US E-Commerce 3Q23 Sales Growth Up 7.8%, Commerce Media Ad Revenue Up ~23%
Beginning in January 2024, most Madison and Wall research and related data published on this Substack will primarily be available to consulting or advisory clients, or otherwise as part of a paid corporate subscription. Please reach out to brian@madisonandwall.com if you would like to discuss these services or for more information about the new offering.
The US Census Bureau released third quarter e-commerce sales data on Friday. Total US e-commerce sales grew by 7.5%, similar to growth levels observed throughout 2023 and ahead of equivalent retail sales growth of 2.0%, leading to e-commerce share gains from 14.1% to 14.9% for the quarter. By major category of e-commerce, non-store retailers were up by 12.4%, general merchandise was up 8.7%, and building materials saw growth in e-commerce of 4.1%. By contrast, e-commerce growth for other categories fell with clothing down -0.8%, electronics & appliances down -1.6% and motor vehicles & parts were down -3.2%, with each of these categories’ e-commerce channels losing share.
For reference, during the quarter we heard data points from retailers including Amazon which grew in constant currency terms by 11% in both North America and Internationally (with online stores up 6% but third-party seller services – i.e. its marketplace – up 18%). Walmart saw its domestic e-commerce sales up 24% and global e-commerce sales up 16% (negatively impacted by the timing of a significant promotional event in India) while the US-only Target saw digitally-originated sales decline 6%. (Note that Walmart and Target’s most recent quarters cover the period from August-October).
Looking at large advertisers who provided new e-commerce data in recent weeks during earnings calls, Unilever stated that its e-commerce grew by 17% to represent 16% of sales globally. Most categories for Nestle revenue growth in the double digits within North America, and Bayer’s consumer health e-commerce revenue grew 13%. Meanwhile, at luxury goods company Kering, e-commerce sales fell around 25-30%, declining to approximately 10% of sales.
Of course, I primarily study e-commerce trends for purposes of assessing how advertising is evolving. By far the biggest player in commerce media, Amazon, saw total constant currency ad revenue growth of 25%, similar to growth observed in the US by Walmart, whose Connect business posted a 26% gain. The smaller Sam’s Club advertising revenue was up by 20%, and international advertising – primarily with India’s Flipkart – was up only 4% given the aforementioned timing issue. Overall US commerce-related media ad revenue was up by approximately 23% during the quarter.
Commerce media (which I define as retail media as well as adjacent forms of ad sales, such as travel-related properties ad sales, ride-share ad-sales, etc, although the vast majority is directly associated with e-commerce sales of physical goods) continues to grow much faster than overall e-commerce. In general, the medium is new but highly appealing to marketers given their focus on these sales channels in the post-pandemic era, and the relative ease with which they can “see” their advertising efforts turning into sales (or at least the ease with which they can justify their budgeting for advertising through these channels). At the same time, sellers of advertising are prioritizing investment through these channels, which means there is a significant amount of innovation in technology and inventory availability, as we see with efforts from Amazon and others to drive commerce-related ad spending into other digital platforms such as Meta, Pinterest and Snap. For a third factor, I point to the increasing focus on marketplaces by retailers paired with the ongoing growth of cross-border (mostly from China into the US and other markets around the world). To the extent that marketplaces are the primary environments where goods are purchased, this catalyzes a significant amount of growth as marketers learn how to compete in this space, which often relies heavily on advertising to drive consumer attention.
Source: Madison and Wall, US Census Bureau