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Online shopping is slowing down, except in one category

U.S. e-commerce growth continues, but the pace of growth is slowing.

According to the latest data from software giant Adobe, US consumers spent $331.6 billion online in the first calendar quarter of 2024 – from January 1 to April 30 – up 7 percent from the previous year. Adobe expects online spending to reach more than $500 billion in the first half of 2024, up 6.8% year-over-year. This is a far cry from the solid double-digit growth seen in recent years, particularly during the Covid-19 pandemic.

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Adobe analyzes over one trillion visits to U.S. retail sites, 100 million SKUs, and 18 product categories.

Among the most dramatic trends cited by Adobe:

  • Online grocery shopping is becoming more and more popular.

  • Consumers are losing value as they look for cheaper products in major e-commerce categories, including personal care, electronics, clothing, furniture and grocery, often choosing generic store labels over more expensive brands.

  • Consumers increasingly use mobile devices when shopping.

  • More and more Americans are taking advantage of buy now, pay later programs.

Consumers are making “strategic” choices and opting for cheaper goods, Vivek Pandya, principal analyst at Adobe Digital Insights, told WWD.

Pandya also said grocery generated $38.8 billion online and was up significantly at 15.7 percent year-over-year, but about 5 percent of that growth can be attributed to price increases from a year ago, while most of the growth will be driven by higher demand . He also said consumers are very comfortable shopping for groceries online, a trend that first emerged during the pandemic.

While grocery prices remain severely inflated, Pandya said overall consumer prices have declined by 5-6 percent this year.

“In an unpredictable economic environment, the latest data from Adobe Analytics shows the continued resilience of the digital economy as consumers engage with new categories online,” Pandya said in prepared remarks. “Grocery is a standout and Adobe expects the category to be a dominant force in e-commerce over the next three years, matching electronics and apparel in revenue share.”

Single-digit growth in online spending was supported by “stable spending” in discretionary categories, including electronics and apparel, as well as growth in grocery spending, according to Pandya.

In the first four months of the year, consumers spent $61.8 billion online on electronics, up 3.1 percent year-over-year, and $52.5 billion on apparel, up 2.6 percent year-over-year. Despite modest growth, both categories account for 34.5 percent of total e-commerce spending and have helped sustain revenue growth, Adobe said.

Adobe also cited cosmetics as another growing category online, pointing out that consumers spent $13.2 billion on cosmetics online in 2024, up 8% year-over-year. Throughout 2023, consumers spent $35 billion on beauty products online, up 15.6 percent from the previous year.

Adobe indicated that mobile spending generated $156.9 billion in online spending in the first four months of 2024, an impressive 9.8% year-over-year growth.

Buy now, pay later (BNPL) is expected to generate more than $81 billion in online spending in 2024, setting a new record as customers take advantage of more flexible ways to manage their budgets, Adobe says.

Confirming Adobe’s BNPL findings, Affirm said Wednesday it had 17.8 million active users in the third quarter ending March 31, up from 15.6 million in the year-ago period. It reported third-quarter fiscal 2024 revenue growth of 51 percent to $576 million from $381 million in the year-ago period. Gross merchandise volume (GMV) increased 36 percent to $6.3 billion from $4.6 billion in the same period a year ago.

Additionally, Affirm’s operating loss was $161 million, an improvement from an operating loss of $310 million in the third quarter of 2023. Adjusted operating income was $79 million in the latest quarter compared to a loss of $6 million in the year-ago period .

“We delivered another set of excellent results in our fiscal third quarter. In the parlance of our times, we have killed,” said Max Levchin, founder and CEO of Affirm.

“This is Affirm’s fourth consecutive quarter of accelerating GMV growth,” Levchin added. “Credit performance was stable and profitability exceeded our expectations, which we see as an opportunity to moderately increase risk exposure by offering credit to more consumers, but as always we remain closely monitoring credit performance. “Financing capacity has increased slightly from quarter to quarter.”

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