Adobe Analytics Shows Buy Now Pay Later Usage Is Higher Amid Economic Concerns

The current economic uncertainty and inflationary pressures in non-discretionary spending categories are prompting consumers to delay purchase payments by leveraging buy now pay later options (BNPL). Categories that have shown increased demand in BNPL purchases include groceries and home furnishings. In the first two months of 2023, online groceries’ share of BNPL orders grew a staggering 40%, while home furnishings grew by 38%. “The rise of buy now pay later usage for groceries tells us that consumers are likely making bigger purchases online to take advantage of special promotions and stock up on staples, thus managing living expenses in more flexible ways,” explained Vivek Pandya, lead analyst, Adobe Digital Insights. “The strong online growth of home furnishing purchasing is expected to bolster buy now pay later adoption, given the higher ticket prices in this category.”

In 2022, consumers spent over $126 billion on home furnishings, a 10.2% increase year-over-year (YoY), and the trend going into February has held, with the merchandise category up 12.9%. “I would theorize that grocery and furniture likely became more popular online purchases during the pandemic and as people have adjusted to the ease and convenience of getting groceries and furniture straight to their front door. It’s a pattern that will continue,” stated Charlie Youakim, co-founder and CEO of Sezzle, a BNPL company.

Consumer cost-of-living expenses are rising

The Consumer Price Index for food at home increased 10.2% for the rolling 12 months ending in February. Living expenses, including Shelter (rent, hotels, and homeowners’ equivalent of rent), fuel oil, electricity, and natural gas, increased by 8.1%, 9.2%, 12.9%, and 14.3%, respectively. As consumers are dealing with higher prices in these categories, they are expanding the use of BNPL to budget their money. “For Sezzle, we can see that there has been an increase in usage since January. In our most recent February results, daily underlying merchant sales (UMS) were up 12% compared to January,” said Youakim.“We have seen a rise in groceries; one of our grocer platforms ranks second in highest usage for our Sezzle Premium product.”

Customers turn to BNPL for more purchases

In 2022, the share of online purchases using BNPL grew by 14% YoY, according to Adobe Analytics, with revenue from BNPL growing 27% YoY. In the first two months of 2023, BNPL order share was up by 10% YoY, though revenue fell by 19%, indicating consumers are using BNPL for smaller purchases.

“Our average order values have been steady and have recently shown a slight increase throughout the past few months in the throes of the economy. This could also be less due to people buying more, but instead people allocating BNPL/Sezzle payment option to a larger portion of their purchases,” said Youakim.

The widening view of the consumer spending slowdown, the looming recession, and the added concern over bank failures contribute to a change in shopping behaviors. “I think it’s certain that consumer shopping habits shift with every economic factor that comes into play, but people are still buying,” said Youakim.

Consumers shift to less costly goods

While BNPL usage across groceries and home furnishings was significantly higher for January and February, electronics fell by 14%, and apparel was up by only 8%, a category that has typically been strong for BNPL users.

Consumers are shifting away from discretionary fashion items and trading down to store brands. The Adobe Digital Price Index (DPI) shows that from January 2019 through February 2023, the cheapest pricing tier grew its share of sales significantly across categories, including groceries (up 35.6%) and electronics (up 57.1%). “E-commerce demand has remained resilient in an uncertain economic environment, driven in part by lasting pandemic habits where consumers had no choice but to leverage online food and home furnishing shopping services,” said Pandya. “Now consumers have embraced the rich e-commerce experiences that made them feel comfortable getting these necessities delivered to their doorsteps, making these categories new growth drivers in the digital economy.”

Mobile shopping continues to grow

In 2022, smartphones drove 45% of overall online sales, but on the current growth trajectory, Adobe expects that every month will see smartphones spur the majority (over 50%) of online sales by December 2023. “At Sezzle, our users have always skewed heavily toward mobile purchasing, but we have seen mobile become even more prominent so far in 2023 (high 80%s),” said Youakim. Mobile purchases are more convenient for consumers and will continue to be an essential component for online shopping.

Adobe Analytics collects data to interpret commerce transactions online, covering over one trillion visits to U.S. retail sites, 100 million SKUs, and 18 product categories.