Online grocery, BNPL keep growing after pandemic ecommerce boom

Grocery and home furnishings grow 

There are signs that consumers are turning online to buy more types of products. Categories like home furnishings and grocery previously struggled to take off in ecommerce, but both saw notable growth in 2022.

Home furnishings grew 10.2% year-over-year, reaching $126 billion in spend. This continued in February 2023, with 12.9% sales growth to $9.4 billion.

Grocery, which saw a surge during the pandemic, saw continued growth of 10.8% in 2022, reaching $86.8 billion. In February 2023, there was even more pronounced growth of 26.7% YoY, driving $8.4 billion in spending.

Not every category saw such a dramatic uptick. Electronics, which consistently has the largest share of ecommerce spend, grew 4% year-over-year in 2022. Meanwhile, apparel fell 3.8% year-over-year.

“Ecommerce 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 Vivek Pandya, lead analyst at Adobe Digital Insights, in a statement. “Now consumers have embraced the rich ecommerce experiences that made them feel comfortable getting these necessities delivered to their doorsteps, making these categories new growth drivers in the digital economy.”

BNPL still up, curbside pickup slows

The pandemic ecommerce boom also led consumers to embrace new types of digital shopping experiences, from how they paid to how they received items.

In this area, there are also signs of continued expansion. Buy Now Pay Later, which allows shoppers to pay in installments, had a fast rise in 2020 and 2021 amid the ecommerce boom. Expansion continued as a higher cost of living due to inflation left consumers seeking to spread out payments. In 2022, the share of online purchases made with BNPL continued to grow at a rate of 14% year-over-year, while revenue grew 27%.

Adding to evidence of staying power, BNPL is proving to be popular in the categories showing the most growth. In the first two months of 2023, groceries’ share of BNPL grew 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,” Pandya said. “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.”

Price is also playing a role. According to Adobe’s Digital Price Index data from January 2019 through February 2023, share increased in the cheapest pricing tier for categories such as groceries (35.6%) and electronics (57.1%).

The pandemic also introduced more shoppers to fulfillment methods that blended ecommerce and stores. One of these was curbside pickup, which was a must-have option for retailers amid the health emergency that required distancing. But this practice has seen a slowdown. In 2021, 23% of online orders from retailers who offered curbside pickup used this option. In 2022, it fell to 19%, followed by a further fall to 17% in the first two months of 2023. However, there are still more signs of interest in grocery, which was a prime use of curbside pickup. That category grew 8% year-over-year in early 2023. By contrast, electronics grew only 2%.

Many retailers now have curbside pickup, and that's unlikely to go away. Rather, it is now best considered one of a number of options that retailers are offering consumers who want to have choices, alongside in-store pickup and local delivery.

Mobile majority

The return to stores didn't replace ecommerce. Rather, the two channels are now blended more than ever before. As shoppers move across physical and digital retail, they are embracing mobile devices that help to connect the two. Adobe noted that the 2022 holiday season marked a “turning point” for mobile shopping, as a majority (51%) of Cyber Week sales were made using smartphones for the first time. This trend is expected to continue. By December 2023, Adobe expects smartphones to drive the majority of sales every month.

Yet there’s a gap between the largest retailers and smaller retailers in growth. Retailers with over $1 billion in annual sales are driving 38% more visits that result in purchases than retailers making $10-50 million in annual sales. For smaller retailers, share of revenue is also 8.6% lower.

It underscores how there are still plenty of opportunities to expand and improve digital commerce. The pandemic proved to be a great leap forward for retailers introducing ecommerce capabilities, but it is not the end of the expansion.