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2022 expected to be first year the U.S. will spend more than $1T online: Adobe

John Copeland, VP of Marketing and Customer Insights at Adobe, joins Yahoo Finance’s Alexis Christoforous to break down the Adobe Digital Economy Index and the future of e-commerce.

Video Transcript

ALEXIS CHRISTOFOROUS: The pandemic has permanently reshaped the way we shop online. Those are the findings of the Adobe Digital Economy Index. Joining me now to discuss some of the trends we saw in that report is John Copeland. He is VP of Marketing and Customer Insights at Adobe. John, good to see you. So when I dug into this report, I found that from March of last year to February of this year, we spent $844 billion online, 42% more than the previous year. What does the start of 2021 look like?

JOHN COPELAND: Yeah, so that's a great question. And thanks for having me on, Alexis. So first two months of this year, $121 billion already, which is 34% higher than January and February of last year. And of the $844 billion spent in those time periods you talked about from March to February, fully 20% of that, through our models, we assessed as being caused by the pandemic, right? So $183 billion of that 844 really caused by the pandemic.

And when you look at that growth rate year over year, that 42% that you were talking about, that's really the equivalent of two-- a little bit more than two years of growth packed into a single year in the online commerce channel.

ALEXIS CHRISTOFOROUS: It's explosive growth, and I guess the question then becomes as our economy's reopened more and more, what kind of trends do you see for e-commerce? Are things going to start to slow down a little bit? What does 2022 and beyond look like?

JOHN COPELAND: Yeah, so we expect some slowing this year. You know, everybody is itching to get out of the house and probably back into the stores. So our range, our estimate this year, is somewhere between $850 billion to $930 billion spent this year. So that would be something between, like, a 5% and a 14% growth year over year. So not as much as we see in a typical year, but last year clearly was not typical. But to your point, what do we see for the future, we expect next year, 2022, to be the first year where the US has more than a trillion dollars spent online.

ALEXIS CHRISTOFOROUS: Incredible, which means a lot of companies if they don't have it in place already, need to get that infrastructure in place to be ready for the deluge of e-commerce shoppers. I want to talk a little bit about the trends you saw in this report. One thing you saw is the way we're paying for things-- buy now, pay later. Is this sort of a layaway type plan, and do you see this lasting post-pandemic?

JOHN COPELAND: Yeah, consumers are really all over this trend. What we've seen for January and February of this year compared to last year is 215% increase in buy now, pay later. The other thing that we're seeing along with it is an increase in the average order value. When consumers use this payment option, the average order value is 18% higher than orders placed not using it.

And it's a little bit different than layaway because layaway, you'd have to keep paying until you could get the product. This one is where you can get the product now, and then the payments keep coming. And we see there are fintech payment companies devoted exclusively to it, as well as credit card issuers kind of getting on the bandwagon and offering that for their customers as well.

ALEXIS CHRISTOFOROUS: You know, what's happening with these branded shopping days, which really seemed to carry some heft to them when things were, quote unquote, "normal." I'm talking about Memorial Day sales, Labor Day sales, Cyber Monday. Did they matter as much last year? And do you think they've lost a little bit of their shine going forward?

JOHN COPELAND: Yeah, last year was clearly a break in the trend. I mean, historically, retailers have focused consumers on those shopping days, usually around some kind of a holiday weekend like President's Day or Memorial Day. But last year, with consumers spending more time in front of screens and more time shopping, what we've seen is that the growth on those specific days hasn't been as strong as on the days around it.

So consumers are clearly taking advantage and retailers also spreading out those shopping seasons and those discounts, in part to take advantage of the fact that consumers are spending more time shopping, but also because they want to sort of manage the strain on the shipping infrastructure as well.

ALEXIS CHRISTOFOROUS: And I know another big trend we saw really out of necessity was buy online and pick up in-store or a curbside pick-up. Do you think that that's going to continue even when we are able to go back into the stores and shop more normally?

JOHN COPELAND: Yeah, absolutely. So we've seen, again, in February of this year, already 67% increase in that behavior, buying it online, going to the store to get it, either going into the store or having that curbside delivery, 67% year on year. We've continued to see this trend grow every year during the holiday season, and it's clearly become something that consumers are used to and often prefer in a lot of instances.

And you've seen reports in the news even in the past couple of weeks of major big box retailers kind of reformatting their stores to make more space for consumers to come in and pick up the merchandise they've ordered online or to serve as, like, a mini distribution center that they can deliver from, and readjusting their labor model as a result.

ALEXIS CHRISTOFOROUS: You know, I'm curious if geography plays a part. I mean, I know in maybe colder states, you know, you don't want to go to the store. You don't want to go out as much. So maybe online shopping is more prevalent there. Has that sort of been the way things have trended?

JOHN COPELAND: You know, what we've seen is it's been actually kind of a national trend. So weather, yes. But there's also the ability of controlling when you get the product, right? So if you know that the store is holding it for you and you've purchased it, you can show up and pick it up at your leisure. You could say, well, why not get it delivered? And a lot of people still do.

But I think folks like the fact that they don't have to wait around for the delivery in those long delivery windows, not knowing when it might show up, or worse yet, perhaps not be home when it gets delivered. And as we know, we see a lot of the accounts in the news, people coming by and then taking from the porch, right, whatever had been delivered. So it clearly puts more control in the hands of the customer to decide when they want to pick up the product that they use.

ALEXIS CHRISTOFOROUS: Well, definitely lots of good insights for the retail industry. John Copeland of Adobe, thanks so much for being with us.