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According to data from Adobe Analytics, online spending during the holiday season increased 8.7% year-over-year as deals and the use of AI-powered chatbots drove purchases.
Sell on retailer websites and apps According to Adobe, revenues between November 1 and December 31 totaled $241.4 billion. The company's analysis includes more than 1 trillion visits to U.S. retail sites, 100 million unique items, and 18 different product categories.
According to Adobe, more demand, not higher prices, led to higher online spending. Adobe's Digital Price Index shows that e-commerce prices have fallen every month for the past 27 months. The company's figures are not adjusted for inflation, but if they were revised, overall consumer spending would be higher.
The e-commerce results are a promising sign for the retail sector, which has yet to report company-specific sales. Walmart, Goal, Macy's and others will release their fourth-quarter financial results at the end of February, including their sales during the main shopping season.
Other early readings about the holidays also looked strong. U.S. holiday retail sales, excluding auto sales, rose 3.8% year over year for the period Nov. 1 through Dec. 24, according to Mastercard SpendingPulse, which tracks in-store and online sales across payment methods measure.
According to Adobe data, deep discounts motivated holiday shoppers to spend. For every 1% drop in the average price, merchandise demand increased by about 1% compared to the 2023 holiday season, Adobe data shows. That led to another $2.25 billion in online spending.
Vivek Pandya, principal analyst at Adobe Digital Insights, says that because grocery and housing prices remain high, consumers are holding off on buying non-essential goods at times of year when they expect to pay less. He described that pattern as “event-driven buying.”
For example, he said, shoppers have opened their wallets during Amazon's Prime Day event in the summer or during sales days like President's Day and Memorial Day.
“There are certain times and opportunities where we see them over-indexing their spend and really moving forward because they see the value in it,” he said. “And outside those periods we see growth decreasing again.”
Some of the best online deals during the holiday season were in the electronics category, where discounts peaked at 30.1% off the listed price; toys, where price reductions amounted to 28%; TVs, where discounts were up to 24.2%; and clothing, where price cuts peaked at 23.2%.
Electronics, apparel, and the furniture and home goods segment were the three top categories for the holiday season, contributing about 54% of total online spending, according to Adobe. Still, the biggest year-over-year growth came from spending on groceries, which rose nearly 13% to $21.5 billion, and on cosmetics, which rose 12.2% to $7.7 billion.
The AI effect
One of the newer drivers of spending is AI-powered shopping assistants, such as ChatGPT and its competitors.
Traffic to shopping sites coming from generative AI-powered chatbots skyrocketed 1,300% compared to last year's holiday season as more shoppers turned to the technology to find gift ideas and direct them to cheaper items, according to Adobe. That data only includes third-party chatbots, not the chatbots that retailers offer on their own apps or websites.
Pandya said that while the technology is still young and the user base is still modest, these chatbots are becoming increasingly meaningful drivers of clicks and purchases on retailers' websites.
“You have a consumer who is very strategic and thinks a lot about his strategy, where he buys, when he buys, what offers the best deal,” Pandya said, “and that's where the generative AI resources, the assistants, help of the consumer and guiding that journey.”
For many shoppers, smartphones played a central role. The majority of the season's e-commerce purchases (nearly 55%) were made via a smartphone rather than a laptop or other device. That's up from about 51% during the holiday season a year ago, Adobe found.
Use of Buy Now, Pay Later, a credit option that allows shoppers to split their purchase into multiple payments, increased 9.6% year over year and contributed to $18.2 billion in online spending during the holiday season. According to Adobe, that was a record high during the holidays. Cyber Monday was the biggest day ever for buy now, pay later with $991.2 million in spend.