By: Chris Curtin, Chief Brand & Innovation Marketing Officer
One of my favorite year-end jobs is to look at year-over-year spending data on Visa accounts to see what trends bubble to the top. From there we get to think about how these trends influence our future thinking. The results tell some interesting stories that you may have already started to notice.
Overall spending through Visa during the 2016 holiday season rose significantly with a solid 12.5% increase year over-year across five major merchant categories. E-commerce and cyber sales also continued to grow, and did so at an even higher rate. And as the digital experience improves—especially on handheld devices—it’s Millennials who lead the way in digital shopping and payment. Given that, and the growing economic power of this largest generation, merchants should feel encouraged to advance their omnichannel efforts and deliver even better technology-enhanced digital experiences. Done right, that effort should help perpetuate a beneficial economic cycle.
Online spending grows, thanks to Millennials
Earlier this month, the National Retail Federation (NRF) reported that retail sales during the holidays increased 4%, with “online and other non-store spending” racing ahead at a rate of 12.6%. This increase continues to reflect consumers’ growing comfort with online shopping coupled with their increasing use of mobile and handheld devices (both of which are underscored by the efficiencies and experience new technologies deliver). And who do we have to thank for driving the digital trend? No surprises here: Millennials.
To understand the extent of this change, consider the following: Nearly half (41%) of all shoppers presently say their smartphone or tablet is becoming their ‘most important shopping tool’. And the preference for making payments with a mobile device, with Millennials once again leading the way (41%) compared to Generation X (28%) and Baby Boomers (16%). The reason for this is the growing belief that mobile payments are both easier and faster—an opinion held significantly more strongly by the younger generations.
The Millennials’ desire for experiences that provide ease, convenience, security, universal acceptance and personalization points to a growing need for merchants to provide updated digital solutions, like Visa Checkout, that let customers shop easily, efficiently and seamlessly.
Digital payments poised to become the preferred payment method of the future
A deeper dive into Visa’s holiday results showed another clear trend across categories—specifically the continuing rise of digital payments. When comparing online/e-commerce (no card present) payments with card-in-hand payments, digital proved to be the higher growth category, up 23% over last year’s holiday season. By comparison, paying with an actual card showed a more modest 6.9% increase.
For example, during the holidays, the travel and tourism merchant category showed digital payments outnumbering payments with a physical card (accounting for 78% of the 2016 holiday spend). Additionally, the year-over-year growth of categories like mass merchant (30.7%) or QSR (19.9%) leads Visa to the bigger-picture belief that buying online will soon shift into the majority. If this holiday season is any indication, it’s clear that digital payments will only continue to grow in popularity—and at a rapid rate.
Overall, it was another successful holiday season—and also an enlightening one. And as always I look forward to seeing how customers and merchants respond to these growing trends as they take the next steps toward a digital future. Resources like Visa Checkout are certainly one way they might improve either shopping or selling experiences, but it will be exciting to watch what other novel inventions make their way into the retail business both online and off. As usual, we’ll be watching, and sharing what we learn.
Treacy Reynolds, National Retail Federation, “Holiday Retail Sales Increased 4 Percent in 2016,” January 13, 2017 (available at https://nrf.com/news/holiday-retail-sales-increased-4-percent-2016)
GfK FutureBuy study, November 2016, commissioned by Visa. Results based on data from an online survey of 20,003 Global Consumers.