Paid search takes the lead in powering retailers’ 2023 holiday sales

Paid search emerged as the driving force behind a remarkable $222.1 billion in online holiday sales during November 1 through December 31, marking a substantial 4.9% YoY increase, as revealed by the latest Adobe Digital Insights report. 

However, it was the ingenious payment strategy of “Buy Now, Pay Later” (BNPL) that stole the show, hitting an unprecedented $16.6 billion for e-commerce purchases in the final two months of 2023, showcasing a substantial 14% surge compared to the previous year’s holiday spending. November, specifically, witnessed a historic high for BNPL at $9.2 billion, surging by 17.5% YoY, with Cyber Monday emerging as the pinnacle, reaching a staggering $940 million—an impressive 42.5% YoY increase.

For the entirety of 2023, BNPL played a pivotal role in driving $75 billion in online spending, reflecting a substantial 14.3% YoY surge and a notable $9.4 billion more than the previous year. 

Despite the surge in spending, the Adobe Digital Price Index reported a consistent decrease in online prices across 18 product categories, showing a 5.3% YoY decline in December 2023. 

Mobile shopping took center stage this season, accounting for 51.1% of online sales, surpassing desktops (47% in 2022). The popularity of curbside pickup remained intact, used in 18.4% of online orders this holiday season, though slightly down from 21% in 2022.

Notably, paid search retained its status as the primary driver of sales for retailers, contributing to 29.4% of online sales during the holiday season. Other significant channels included direct web visits (19.3%), affiliates and partners (16.6%), organic search (15.9%), and email (15.3%). Surprisingly, revenue directly attributable to social media remained under 5% of total sales this season, although it witnessed a 5% YoY growth.

As the holiday season concluded, discounts played a pivotal role, with Adobe Analytics estimating that consumers spent $123.5 billion online in November, showcasing a 6% YoY increase. Cyber Week, spanning the five days from Thanksgiving to Cyber Monday, drove an impressive $38 billion in online spend, up by 7.8% YoY. In December, the momentum continued with consumers spending a total of $98.6 billion online, reflecting a 3.7% YoY increase. 

The prevalence of discounts remained prominent across various e-commerce categories, including electronics, toys, and apparel, driving end-of-year shopping to new heights. As the new year begins, marketers may face the challenge of navigating high credit card debt and lingering BNPL payments, necessitating innovative strategies to sustain consumer spending momentum in 2024.