelerated when foot traffic in physical stores and local buying reduced to a trickle. On the other hand, some online sectors skyrocketed: Online groceries grew an astounding 230% in the first three weeks of February, compared to the same period in 2020. 10 The chart below will detail the exact monthly impact on each of these sectors:

Source: U.S. Census Bureau, author’s design

As one can see on the graph above, the impact was uneven across retail sectors. The automotive, clothing and electronics sectors suffered when the lockdown started on March 15th . Conversely, grocery stores and large general retail stores (such as Walmart and Target) saw a surge in sales. When things started to get back to some sort of normalcy, economic activity resumed. Automotive had a big jump in sales, and General saw a smaller bump. So, albeit with some differences in each sector, the overall impact lasted for three months, and then came a return to business as usual.

Pent-up demand and trillions in savings. Scott Brown, chief economist at Raymond James Financial explained: “The bottom line is all about the pandemic. Once the pandemic is behind us, you are likely to see a big rebound in consumer services,” 11 . It is likely that the US economy has pent up demand in the retail market, as many American households are saving up trillions during the pandemic. 12 The stimulus package 13 and the infrastructure program promised 14 to bring economic growth that will benefit the poor. This can help brick-and-mortar retail once again.

Can small brick-and-mortar retail shops ever win this David and Goliath match with large online firms? There has been a trend away from small physical stores since 2008, and perhaps even longer. It is also clear that Amazon is one of the winners in the past decade, making its founder the wealthiest man in the world in the process. However, Amazon has been losing online market share to large retailers such as Walmart and Best Buy, who have been growing faster online than Bezos’ firm. Small firms are starting to get online, but still lag behind.

So…a sequel perhaps? The trend towards large online retail is expected to continue in the short-term. Yet, more and more small online businesses will grow faster than they have so far and gain more market share, as covid cases go down and eventually large online retail approach their peak, much like Amazon did. Finally, If Biden’s economic plan with higher taxes on the rich and heavy infrastructure investment comes through, brick-and-mortar retail’s decline might be slightly less steep than otherwise expected. But that is a topic for a follow-up piece. A sequel, perhaps…

Bernardo Weaver is a senior finance consultant at the World Bank Group in Washington DC and a finance professor to top investment banks and Hedge Funds in Wall Street. Mr. Weaver also teaches M&A as an adjunct professor at Georgetown McDonough School of Business and at Pepperdine University Graziadio School of Business. Mr. Weaver is a Wharton MBA grad, and holds an LLM from UConn Law, and a law degree from P.U.C.- Rio, in Brazil.


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1 Jan 29, 2021, 2021 Don Davis | Feb 2, 2020 Oct 15, and 2020 May 28. “US Ecommerce Grows 44.0% in 2020.” Digital Commerce 360, March 1, 2021.

2 Verdon, Joan. “Adobe: Pandemic Shift Is Permanent, E-Commerce To Hit $1 Trillion In 2022.” Forbes. Forbes Magazine, March 15, 2021.

See Verdon, above.

See Verdon above.

See Digital Commerce above.

6 Perez, Sarah. “US e-Commerce on Track for Its First $1 Trillion Year by 2022, Due to Lasting Pandemic Impacts.” TechCrunch.
TechCrunch, March 15, 2021.

Al-Muslim, A. (2020, September 29). U.S. retail store Closures hit record in first half. Retrieved March 18, 2021, from

8 Retail in the red: Bdo bi-annual bankruptcy update. (n.d.). Retrieved March 19, 2021, from

Isidore, C., & Meyersohn, N. (2019, October 01). What the retail Apocalypse means for the American economy. Retrieved March 18, 2021, from

10 See Perez above.

11 Mitchell, J. (2021, February 26). Boost to household income primes u.s. economy for stronger growth. Retrieved March 19, 2021, from

12 Brennan, Peter. “Consumers to Unleash Trillions of Dollars in Excess Savings When Pandemic Ends.” Accelerating Progress, February 8, 2021.

13 Nassauer, S., & Glazer, E. (2021, March 11). Covid-19 stimulus package is a boon for business. Retrieved March 19, 2021, from

14 Michael. “With Relief Plan, Biden Takes on a New Role: Crusader for the Poor.” The New York Times. The New York Times, March 11, 2021.


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