A UPS worker sorts packages in New York on Dec. 18, 2017.
Adam Jeffery | CNBC
Online spending rose 4.9% year over year, setting a record for e-commerce during the holiday season, as shoppers pounced on discounts and leaned on buy now, pay later to cover more of their purchases, according to Adobe Analytics.
Sales totaled $222.1 billion on retailers’ websites and apps from Nov. 1 to Dec. 31, according to Adobe.
Adobe’s data covers more than 1 trillion visits to U.S. retail websites, 100 million unique items and 18 total product categories.
This year, more purchases rather than higher prices drove spending, Adobe said.
Prices have been falling across many product categories sold online, such as electronics. E-commerce prices have dropped for over a year, and were down 5.3% year over year in December, according to Adobe’s Digital Price Index, which tracks online prices across 18 product categories. If Adobe adjusted for inflation, online consumer spending would have grown even more during the holiday season.
Strong spending during the critical season could bode well for Walmart, Amazon, Target, Macy’s and other retailers, if they attracted a healthy share of those dollars. For most major retailers, fourth-quarter earnings season kicks off in February, and those reports will give a clearer picture of the companies that gift-givers and party hosts favored.
Yet strong online holiday sales may not mean consumers will spend freely in the new year. Some shoppers may shell out more than they can afford during the peak shopping season, and could pull back in the months ahead as the bills come due.
One reason for big spending in November and December? Big discounts. Adobe found that discount levels hit record highs during the holiday season.
For example, discounts peaked at 31% off listed price in the electronics category, compared with a peak of 25% during the holidays in 2022. Price cuts topped out at 24% for apparel, compared with a peak of 19% during the holidays in 2022.
Cyber Week, the five days between Thanksgiving and Cyber Monday known for compelling deals, accounted for $38 billion of online holiday sales — or nearly one in five dollars spent during November and December. Spending during the promotional period rose 7.8% year over year.
Buy now, pay later, a financing option that has become easier to use on retailers’ websites, proved more popular this holiday season, too. The payment plans, which are offered by companies like Affirm and Klarna, allow shoppers to pay off items in smaller installments over time.
Use of buy now, pay later hit an all-time time and contributed $16.6 billion in online spending during the holiday season, Adobe found. That’s a 14% jump from the year-ago holiday period.
Other holiday spending totals have come in rosier than expected, too. Retail sales during the holiday season, excluding automotive sales, increased 3.1% in the U.S. year over year, according to preliminary data from Mastercard SpendingPulse. The company measures in-store and online retail sales across all types of payment, and its total is not adjusted for inflation.
In a news release, Mastercard Economics Institute’s Chief Economist Michelle Meyer credited a healthy jobs market and easing inflation for giving consumers confidence to spend.
The company also found sharp growth in online spending during November and December. Online retail sales rose 6.3% year over year compared to a 2.2% increase for in-store spending, according to Mastercard. But online shopping remains a smaller portion of overall holiday spending.
