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Early sales, BNPL use will help drive robust holiday spending growth this year

The trend: Several new forecasts point to healthy growth in holiday spending this year.

  • PwC expects spending to grow by 7% year-over-year (YoY), with average spending on gifts, travel, and entertainment reaching $1,530.
  • Adobe Analytics’ holiday report expects online sales to grow 4.8% YoY to $221.8 billion in the period between Nov 1 and Dec 31.
  • Our own forecast puts US holiday sales growth at 4.5% this year, the sixth-fastest increase in the past 15 years.

But price is still top of mind for the vast majority of consumers.

  • Over 75% of shoppers are looking for deals this holiday season, per PwC.
  • And buy now, pay later (BNPL) use is set to soar: BNPL will account for $17 billion of online spending in November and December, a 16.9% spike YoY, according to Adobe, as more shoppers turn to flexible payment options to stretch their budgets.

Getting a head start: The proliferation of sales beginning in October is successfully pulling spend forward as shoppers look to snap up deals quickly.

  • Seventy-two percent of shoppers expect to see deals prior to Black Friday, while 49% plan to shop before then, per PwC.
  • Nearly half (46%) of consumers are using Amazon’s upcoming Prime Big Deal Days as an opportunity to get started on their holiday shopping, according to Bazaarvoice.
  • But as more retailers roll out sales early in the season, fatigue is setting in. Roughly four in 10 (39% of) shoppers say they are feeling burned out from the extended holiday retail season, per a survey by Slickdeals.

Economic pressures build: The projected increase in BNPL use during the holiday season brings home the fact that many households are struggling under the weight of increased everyday expenses.

  • One in five US consumers plans to use BNPL to purchase holiday gifts this year, per Adobe. At the same time, more shoppers are using the service to purchase essentials like groceries, whose share of BNPL spending has risen by 37.5% this year. Overall, BNPL users spent $46.7 billion so far in 2023, a 14.7% increase YoY.
  • Given that BNPL use is higher among financially insecure consumers, the increase in adoption this holiday season points to the reduced buying power many households are facing thanks to a cocktail of higher prices, rising interest rates, reduced government assistance, and the resumption of student loan payments.

The big takeaway: Holiday spending this year is likely to be solid as consumers take advantage of heavy promotions and flexible payment options like BNPL.

  • At the same time, the emphasis on cost and value is causing shoppers to focus their spending on essentials and practical gifts, and seek out cheaper retailers where their dollars can go further.

First Published on Oct 5, 2023