Holiday shoppers shift to long-term financing

Dive Brief:

Holiday consumers aren't just changing how they're shopping or what they're buying, but also how they're paying for it, according to a report from payment-over-time platform Bread, which was emailed to Retail Dive. Credit cards are slipping as a payment method of choice, with millennials in particular heavily drawn to longer-term financing, with 12 months or longer the top choice.
On Black Friday, the vast majority (87.2%) of shoppers chose term lengths of 12 months or longer, with nearly half (over 48.3%) choosing 24 months or longer. It was similar on Cyber Monday: 90% of shoppers chose term lengths of 12 months or longer, with over 46.6% going for 24 months or longer. Some 42.5% of Black Friday applicants and 43.3% of Cyber Monday applicants were millennials, Bread found.
Consumers are increasingly applying for financing before checkout and even before an item lands in carts, according to Bread's analysis of data collected from this past Black Friday/Cyber Monday shopping event. Nearly three quarters (73.6%) applied for financing before checkout on Black Friday, a 29.2% increase from last year — and 69% did so on Cyber Monday.

Dive Insight:

With longer-term financing options available through PayPal and other e-commerce payment methods, it was probably only a matter of time before the stiffer terms of credit cards began to fall out of favor. The more comfortable time frames may be pushing consumers to go for more expensive purchases, considering that, according to Bread's analysis, average order value surged over the Black Friday weekend. The average AOV on Black Friday was 14.5% higher than in October, and the average AOV on Cyber Monday was, in turn, 4% higher than Black Friday and 19.1% higher than in October.

Bread also found a shift in shopping behavior patterns over the big weekend. The old-fashioned "early bird" mentality is ebbing, the researchers found. Black Friday shoppers started early and ended late, with shopping volume peaking between 10 and 11 p.m. ET. Cyber Monday shoppers also kept momentum throughout the day—the peak hour was 3 to 4 p.m. ET , but there was another spike between 9 and 11 p.m. ET, Bread said.

Consumers are sticking to their desktop computers for the most part, although they do engage on mobile. More than half (53.3%) of financing pre-qualifications were accomplished on mobile on Black Friday, but only 38.6% of checkouts were, while on Cyber Monday 44.1% of pre-qualifications took place on mobile, but only 34.8% of checkouts did.

The shift to longer-term financing comes as credit card delinquencies are expected to rise next year, according to other research. More U.S. households are revolving credit card debt today than did before the recession, and the number of open credit lines will pass the previous high during 2018, according to a new a study from business management consultancy Mercator Advisory Group.

"For 2018, key questions for merchants and their payment providers, including acquirers, card networks, and issuers, will be: Where and how will consumers be making their purchases, and do the patterns and behavior revealed suggest what merchants should do?" Raymond Pucci, Mercator Advisory Group associate director of research services, said in a statement emailed to Retail Dive.

This story is part of our ongoing coverage of the 2017 holiday shopping season. You can browse our holiday page and sign up for our holiday newsletter for more stories.