Buy now, pay later boom shows shoppers are swapping impulse buys for strategy

From spreading out payments to dodging impulse purchases, holiday shoppers this year took a more judicious approach to spending over the Black Friday-Cyber Monday sales weekend, recent data shows.

Underscoring this trend, “buy now pay later” services such as Klarna, Affirm, Afterpay and PayPal Pay Later are increasingly popular among consumers of all income levels — whether shoppers are looking for convenience or seeking to spread out their budget, according to David Tinsley, a senior economist at the Bank of America Institute.

Most customers are “light users,” he said, meaning they have about one to four transactions in their account, he added

So far this holiday season — beginning in November — the services have driven $10.1 billion in spending, a 9% jump from last year, according to Adobe Analytics. Cyber Monday was the single largest day for BNPL, accounting for a record $1.03 billion, a more than 4% increase over last year. That’s about 7% of what Americans spent online that day.

Meanwhile, PayPal reported its BNPL transactions increased 23% year over year in the days leading up to Black Friday.

“Consumers are looking for ways to maximalize their dollars,” said Mickey Chadha, a Moody’s retail analyst and vice president. “It all comes down to: How can I actually get what I want at the best value I can get? I think all these factors play in.”

“Consumers are planning ahead, prioritizing value, and making the most of how they spend their money,” Michelle Gill, the general manager of small business and financial services at PayPal, wrote in a news release on the rise of BNPL.

Shoppers also added more items to their transaction this year, with Afterpay noting a 10% increase in basket size year-over-year.

Another factor is that these services are becoming more widely available each year at checkout. “BNPL could also just be going up because e-commerce is going up,” said Sucharita Kodali, an analyst at Forrester.

Still, these flexible payment methods carry risks. Some services charge interest on missed payments, and experts warn it could lead to overspending, especially for financially vulnerable consumers.

Preholiday caution

More broadly, the rising cost of groceries, housing and energy — as well as tariff-induced price increases on core gifting categories such as apparel, toys and electronics — has forced consumers to be savvier when their dollar isn’t going as far, analysts said.

“People are being cautious,” Kodali said. “The other shoe is going to drop any day now — the economy from a retail standpoint has been really positive … and this can’t go on forever.”

While the National Retail Federation forecasts spending in November and December will break a record $1 trillion — an increase of between 3.7% and 4.2% over the same period last year — that doesn’t mean people are buying more, rather that things are costing more, analysts say.

Still, there were signs of strength. A record 202.9 million consumers shopped online and in stores over the five-day holiday weekend, up from last year’s 197 million, National Retail Federation chief executive Matt Shay said Tuesday. Online sales on Cyber Monday reached $14.5 billion, while Black Friday hit $11.8 billion, according to Adobe Analytics. That’s a 7.1% and 9.1% surge over last year, respectively, and both surpassed Adobe’s forecasts.

But in-store shopping slumped.

Visits to malls and downtown areas on Black Friday fell a respective 2.5% and 2.6% compared to last Black Friday, according to MRI Software, which tracks pedestrian traffic.

Small Business Saturday mall visits fell 4.3% while downtown traffic dropped 6%.

RetailNext, which tracks in-store traffic for more than 560 brands, recorded a steeper decline. Visits fell 3.6% on Friday and 8.6% on Saturday.

While there’s a convenience factor to this, Chadha said, this shift also suggests consumers want to be more purposeful in their spending. To Joe Shasteen, global head of advanced analytics at RetailNext, this doesn’t mean consumers were spending less but changing how they intended to spend.

“Shoppers showed they’re done with the impulse-driven, one-day frenzy,” he said in a news release. “Prices, tariffs, and tighter budgets pushed people to shop with discipline, not adrenaline, and they responded by turning Black Friday into a value calculation.”

Consumers also took advantage of markdowns on everyday essentials. Among the top product categories from Shopify sellers were vitamins and supplements, followed by skin care and activewear. Adobe Analytics projects online grocery sales will drive $23.5 billion in revenue, a 9.3% year-over-year increase.

“We’re seeing promotions on essentials and the things that consumers feel they need first,” said Marshal Cohen, chief retail adviser at market research firm Circana. “When they have the opportunity to buy grocery and pharmaceutical products at a discount, they’re going to do so.”

But that doesn’t mean all shoppers are avoiding more exciting gifts.

“Santa Claus is going to show up — and is he going to show up with vitamins? Yeah. But he’s also going to show up with a toy here and there,” he said.