Online holiday sales nudged up 3.5% year over year, reaching $211.70 billion in web sales in November and December, according to Adobe Analytics.

This marks the largest ever online holiday season, but substantially slower growth than in recent years.  By contrast, from 2018-2021 online holiday season sales increased year over year by an average of over 17%.

Of the 61 days in November and December, shoppers spent more than $3 billion online on 38 days, according to Adobe. This is the same as the 2021 holiday season but an uptick from 2020, when 25 days exceeded $3 billion in online sales. Adobe’s data is based on 1 trillion visits to U.S. retail sites that offer 100 million SKUs in 18 product categories.

The slight growth in online sales for the entire holiday season reflects the turbulent year across the retail industry, with shoppers pulling back on spending due to inflation and other economic concerns. Single-digit growth is a departure from the two previous years, especially early in the COVID-19 pandemic when U.S. ecommerce sales surged upwards of 40% each quarter.

According to ecommerce platform provider Salesforce Inc., online sales rose slightly more than Adobe’s estimates, at a 5% year-over-year growth rate. But the volume of orders was flat year over year, and the number of units per transaction decreased 3.2% year over year, according to Salesforce. Further demonstrating inflation’s impact, Salesforce finds that the average selling price of items increased 5.2% year over year in November-December 2022. Salesforce’s data is based on the activity of 1.5 billion global shoppers.

In some respects, retail growth is normalizing and consumers are returning to their pre-pandemic shopping habits, says Don Davis, editor at large for Digital Commerce 360.

“Comparing 2022 online holiday sales to 2019, we see that the compound annual growth rate comes in at about 14%. That’s just about what ecommerce was growing before the pandemic,” Davis says. “So, COVID-19 didn’t kill stores or accelerate online shopping by several years. Rather, online took market share from brick-and-mortar stores during the pandemic overall, though not in 2022, when consumers returned to stores in large numbers. That shift to online was occurring before the pandemic and likely will continue in the years ahead.”

‘Sigh of relief’ for the 2022 online holiday season

So, while 3.5% industry growth is modest, retailers should be happy that the season produced any growth, says senior consumer insights analyst Lauren Freedman.

“Ecommerce felt a big sigh of relief after the 2022 holidays,” Freedman says. “After bracing for a rough season, retailers are glad to have gotten through it on a somewhat positive note, though of course there was variation in the performance numbers. Now, they are shifting gears in hopes of jumpstarting 2023.”

That’s certainly the case at jewelry merchants The Pearl Source and Laguna Pearl, says Leon Rbibo, president of both online retailers. Online sales increased 12% year over year in Q4 at The Peal Source and 8% year over year at Laguna Pearl, he says.

“We did not see the doom and gloom that much of the industry predicted this holiday season,” Rbibo says.

Similarly, the holiday season had its ups and downs at GiftsForYouNow.com, says Jim Tuchler, president of parent company Techny Advisors LLC. The online gifting merchant did not face the product shortages that plagued it during the 2021 holiday season. Having more merchandise on hand, coupled with slower sales, allowed it to ship packages later into the holiday season.

“Since ecommerce in general didn’t continue meteoric growth, there was capacity in the system,” Tuchler says. “That allowed us to ship later into the season for Christmas delivery, perhaps an extra three days versus last year.”

A slower start to the season’s sales

Despite marketing messages and promotions for the holiday season in early November, many merchants did not see a pickup in sales until later in November, right before Thanksgiving weekend called the Cyber 5.

In fact, online sales in the U.S. were down 8% year over year the first week of November, and down 5% the second week, according to Salesforce data. Adobe’s data finds that online sales were flat during the early holiday season, with a 0% year-over-year increase in October 2022 and a 0.1% year-over-year increase from Nov. 1-21.

Both The Pearl Source and Gifts For You Now both reported this was the case, with slower sales early in the season and starting to increase around Black Friday.

“Though holiday sales got a slower start than they did last year, they accelerated dramatically,” Rbibo says. “We didn’t really see the pop we’re accustomed to seeing until very late November, when ordinarily things begin to pick up around the first week of November.”

Rob Garf, vice president and general manager, retail, at Salesforce, says this reflects the game of “discount chicken” shoppers and merchants now play.

“Online retailers offered discounts early and consumers held out until the last minute, but in the end, they did show up,” Garf says. “Our data shows an incredibly strong correlation between discount rates and digital sales, as consumers held out for the biggest and best deals.”

Those large discount-heavy days of Black Friday and Cyber Monday were again the largest days of the season in terms of online sales. Cyber Monday was the largest online sales day of the season with $11.30 billion, followed by Black Friday at $9.12 billion and then Thanksgiving at $5.30 billion, according to Adobe’s estimates.

“If I had to sum it up, shoppers started later this year, perhaps wary of an economic downturn,” Rbibo says. “But once they got a taste for some of the steep discounts retailers were offering, sales accelerated hard.”

While it’s expected that shoppers will flock to discounts around Black Friday, below are four factors that made the 2022 holiday season unique.

A year of inflation worries shoppers

Inflation was a headline throughout 2022 and impacted how the holiday season unfolded. The higher online prices trickled down to a pullback in consumer spending and an acceleration of discounts.

Through the first nine months of 2022, the median online inflation rate was 2.0%, according to data from the Adobe Digital Price Index. This is far lower than the overall inflation rate during this time period, which was a median of 8.3% for the first nine months of 2022, according to data from the U.S. Labor Department. Online prices for goods increased year over year in each of the first six months of 2022 and, by June, had increased for 25 consecutive months. Not until July did online prices start to decrease, according to Adobe.

Because of inflation, 23% of online shoppers said they spent less on their online holiday shopping compared with last year, according to a Digital Commerce 360/Bizrate Insights survey of 1,023 online shoppers in January 2023.

Plus, 30% of online shoppers said they comparison shopped more during the 2022 holiday season than in the 2021 holiday season.

Going into the holiday season, merchants were aware of shoppers being more budget-conscious and knew they needed to entice shoppers with promotions.

Merchants respond with deep discounting

Discounts hit records during the 2022 holiday season, and shoppers took advantage of them.

Eight major ecommerce categories offered a deeper discount during the 2022 holiday season compared with 2021, according to Adobe. Plus, the discounts were deeper in 2022 in all but two categories compared with 2020 as well.

Toys, a natural Christmas purchase, featured some of the largest discounts, with 34% off list price during the 2022 season compared with 19% in 2021. Electronics at 25%, computers at 20% and apparel at 19% were also highly discounted during this holiday season.

These discounts helped propel the season into positive territory for many merchants, said Vivek Pandya, lead analyst at Adobe Digital Insights.

“At a time when consumers were dealing with elevated prices in areas such as food, gas and rent, holiday discounts were strong enough to sustain discretionary spending through the entire season,” Pandya says.

Salesforce data finds that the average discount was 21% for online merchants, compared with 19% during the 2021 holiday season.

Many shoppers were satisfied with the discounts online retailers offered, according to the Digital Commerce 360/Bizrate Insights consumer survey. 22% said they encountered steep promotions and made purchases, and 39% said they found adequate promotions and got their fair share, according to the survey.

They worked to get the best deals: 13% said they spent significant time tracking promotions prior to making purchases, and 22% said they spent some time tracking promotions.

Signifyd, which provides fraud-prevention technology for web merchants, also noted an increase in discounting. Shoppers who purchased online with a discount code increased 16% during the 2022 holiday season compared with the 2021 holiday season.

In total, consumers applied discount codes to 17% of online holiday purchases during the 2022 holiday season, up from 14% in 2021, says Signifyd data analyst Phelim Killough.

Omnichannel fulfillment still matters later in the season

Consumers need their gifts by Christmas and opt for other methods besides home delivery late in the season. Once the cut-off date for free ground shipping passes, many online shoppers turn to buy online, pick up in store or curbside pickup to get their orders.

Nearly 20% of online orders placed globally during the holiday season were picked up in stores, according to Salesforce data. The share of BOPIS orders mostly stayed around this 20% rate until Dec. 15. Then, each day the share of BOPIS orders ticked up until peaking on Dec. 23, when 35% of online orders were picked up at the store, according to Salesforce.

That late-season shift benefits merchants that can offer in-store pickup. After Dec. 15, U.S. retailers that offered BOPIS grew their revenue seven times faster than merchants that did not offer omnichannel fulfillment, according to Salesforce.

Curbside pickup, however, is waning in its importance to shoppers, likely a sign that shoppers are less wary of getting sick by going into physical stores. Of online retailers that offered the service, 21% of orders were fulfilled via curbside for the holiday season, down from 23% during the 2021 holiday season, according to Adobe data.

Like BOPIS, shopper use of the service peaks the closer Christmas is. From Dec. 22-23, 42% of online orders were fulfilled via curbside, according to Adobe data based on the merchants that offered this service.

While curbside was a hot service to offer during the pandemic, some merchants have decided to discontinue the service, including apparel retail chain Kohl’s Corp.

Only 9% of online shoppers said they chose to purchase from a specific retailer during the 2022 holiday season because it offered curbside, down from 12% of online shoppers in 2021 and 15% in 2020, according to comparable post-holiday surveys from Digital Commerce 360/Bizrate Insights.

Financed purchases with buy now, pay later increase

Online financing options, known as buy now, pay later, have grown in popularity over the last few years, including during the holidays.

During the 2022 holiday season, buy-now-pay-later (BNPL) orders rose 4% compared to 2021, according to Adobe data.

Salesforce finds that 5% of online orders in the U.S. were paid via such financing options during the recent holiday season. And the number of orders financed during November and December increased 4% year over year, according to Salesforce.

45.7% of Digital Commerce 360’s Top 1000 online retailers — North America’s leading retailers by web sales — offered a BNPL option in 2021, up from 28.2% in 2020. And 7.4% offered two or more BNPL options, an increase from only 1% in 2020.

9% of shoppers said they financed more of their purchases using these installment methods during the 2022 holiday season compared with 2021, according to the Digital Commerce 360/Bizrate Insights survey.

Final takes on the holiday season

The holiday season is always the capstone of the year for merchants. While ecommerce sales did not rocket skyward as in years past, most merchants strengthened their online and omnichannel services during the pandemic. And that bodes well for ongoing growth in retail ecommerce.