Nearly 9% increase in online holiday spending due to deep discounts and AI-powered chatbots, according to Adobe data.

• During November and December, consumers took advantage of discounts, resulting in an 8.7% increase in online spending, as reported by Adobe Analytics.
• Vivek Pandya, lead analyst for Adobe Digital Insights, stated that shoppers are adopting "event-ized buying" by waiting for specific sales periods to purchase desired items.
• Nearly 13% growth in spending on groceries and 12.2% growth in spending on cosmetics were the biggest year-over-year spending increases, with $21.5 billion and $7.7 billion spent respectively, according to the data.

During the holiday season, there was an 8.7% increase in online spending compared to the previous year, as promotions and AI-powered chatbots encouraged purchases, according to Adobe Analytics data.

According to Adobe, retailers' websites and apps generated $241.4 billion in sales from November 1 to December 31. The company's analysis encompasses over 1 trillion visits to U.S. retail sites, 100 million unique items, and 18 distinct product categories.

Higher online spending was driven by increased demand, not higher prices, according to Adobe. Despite falling e-commerce prices for 27 months, Adobe's Digital Price Index found that consumer spending would be higher if the figures were adjusted for inflation.

The retail industry is showing positive signs with the e-commerce results, and companies such as , , and others will reveal their fiscal fourth-quarter results, including sales during the key shopping season, in late February.

According to Mastercard SpendingPulse, retail sales in the U.S., excluding automotive sales, increased by 3.8% year over year during the holiday season from Nov. 1 to Dec. 24. Other early reads on the holiday season have also shown positive results.

Online spending increased by $2.25 billion during the 2023 holiday season due to deep discounts, according to Adobe's data. For every 1% decrease in the typical price, demand for merchandise increased by 1% compared to the previous year.

As groceries and housing prices remain high, consumers are delaying the purchase of nonessential goods during times when they anticipate lower prices, which Vivek Pandya, lead analyst for Adobe Digital Insights, referred to as "event-ized buying."

During Amazon's Prime Day event in the summer or during sales days such as President's Day and Memorial Day, shoppers have opened their wallets.

"He stated that there are specific instances where companies overinvest in certain opportunities, which propels them forward, as they recognize the value. However, outside of these moments, growth tends to slow down."

During the holiday season, the best online deals were in electronics, with discounts reaching a high of 30.1% off the listed price; toys, with price reductions reaching a maximum of 28%; TVs, with discounts reaching a maximum of 24.2%; and apparel, with price cuts reaching a peak of 23.2%.

The three top categories for the holiday season were electronics, apparel, and furniture and home goods, which accounted for approximately 54% of total online spending, according to Adobe. However, the biggest year-over-year spending growth came from groceries, with a nearly 13% increase to $21.5 billion, and cosmetics, with a 12.2% increase to $7.7 billion.

The AI effect

AI-powered shopping assistants, such as ChatGPT and its competitors, are among the newer factors influencing consumer spending behavior.

The number of visitors to retail websites from AI-powered chatbots increased by 1,300% during the holiday season compared to the previous year, as more shoppers used the technology to find gift suggestions and direct them to cheaper options, according to Adobe. This data only included external chatbots and not those provided by retailers on their own apps or websites.

While the technology is still in its early stages and the user base is limited, chatbots are increasingly driving clicks and purchases on retailers' websites.

"Pandya stated that the consumer is highly strategic and constantly considering their buying strategy, including where, when, and what offers the best deal. The generative AI assistants are aiding the consumer in this journey by providing support and guidance."

During the current shopping season, smartphones were the primary device for a majority of shoppers, with nearly 55% of e-commerce purchases taking place through a smartphone, compared to a laptop or other device. This is an increase from the previous holiday season, where about 51% of purchases were made through a smartphone, according to Adobe.

During the holiday season, the use of buy now, pay later increased by 9.6% year over year and resulted in $18.2 billion in online spending. This was an all-time high for the holiday season, according to Adobe. Cyber Monday saw the highest spending on buy now, pay later with $991.2 million.