Holiday Shopping Season Will Look Different As Shoppers Take On More Debt

New Salesforce research shows that 37% of indebted consumers use their credit cards more today than a year ago, while 32% report using alternative credit services like “buy now, pay later” more frequently. Moreover, 43% of consumers carry more debt compared to 2023. And this isn’t unique to one income bracket — consumers across all levels are tapping into their credit lines more today than last year.

But this increased reliance on credit isn’t due to consumers buying more. According to the Salesforce Shopping Index, online order volumes have been falling since 2022 and decreased by 2% year over year in the first quarter of this year. When they do buy, they’re trading down, buying discounted merchandise, and seeking private labels.

Holiday Shopping Prediction #1: Chinese Shopping Apps Will Take Market Share

As consumers face uncertainty around rising prices, they’re changing shopping habits. Long gone are the pandemic times when the fastest shipping time could win over new business. Now it comes down to price.

Shoppers are looking for the best deal. Two-thirds of global shoppers report that prices dictate where they chose to shop, with less than one-third prioritizing quality of the goods. Temu is the clear winner, with 43% of Western shoppers purchasing on this platform within the last six months. But for Gen Zers, Shein is the top destination, with half of this group placing an order recently.

This holiday season, we predict that Chinese shopping applications will capture $160 billion in global ecommerce market share outside of China.

Holiday shopping prediction #2: Middle-mile shipping puts strain on margins

The Houthi attacks in the Red Sea and rising crude oil prices are driving up container costs worldwide, putting strain on the middle-mile infrastructure for the first half of the year. Additionally, last-mile challenges are also stacking up thanks to events like the collapse of the Francis Scott Key Bridge and rising delivery costs – stalling delivery times and adding expenses for retailers.

But retailers shouldn’t push the shipping expenses back on shoppers. Free shipping offers are a top three reason why consumers choose to make a purchase from a particular brand or retailer. Over half of shoppers say they are more likely to purchase online than in store if delivery is free.

This holiday season we predict brands and retailers will spend an extra $197B in middle-mile expenses, increasing 97% over last year.

Holiday shopping prediction #3: Shoppers embrace AI to search for the perfect gift

Last holiday season, 17% of online purchases were influenced by AI – both predictive and generative. That totalled a whopping $199M of onlines sales worldwide in November and December. This year, consumers will increasingly leverage AI – knowingly or not – to search for the right gift at the right price. In fact, 53% of shoppers surveyed said they are interested in using generative AI for inspiring the perfect present. As retailers increasingly embed AI into search experiences, we predict search will drive a nearly 3x better conversion rate compared to traffic not engaging with site search.

Holiday shopping prediction #4: Black Friday becomes Cyber Friday

Over the years, as online shopping grew in popularity and consumers could shop from anywhere, holiday shopping started earlier and earlier in November. Last year, Black Friday gained back 4% of online holiday sales, establishing itself as the biggest online shopping day of the year.

We’re expecting the same in the upcoming holiday shopping season. Two-thirds of shoppers say they’re holding out on making big purchases until Cyber Week, anticipating better deals.  The big news is that Black Friday is going to be the biggest day for digital. Salesforce research predicts online sales will take 7% off in-store sales on Black Friday.

Holiday shopping prediction #5: Retailers tap loyal shoppers to avoid skyrocketing digital marketing costs

Customer acquisition continues to be costly for retailers. In the face of busy election cycles, and as Chinese companies buy up advertising inventory, digital marketing costs continue to get more expensive, and opportunities to get in front of the right audience grow scarce. This means that brands and retailers have to better engage their existing customer base amid this tug-of-war over digital advertising space.

But there are other opportunities. Shoppers are doubling down on loyalty. According to our Salesforce Shopping Index, the rate of repeat buyers in the first quarter increased by 8% over the last two years. Shoppers are prioritizing brands and retailers that offer loyalty programs. Our research shows that 63% of shoppers are making more purchases from stores where they can earn and redeem loyalty points. This holiday season, we predict that 2 out of 5 holiday purchases will be made by a loyal repeat buyer.

Read Also: Top 5 Money Saving Tips While Shopping In Kenya

By Zuko Mdwaba, Salesforce Area Vice President & Africa Leader