Online Sales Drove a Strong Start to the Holiday Shopping Season

Key Takeaways

• Consumers have spent record amounts online so far this holiday season, according to Amazon and Adobe.
• National Retail Federation reports that retailers probably made more purchases online on Black Friday, Cyber Sunday and Thanksgiving than they did physically.
• NRF says that households with lower incomes are more inclined to shop in stores. It could be due to the fact they prefer to use debit and cash cards, and to avoid receiving free shipping.

Consumers have been spending a lot online, which has helped retailers do brisk sales to kick off the holiday season.

Amazon’s (AMZN) company reported that Play-doh and Barbie dolls as well as Beats headphones were among the most popular products purchased on Amazon. Adobe (ADBE), a leading online retailer, reported that shoppers were also buying Harry Potter, Lego, Mario Kart 8, Zelda and Zelda Games, computers, digital cameras, electric scooters and bicycles.

Adobe reported that this fueled an increase of nearly 15% in the amount spent online on Black Friday. This totaled $10.8 billion. Adobe announced Tuesday that Americans spent $10.9billion more over the long holiday weekend. They also spent $13.3billion on Cyber Monday. Amazon sold a record number of items — and took in more revenue than in prior years — during its Nov. 21 through Dec. 2 holiday promotion, the company said.

“Early discounts were strong enough that many consumers felt comfortable hitting the buy button earlier on during Cyber Week, with Cyber Monday becoming ‘last call’ for shoppers to take advantage of big holiday deals," said Vivek Pandya, lead analyst at Adobe Digital Insights.

Retailers likely checked out more consumers online than in person on every day between Thanksgiving and Cyber Monday except Saturday, according to the National Retail Federation. In-person Black Friday sales were up less than 1% year-over-year, while stores drew about 3.2% fewer people, according to Mastercard and RetailNext, a firm that tracks foot traffic. Cold weather, particularly in the Midwest, may have kept some shoppers at home, RetailNext said. 

Higher-Income Households Drive Online Sales

Households with six-figure annual incomes are "significantly" more likely to shop online, NRF President and CEO Matthew Shay said Tuesday. About 60% of this demographic indicated in surveys that they'd buy online during the holidays, versus 40% of households earning under $50,000 annually, the federation said.

A record number of people used buy, now pay later tools on Cyber Monday, according to Adobe. Max Levchin, CEO of BNPL provider Affirm (AFRM), in a Tuesday interview on CNBC cited high spending on categories including apparel, furniture, houseware and consumer electronics.

Lower-income consumers may shop in person more because they rely more on cash and debit cards, want to avoid shipping and return fees, are looking for deals rather than just gifts, and prefer to examine expensive items, according to the NRF.

Preliminary data may undersell how many people still shop in-person because more affluent Americans' online spending eclipses the more modest sums others spend in stores, according to Shay. "People really are out there shopping," he said.

Discounts were not particularly dramatic to start the holiday season. Most retailers were offering similar or less significant price cuts than they did last year, according to J.P. Morgan and Deutsche Bank analysts.

And people have had less incentive to organize their holiday shopping around Black Friday, since many retailers in recent years have started launching their seasonal sales in late October or early November.

NRF predicts that spending over the entire season will be up 2.5-3.5% from the $955 billion sales of last year.

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