Retail sales: Online is the real winner

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The good news in today's U.S. retail sales report for July is the rebound of 0.8 per cent over the previous month, which was well above expectations and marked the first gain in four months. But even more impressive is the trend away from traditional bricks-and-mortar retailers toward online retalers.

Bespoke Investment Group has a nice chart on its blog highlighting this trend. Apart from the blip that followed the dot-com bust in 2001 – presumably a time when online retailers themselves were going bust – the trend has been remarkably steady: So-called non-store retailers now represent 9.1 per cent of total retail sales, up from 8.4 per cent last year.

Electronics and appliances stores have been the biggest casualties. As Bespoke pointed out, their share of total retail sales – admittedly never huge – is now at its lowest level since 1993.

Still, while the upward trend in online sales is notable for the way it keeps going up and up and up, the 9.1 per cent share of total retail sales just doesn't seem to represent the potential here. It seems to me this should be well within the double-digits – and this is likely where it is headed.

Perhaps my family is unusual, but we avoid most stores. Most of our veggies come from an organics delivery company, most books are bought online, I ordered my last pair of shoes online (yes, they fit) – and I think my last couple of clothing updates were done online as well, though they came from mainstream retailers.

My small purchases aside, you can see this trend play out in the stock market. Amazon.com Inc. has been one of the biggest winners, of course, with the shares rising 192 per cent over the past five years.

Credit card companies have also been big winners: Visa Inc. has risen 113 per cent over the same period, after factoring in dividends, while MasterCard Inc. has risen 98.1 per cent. Keep in mind that the broader S&P 500 has risen just 4.2 per cent over this period.

However, while you can see a day when package delivery companies become the new malls, their share prices haven't benefited. United Parcel Service Inc. has risen 15.6 per cent over the past five years – again, after factoring in dividends. FedEx Corp. has slumped 15.2 per cent.