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Online shopping officially overtakes brick-and-mortar retail for the first time ever

Kate Rooney
  • The report from the Commerce Department this week shows a new milestone for online shopping.
  • The total market share of sales done with “non-store” retailers, or online, was higher than general brick-and-mortar sales in February. 
  • “The days of the internet and online shopping being “just a fad” have come a long way over the years,” says Bespoke’s Paul Hickey.

Online shopping led by Amazon AMZN hit a new milestone in February.

The total market share of "non-store," or online U.S. retail sales was higher than general sales for the first time in history, according to a report from the Commerce Department this week.

"The days of the internet and online shopping being 'just a fad' have come a long way over the years, but February's Retail Sales report (released Monday) highlighted another of many major milestones that the growth of online shopping has reached over the years," said Paul Hickey, co-founder or Bespoke Investment Group, which reported the statistic in a note to clients Tuesday.

The online sector, referred to as "clicks," has been slowly eating up market share in the past two decades. Its total rose from below 5 percent in the late 1990s, to about 12 percent in 2019, according to the Commerce Department. In February, online sales narrowly beat brick-and-mortar, or "bricks." Non-store retail sales last month accounted for 11.813 percent of the total, compared with 11.807 percent for general merchandise. To be sure, brick-and-mortar sales are higher when including other categories such as auto and restaurant sales.

"Sure, we had to go out to three decimal places, so the margin of different is extremely small, but looking at the chart the trend remains clear; the share of total sales for each sector are clearly going in opposite directions," Hickey said in a note.

Source: Bespoke Investment Group

Online sales is now the fourth largest sector overall, bringing in about $59.8 billion in adjusted sales for February. Motor vehicles and parts is the largest segment, making up about 20 percent of all retail spending. Food and beverage store sales and restaurants and bar sales each make up about 12 percent.

E-commerce behemoth Amazon has been a major enabler of the switch to online.

"Amazon Prime has been a big driver because people don't think about shipping anymore — that's a big contributer," Hickey told CNBC in a phone interview. "We're seeing an overall a continuation of a trend that's been going on for years now."

Total U.S. retail sales fell in February, the latest sign that U.S. growth is slowing. Retail sales dropped 0.2 percent as Americans scaled back on buying furniture, clothes, food and electronics and appliances. Economists polled by Reuters had predicted retail sales to rise 0.3 percent for the month.

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