Retail Pulse Report: Buy Now Pay Later, GenAI Influencers, and Retail Empathy
Did BFCM weekend tell us anything useful? Should you push BNPL on financially-constrained consumers? Should you create a GenAI influencer to drive traffic to your product page?
[This is Adobe Stock’s AI-generated idea of what “empathy in a retail store” looks like.]
I maintain that the reason why consumers both feel like the economy stinks and also spend like there is seemingly no tomorrow is an expectation gap. It is true that consumers are better off than they were right before the pandemic, even when groceries are 25% more. It is also true that consumers are barely keeping up with inflation and feel like they should, by rights, be doing better than they are. And that it is this dichotomy that shapes retail results, including what we saw for Black Friday / Cyber Monday weekend.
I also saw two topics this week that I would tag now for further discussion in 2025: when does GenAI applied to products become deceptive? And what does it take to create positive customer experiences in 2025? How do I get there? Let’s dive in!
Retail Economic Indicators
By now, you’ve probably already seen fifty articles picking apart Black Friday / Cyber Monday (BFCM) weekend. Sales were better than expected, traffic was better than expected, and also the results were still muddied enough that it was hard to tell if this was a roaring success, a total failure or somewhere in between. The only inarguable result was that online sales won big-time.
Just as an example of the challenge in dissecting last week, Total Retail and Chain Store Age took two completely different angles on the same number. The headline stat was NRF’s estimate that 197 million people shopped over BFCM weekend. Total Retail reported it as “fewer people shopped this year than last year,” building off of the fact that 197 million is less than the 200 million that shopped during this period in 2023.
Chain Store Age focused on the fact that 2024’s result was far higher than predicted (183.7 million shoppers). And also noted that the number of people actually shopping in stores was higher in 2024 – 126 million vs. 2023’s 121.4 million. Online was up by a lot, but store visits were also up. Simon Malls highlighted the same, traffic to its properties was up 5.9% on Black Friday and up 6.4% on the weekend, with malls especially benefitting (versus other types of retail locations). At the same time, Sensormatic reported that Black Friday traffic at locations was down 8.2% from 2023 and down 3.9% on the whole weekend. My take-away? All the places I went on Black Friday were the busiest that I’ve seen in years. But it’s still a winners/losers game, with the winners winning big, and leaving only crumbs for everyone else.
Interpreting the results is difficult in part because the average, while slightly up, hides a lot of extremes. But it’s also difficult because of the impact of inflation/deflation. You don’t really get a sense for it until you watch pre-pandemic holiday movies and see people buying meals for $6 or coffee for $2. The prices from Back to the Future Part II suddenly don’t seem so shocking ($45 for a bottle of “Pepsi Perfect” for those of you who don’t want to click through).
Adobe Analytics, in their press release on BFCM weekend results, pointed out the challenge: “Adobe figures are not adjusted for inflation, but if online deflation were factored in, growth in consumer spend would be even stronger.” They note that online prices have fallen for 26 consecutive months in the categories they track. So keep in mind that while BFCM weekend results were better than expected, it would have been even better if falling prices were taken into account.
And finally, as everyone tries to decide if looming tariffs are real or a negotiating tactic, more and more analysts are putting pencil to paper to figure out what the impact will be on consumer goods and prices. The Budget Lab at Yale offered a more pessimistic vision than the Goldman Sachs estimate I shared last week, figuring that the known planned tariffs announced so far would raise consumer prices 1.4-5.1%, and cost US households $1900-7600 per household. This hit would lower real GDP in the US in 2025 by 0.5 to 1.4 percentage points. Note that the range is wide because they estimated both non-retaliation and retaliation scenarios, where retaliation drives the results in a worse direction.
Retail Tech & Research Data
In research news, I have one interesting study versus two that are kind of depressing. Harvard Business Review covered research into how Buy Now Pay Later (BNPL) changes consumer behavior. The questions they asked are really good ones – ones that you need to know for sure before you can really buy into the benefits of adopting BNPL as a retailer.
The research focused on results at one “large” retailer, looking at buying behavior before and after introducing BNPL, and comparing both before/after behavior for people who adopted it, as well as how that behavior overall compared to people who did not adopt it. They note that this is something of a limitation of the research, that it only uses one retailer’s results, but for any retailer trying to figure out if BNPL is worth it, the results are still helpful.
The research found that having access to BNPL does increase consumer spending. Consumers who adopted BNPL increased their likelihood to purchase from 17% to 26%. Basket sizes were 10% larger than before the shoppers adopted BNPL, and even more important, this wasn’t a one-time hit. Six months later, these results still held.
Credit card users are more likely to adopt BNPL (vs debit card users), as were those that tended to make smaller basket purchases on average (vs those that were already purchasing large baskets). They tended to be more financially risky, but they still had BNPL instruments available to them six months later, so at least in that amount of time had not run into financial trouble due to adopting BNPL (I feel like you need a longer timeline for that to become evident).
The researchers followed up the analysis with a study where they offered shoppers different combinations of choices. This is another case of what consumers say they will do in a survey vs. what they do in real life, but the researchers did find that people who opted in the study to pay BNPL installments (typically 4 for each purchase) reported feeling less financially constrained than those who chose to pay a lump sum up front. This effect held true across a range of products and a range of installment options.
The net is, there are plenty of incentives there for retailers to adopt BNPL as an offering for their shoppers. But while it moves the needle on small baskets and makes your offering accessible for people who are more financially constrained, it also makes both you and them more vulnerable to those constraints. The authors caution that its use should be managed with care.
On the depressing front, The Action Network calculated the ten worst states for porch piracy theft, calculating the odds of a consumer experiencing porch piracy based on how much residents search about porch piracy, the percent of consumers from the state who had reported a package stolen in the last 3 months, and the number of thefts reported in 2023. In order from worst on down: Texas (29.8% change of experiencing porch piracy, more than double #2), North Caroline (14.4%), Florida, California, New York, South Carolina, Washington, Virginia, Kentucky, and North Dakota (finishing out the top 10 with a 29.8% probability but a much smaller population to spread that probability across). It’s the time for max opportunities for porch pirates, so good luck out there!
And just as depressing, 97% of the top 100 US retailers had a third-party data breach in the last year, according to SecurityScorecard. As a consumer you can either invest a lot of emotion into trying to protect yourself or you can throw up your hands and just assume that everything you have ever typed or saved is out on the dark web somewhere. Sigh.
AI & Retail
More and more people are asking, with GenAI everywhere, what is real anymore anyway, and this company’s service will really make you question. In a stat that got a little bit of airtime, Adobe Analytics noted that 17.8% of traffic to eCommerce sites was driven there from influencers on social media, and that conversion rates from influencers is overall higher than conversion rates from social media in general.
Want in on that? Try Muku.ai, a tool that will turn your product listing URL into an influencer-style video post. Who needs an influencer when you can just make your own? At what point do these things come back on retailers as being deceptive in some way?
Adobe Analytics also noted that this year showed high adoption of chatbots like ChatGPT as referral sources for eCommerce sites, showing that consumers are at least trying to adopt GenAI to find products and deals. The Associated Press asked whether those chatbots really were making holiday shopping easier, and found that while they may be using chatbots, that doesn’t mean that those chatbots are useful or reliable.
They found that the biggest benefit was the ability of the chatbot to ask clarifying questions and to refine recommendations based on those additional responses. This makes them overall better than personalization. But it’s still a buyer-beware scenario. They noted several examples: buyers asking about the best TV’s for gaming and getting answers that are not TV’s. Asking about a “thoughtful gift for a brother” and getting back t-shirts and keychains. They noted that chatbots tend to be terrible at understanding prices or price comparisons, and they questioned whether consumers were really able to find the “best deals” in that case, if prices are too absolute value to be interpreted or compared.
Retail Winners and Losers
When ChatGPT entered, ahem, the chat, Google internally called it a “red alert” situation – an existential threat to its search business. So, shock and surprise, Google is pushing out big updates to its product search capabilities in a bid to open a moat against Perplexity and Open.ai, both of whom have recently announced new product search capabilities.
For Google, a lot is coming from Google Lens, where the emphasis is on image recognition. Snap a photo of an item in a store and get product information, similar products that are in stock, whether a store’s price is competitive, as well as shopper reviews.
It’s available first for beauty products, toys, and electronics. It will work in any store, large or small. The search will return results from retailers that share their local inventory with Google. On the user front, you have to have opted into the Google Lens app’s precise location sharing to get it to work.
In other news, Louis Vuitton just celebrated its one-year anniversary on Discord, not a company I ever would’ve looked on Discord for, but that’s pretty much exactly the point. Rather than go for flashy paid engagement in someone else’s Discord community, LV has opted for the long term, slow burn, sustained engagement of hosting their own server and engaging authentically with their community of now 8,000 members (in an aspirational demographic that all kinds of luxury retailers need to figure out at some point in the future). They celebrated their anniversary by offering a week-long mystery game exclusive to the community.
That’s kind of a feel-good moment, but in the spirit of the holiday season, I will close the Retail Winners and Losers section with a clear winner: IKEA, which has sponsored and enabled the construction of a Small Home in San Antonio’s Towne Twin Village. Aw, that’s nice. Yes. But what’s cool about what they did was that they specifically brought in a Trauma-Informed Design (TID) specialist, who focused on addressing the emotional needs of the intended recipient, a person experiencing homelessness.
In the design process, they learned things that might seem counter-intuitive at first but make more sense when you try to spend a minute in a homeless person’s situation. For example, they originally thought that big floor-to-ceiling windows would be important for healing, to let in lots of natural light. But the impacted people advising the design felt they were a safety risk and valued more the privacy and the sense of safety they could achieve by closing out the outside world. The designers ended up focusing much more on elements that emphasized a cocoon of safety, and look to take these learnings elsewhere.
In what is generally supposed to be a season of thinking of others, I leave you with a quote from Samantha Eisenman, Sustainability Business Partner at IKEA: “[A home is] not just four walls and a roof; it’s a space where you can create memories, and can discover and nurture yourself and others within that space. The TID approach supports all of that.”
Store Innovations
One last story for you this week, from Fast Company. I have some back burner thoughts about what the future of the store should really look like. I’ve railed in the past about how frustrating it is to hear about stores of the future that seem to believe the future is to turn stores into giant vending machines. And also how most of the new tech I see go into stores turns out to be underwhelming.
This article captures the finer art of thinking through how to make the store a more engaging discovery experience, with the right amount of store associate expertise to make it fun AND valuable to go to a store. I recommend a read (it’s short).
What Did We Learn This Week?
Part of the reason it’s hard to predict the future of retail is because it is experiencing multiple possible futures at once, and a lot of what you see ahead depends on your starting point. Consumers are feeling the strain of higher interest rates and inflation. And also, consumers are out shopping in force almost as much as last year, and even without adjusting for inflation/deflation, spending more than they did last year. In-person shopping was down year over year – or up, depending on where you went. The rising tide is not lifting all boats, and it’s not necessarily clear what it takes to be a winner – or a loser.
Also, Buy Now Pay Later pays! This isn’t really surprising, given its pretty rapid adoption across the globe. But the study I covered is a good start into understanding why and how, and I think it’s an important contribution to the conversation about the future of BNPL. The bigger question is still a long term one – I was surprised that the increase in spending persisted six months out. But I don’t think that’s long enough to determine if BNPL users are getting themselves into trouble.
Porch pirates and hackers are more problems for the long term. They are facts of life that retailers must build into any assumptions they make about process changes that can be impacted by these things, and both groups are getting more sophisticated.
Creating your own product influencer is cool. But is it deceptive? I have a feeling we’re going to have to grapple with a lot more of these questions in 2025. And chatbots are helping consumers with their gifting ideas this season, but define “helping” – like everything else GenAI, there is a lot of hype, but success here may reflect more on consumers persevering despite a bad experience, rather than chatbots creating a more frictionless experience that they’ll want to do again.
And finally, empathy also pays. You don’t have to go as far as IKEA – but you can easily go as far as Louis Vuitton. The more you can understand your shoppers – not just who they are, but what they want and most importantly why – the more you can create experiences they value. And I have a feeling that’s also something we’ll be talking about a lot in 2025.