Consumers flock to e-commerce for discounts, flexible payment options
Online shopping hit new highs this 2023 holiday season, shattering records thanks to deep discounts and flexible “buy now, pay later” options. According to Adobe Analytics, consumers spent $222.1 billion shopping online between Nov. 1 and Dec. 31 last year, a 4.9% increase over the previous record set in 2022.
“With over $222 billion spent online this holiday, consumers turned the convenience and flexibility of e-commerce into gifts for everyone on their lists,” said Patrick Brown, vice president of growth marketing and insights at Adobe. “Even in the face of economic uncertainties, the 2023 online holiday shopping season still set new records as discounts drove shoppers to make purchases earlier and more often.”
Steep discounts drive record spending
Retailers offered major deals to attract budget-conscious shoppers facing high inflation and worries over a potential recession. Adobe tracked overall discounts of up to 20% across categories like toys, televisions, computers and clothing. Popular products saw even steeper price cuts in the range of 30 to 50%.
These aggressive promotions paid off, fueling a spike in spending during the critical holiday shopping week spanning Black Friday to Cyber Monday. Online sales rose nearly 3% year-over-year to hit $211 million just on Cyber Monday alone, a first in history according to Adobe. Salesforce reported $230 billion in global digital sales from Nov. 1 to Dec. 31, showcasing the overall strength in online holiday spending.
|Cyber Weekend Year-Over-Year Growth
|Furniture & Home Furnishings
“Retailers entered the holidays with higher inventory levels than a year ago, and those excess inventories led to very aggressive promotional pricing from Black Friday onwards,” said Rob Garf, vice president and analyst at Retail Solutions at Salesforce.
The deep discounts spurred early shopping as consumers took advantage of sales. By the end of December, 61% of online sales took place at full price compared to 66% last year, indicating shoppers made more purchases on promotion according to Salesforce data. Retailers also extended sales events to capture more demand.
BNPL powers record e-commerce spending
Along with discounts, alternative payment options like “buy now, pay later” (BNPL) fueled growth in online shopping. BNPL lets consumers split purchases into multiple installments over time with no interest. Usage of these flexible financing options surged 78% year-over-year, accounting for $6 out of every $10 spent online during the 2023 holiday season per Adobe.
Top BNPL providers like Affirm, Afterpay, Klarna and PayPal all experienced robust holiday transaction volume growth above prior years. Affirm revealed its single biggest day ever on Cyber Monday, delivering 115% sales growth compared to the same shopping day last year. Afterpay’s U.S. e-commerce market share has doubled year-over-year during the holidays based on initial estimates.
70 million+ U.S. consumers have now used BNPL services, showcasing the mainstream appeal. Millennials and Gen Z shoppers especially appreciate these alternative financing options. BNPL also helps consumers avoid credit card debt and interest charges. Merchants benefit from higher average order values.
With broad consumer and retailer adoption coupled with the rise of digital shopping, BNPL has plenty of room left to penetrate the wider payments ecosystem.
What’s next for online shopping and BNPL
While economic uncertainty could impact consumer spending behavior in 2024, experts still foresee resilience for e-commerce and BNPL’s growth trajectory. The convenience, selection and experience of online shopping will be difficult to replicate offline. BNPL in particular helps drive higher sales for merchants while providing flexible financing options for budget-conscious consumers.
The strong 2023 holiday season reinforced these digital commerce tailwinds. Shoppers turned to their phones and computers to hunt for deals, snag hard-to-find products, and leverage BNPL financing to stretch their budgets. This shear level of consumer demand showcases e-commerce’s staying power regardless of economic conditions.
And BNPL providers continue expanding services, introducing new merchant partnerships and payment integrations. PayPal already boasts a massive base of over 430 million active user accounts globally to tap into. Apple’s rumored “Apple Pay Later” BNPL feature could significantly accelerate adoption once launched given the company’s giant iPhone installed base.
So even with potential recession worries on the horizon, experts foresee the digital shopping shift persisting thanks to e-commerce’s convenience and flexibility. BNPL will likely continue experiencing robust growth as providers enroll more consumers and merchants. So while overall retail sales might fluctuate in 2024, online channels seem poised to keep reaching new records thanks to shoppers’ appetite for discounts, expansive product selection and easy financing options.
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