Record Online Holiday Spending Driven By Deep Discounts And 'Buy Now, Pay Later' Deals

Online spending during the 2023 holiday shopping period hit a record $222.1 billion thanks to major discounts and flexible payment methods, such as “buy now, pay later.”

The data, published by Adobe Analytics on Thursday, covered the period from November 1 to December 31, taking in the Thanksgiving period from Black Friday to Cyber Monday, and Christmas.

The record consumer spend of $222.1 billion for the period was up 4.9% on the previous year, but it came at a cost for some retailers as discounts hit record highs, while flexible payment offers such as buy now, pay later can run the risk of payment defaults.

The Vanguard Consumer Discretionary ETF VCR an exchange-traded fund that includes stocks such as Amazon AMZN and Nike NKE, gained 22.8% during the period, but in the first three days of 2024, it is down 3.5%.

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Top Categories By Consumer Spend

The electronics category saw the most online spending at $50.8 billion and consumers took advantage of discounts that peaked at 31%. Among the most popular items in this category where consoles such as Microsoft’s MSFT XBox.

Apparel was next with consumer e-commerce spend of $41.5 billion, with discounts up to 24% available. Popular buys were sports apparel such as sneakers.

Third was furniture with online spending of $27.3 billion, fourth was groceries with spend of $19.1 billion and fifth was toys at $7.7 billion spend, with a resurgent Barbie among the top buys.

Consumer Credit Tightening

Buy now, pay later schemes were popular, contributing $16.6 billion in spend during the holiday season. In total in 2023 this flexible payment method accounted for $75 billion in online spend.

This, however, and other credit payments could come under pressure later this year. Nomura, in a note on Thursday said headwinds were building for household finances.

“Most household liabilities are insensitive to rising rates, but credit card interest costs are increasing, and delinquency rates have picked up.”

This was echoed by Goldman Sachs in a note on the consumer finance sector. It said credit card delinquencies and losses had moved beyond pre-pandemic levels.

“We generally see losses peaking by mid-24 for most issuers and heading toward a more normalized level in 2025,” Goldman said.

Its top picks in the consumer finance sector were American Express AXP Capital One Financial Corporation COF Ally Financial ALLY.

Now Read: Private Employment Shows Robust Growth In December: What It Means For Friday’s Key Jobs Report

Image: Created by AI via Midjourney