2023 is a challenging year for retail business, like a candle burning on both ends: from one end, interest rates and inflation continue to rise, from the other end, digital disruption is challenging business models in a way that is pushing business leaders out of their comfort zone.

Every good business idea today is disseminated and adopted at hyperspeed. Millennials and Gen Z play a critical role – digital-savvy generations who prioritize convenience and verify prices or find affordable alternatives in seconds.

Generational preferences had been driving the decline of brick-and-mortar retail, which was accelerated by the pandemic: in 2022 there were approximately 700 malls in the United States, down from ~1000 malls in 2020. Nick Egelanian (SiteWorks), forecasts that by 2032 there will be only 150 malls left.

If traditional retail is suffering so much, ecommerce should be celebrating incredible growth. If we look at 169 global markets Similarweb measures across desktop and mobile devices, the growth of digital traffic compared to pre-covid  levels (January 2023 vs January 2020)  is impressive. For categories which were digital heavy before Covid – like Consumer Electronics or Fashion – we see growth of +17% and +20% accordingly, for Groceries and Beauty it’s +53% and +43%, respectively.

That global 3-year perspective indicates why traditional retail is suffering so much across the board. But zooming to the United States and looking at the Year over Year comparison, we see a very challenging landscape for digital retail.

According to SimilarWeb data traffic to all retail websites in the U.S in 2022 went down 1,8% YoY. The biggest decline is observed in Marketplaces, Consumer Electronics and Home & Garden (-6% each), balanced by the increases in Fashion (+9%), Groceries (+8%) and Beauty (+4%).

These are important numbers showing us where the demand is still growing. However traffic is only the potential for monetization while real business outcomes are hidden in how the customers convert. According to Similarweb, in the United States Converted Visits for all retailers decreased YoY, negatively impacting Consumer Electronics and Home and Garden categories the most, while staying positive for Fashion.

Big picture numbers, even if important in understanding the landscape, are not enough to reveal either growth opportunities or threats.

A few examples of insights from deeper analysis:

• Consumer Electronics retailers with the BNPL payment method were almost unimpacted by the decline of Converted Visits. (-17% without vs -1% with BNPL).

• Beauty retailers were suffering with a decline in converted visits as the demand for beauty products was monetized by Amazon (Fragrances +45% YoY).

• While the Fashion category has +9% traffic growth, the Chinese fast fashion segment (led by SHEIN) noticed 35% growth.

• In the declining Home & Garden category, DIY & Tools segment remains a green island. However, the most successful in monetizing the demand are Amazon (+25% YoY) and tool rental companies (boels.com traffic growth +255% YoY).

With low barriers to entry and turbulent times, competing in the digital world is intensifying. While customers’ behavior is constantly changing, new business models and new market players are popping up every day. Digital retail disrupted traditional retail, but now is itself under…. digital disruption.

Leading the market research department at Similarweb, Marta Sulkiewicz, VP Global Research Solution, is a digital insights and marketing technology expert with over 20 years of proven track record in the sector. Before joining Similarweb Marta was a C-level executive of Gemius, a company delivering audience insights on digital and cross-media, as well as digital advertising and media effectiveness in EMEA.