Why it matters:
- November and December are the biggest shopping months of the year, and a crucial indicator of what to expect in the coming year. U.S. holiday sales are expected to hit record numbers and exceed $957 billion.
- The holiday season was a crucial test for mobile shopping, AI-shopping assistants, and new payment plans — and consumers used them in record numbers. Their usage of these next-generation digital shopping features is poised to continue in 2024.
- Consumers showed they will keep on spending even as they express concern about the economy.
It’s been a holiday season full of surprises for retailers.
Consumers not only surprised retailers with the strength of their spending, but they showed greater-than-expected willingness to use mobile apps, social media links, AI-powered product recommendations, and pay-over-time options to drive their spending.
The shifts in consumer behavior over the holiday season will influence how retailers operate in 2024.
Here are the top takeaways from holiday 2023 that will shape retail in 2024.
Consumers will continue to spend, even while worrying about the economy
Consumers during the holiday season, and for much of 2023, surprised economists and retail forecasters with how much they spent, despite ongoing concerns about inflation.
Economists had expected to see a significant slowdown in spending, or even a recession, by the end of the year due to interest rate hikes put in place to curb inflation. But inflation slowed at a faster pace than expected, and consumers beat spending forecasts for the first half of 2023.
In November, retail sales were up 0.3% over October, and up 4.1% year-over-year, the Census Bureau reported. That boost was driven by a strong Black Friday weekend that drew record numbers of shoppers and sales growth both in stores and online.
“The U.S. economy is on track to end 2023 with vigorous growth for the year,” the National Retail Federation concluded in its December Monthly Economic Review report.
“The remarkably resilient consumer sector has been the story of 2023,” NRF Chief Economist Jack Kleinhenz said in the report.
The 2024 Consumer Trends Report, produced by Dan Frommer, editor of The New Consumer newsletter in collaboration with venture fund Coefficient Capital, and released in mid-December, noted that a year earlier the country was bracing for the recession that everyone was sure would arrive in 2023. Instead, “U.S. consumer spending set new records in 2023,” the report stated.
The report found that while consumers still view inflation as the most important problem in the country, economic concerns have not led to decreased spending.
[Read: Meta, Google, and Shopify Execs on How New AI Tools Will Drive Sales in 2024]
The shifts in consumer behavior over the holiday season will influence how retailers operate in 2024.
Phones are becoming the favorite place to shop
Over the five-day Black Friday to Cyber Monday weekend, more than half of online purchases were made on a mobile phone, the first time that phones have overtaken desktops and laptops for e-commerce, according to Adobe Analytics.
The analytics firm, which tracks over 1 trillion visits to U.S. e-commerce sites, reported that the holiday weekend “set a new bar” for acceptance of mobile shopping.
“Mobile has become a key growth driver in the digital economy, and the increased usage shows that many consumers now find the experience on par with desktop shopping,” Adobe reported.
As a result, retailers are upgrading their mobile shopping experiences to easily capture those on-the-go and on-their-phones shoppers, with an even greater shift to mobile expected in 2024.
Social media shopping comes into its own
The growing consumer comfort with making purchasing on phones helped boost the impact of ads and influencers on social media during the holiday season.
This holiday season saw a surge in purchases made directly through social media sites.
Social media now isn’t just a place to find products, retail tech company Shopify reported. Increasingly, Shopify said, “it’s a place to buy them.”
A survey Shopify conducted with Gallup found that 33% of consumers said they are likely to shop directly from Instagram, while 31% said they would shop from Facebook and 28% from TikTok.
“Customers want an easy, intuitive shopping experience, and increasingly, they want it right in the middle of their scrolling session,” Shopify said.
Retailers are telling Shopify that they expect this trend to increase in 2024 and beyond, with 30% saying they believe social media platforms will generate their highest sales volume by 2030, ahead of their own online stores.
[Read: Retro Rewards: How Businesses Are Monetizing the Nostalgia Trend to Win Over New Customers]
AI-powered shopping expected to influence billions in retail sales
Retailers discovered during the holiday season that AI-generated product recommendations as well as AI-powered chatbots and virtual shopping assistants can be powerful tools to boost sales.
They also learned that consumers like getting AI assistance with their shopping. Heading into the holidays, the Shopify/Gallup survey found that 74% of consumers believed that AI helps in finding deals and offers, 69% believed it makes it easier to discover new brands and products, and 67% said it makes it easier to get recommendations based on previous purchases.
Retail software company Salesforce predicted at the start of the season that AI recommendations would drive $194 billion in online sales during the holidays. During the kickoff to the peak holiday season, the Black Friday/Cyber Monday period, AI influenced over $51 billion worth of sales, Salesforce reported.
Consumers opting to ‘buy now, pay later’
This holiday season also saw a dramatic increase in the use of buy now, pay later (BNPL) payment options, which typically allow consumers to divide online payments into four or more installments.
Adobe Analytics reported that BNPL usage hit an all-time high on Cyber Monday, contributing to $940 million in online spending. BNPL spending on Cyber Monday was up 42.5% over a year earlier, an increase Adobe described as “staggering.” For the month of November, BNPL was used for over $8.3 billion in spending.
With more consumers using BNPL plans, retailers are increasingly adding the option in stores as well as online. One of the BNPL providers, Affirm, announced Dec. 19 that it was expanding its pay-later options to the self-checkout lanes at Walmart so that store shoppers could opt to be billed in installments.
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