BofA Investigates: Are New Holiday Hotspots Emerging from Online Spending?

A recent report from the Bank of America Institute examines whether the surge in online shopping is creating new holiday shopping hotspots, drawing insights from their internal credit and debit card data.

The report highlights a notable shift in consumer behavior, particularly among lower-income households, who are increasingly opting for online shopping over traditional brick-and-mortar stores in search of better deals. The data reveals that in-person spending during the holiday season has seen a 5% decline compared to 2019, with consumers favoring earlier online shopping. Furthermore, Cyber Monday has captured an additional 2% of holiday spending, indicating a rising preference for the convenience of online purchases.

This trend, which gained momentum during the pandemic, continues to thrive despite the easing of restrictions. As of August 2024, online spending accounted for 26% of total retail card expenditures, reflecting a 1.5 percentage point increase over the past two years. This shift is particularly pronounced among households earning less than $50,000 annually.

The phenomenon dubbed “trading lines for screens” is especially relevant during the holiday season, as shoppers prioritize convenience and savings. Online sales typically peak on Cyber Monday, with a secondary surge occurring just before Christmas, allowing time for deliveries.

Conversely, higher-income households have not shifted away from shopping malls to the same extent. While spending at malls has declined by 20% among lower-income consumers since 2021, higher-income individuals have only reduced their expenditures by 4%, indicating more stability for upscale shopping centers.

Overall, the findings suggest that traditional holiday shopping days like Black Friday and Christmas Eve remain influential for in-store spending, but their dominance is diminishing. The percentage of holiday spending in malls during the two weeks surrounding Christmas dropped to 15% in 2023, a decrease of 3 percentage points since 2019. Meanwhile, online spending during this period has risen to nearly equal that of brick-and-mortar stores.

Looking ahead, it remains to be seen if recent port strikes will affect holiday shopping trends; however, Bank of America Global Research anticipates minimal disruption unless the strikes persist. Retailers may choose to absorb increased costs to prevent passing them on to consumers.

As the 2024 holiday season approaches, it is expected that online spending will continue to grow, with consumers shopping earlier. Lower-income households will likely prioritize value and seek out bargains, intensifying competition in the retail landscape.