The COVID-19 pandemic has affected nearly every phase of American life, and shopping is no exception. It has wrought changes in what we buy, how we buy it, and how we pay for it.

Let’s look at some areas where the coronavirus crisis been especially influential: purchase methods such as buy now, pay later (BNPL); home and car buying; and the operations of physical stores and their relationship with e-commerce. We’ll examine the trends and evaluate which seem likely to stay, marking a fundamental shift in shopping habits.

Buy Now, Pay Later (BNPL)

BNPL is a type of short-term financing tool that allows consumers to make purchases and pay for them in installments, often without charging any interest. You apply at the checkout point, and you’re usually approved in seconds by the lender the merchant has signed up with. Affirm, Afterpay, and Klarna are some of the leading BNPL companies.

BNPL isn’t new—many of the firms offering it have been around since 2012—“but it’s particularly well-suited to e-commerce,” says Ted Rossman, senior industry analyst for Creditcards.com. It has certainly benefitted from the pandemic-induced surge in online buying: A March 2021 survey of 2,000 Americans by the Ascent, the research arm of the Motley Fool, found that 55.8% used a BNPL service, up from 37.65% in July 2020—an increase of almost 50% in less than one year.

Rossman says that BNPL offers “an enticing mix of instant gratification and financing,” making it especially popular among younger consumers in the coveted 18 to 44 age group for a discretionary big buy. “If you split it into installments, it feels more affordable,” he continues, but it doesn’t incur massive, ongoing debt.

Will buy now, pay later last?

BNPL does look like it’s here to stay. Those who try it like it. Repeat customers and the retention rates reported by many of the companies are “astonishingly high,” an extensive BNPL study by the Strawhecker Group noted. In addition, 79% of consumers would use it more often if more merchants offered it, and 83% wish more merchants did.

The merchants, who pay the BNPL firms a fee, also “love it because it seems people spend more when they use BNPL,” says Rossman. “It also encourages people to come back to the retailer’s website.”

Whether BNPL will become as entrenched as credit cards is another question. Right now it’s flourishing in online purchases, but growth might slow as people return to brick-and-mortar stores (where it often isn’t offered or as convenient to use). The Strawhecker Group report also delineates some skepticism about BNPL among older consumers and concern about a saturation point among the millennial and Gen Z consumers who could “begin viewing their helpful new app as exploitative and predatory”—especially if there’s bad press about late-payment fees, unexpected interest rates, and credit score damage.

Also, according to both Rossman and the Strawhecker Group, with 10-odd companies offering services now, there are too many in the space. Given that consumers aren’t loyal to any particular BNPL provider, a shakeout seems likely, especially since PayPal joined the fray in 2020 with its Pay in 4 plan.

Homebuying Online

Buying a home sight unseen—sounds crazy, no? But in the pandemic year of 2020, it happened a lot. Some 63% of homebuyers made an offer on a residence they’d never clapped their eyes on, according to a survey by the online real estate brokerage Redfin. In November 2019 only 32% had ever done so.

For years, with the advent of public multiple listing services and real estate aggregators such as StreetEasy, people have been looking at homes online. Now, however, they’re also buying them online as the final step in a speeded-up and enhanced virtual process born out of COVID-19–induced lockdowns, travel restrictions, health protocols, and inventory shortages.

“Before the pandemic, [a sight-unseen sale] was an interesting anecdotal story that happened from time to time—we didn’t even track it because it was so infrequent,” says Ryan Schleis, senior vice president of research and analytics at the Corcoran Group, a New York–based realty firm. But in the last year Corcoran Sunshine, its new-properties division, did 50 “totally virtual” deals, about 10% of all its annual transactions. And almost all of the company’s deals started digitally, says Schleis—such as with a client taking a virtual tour of the property.

Such visual enhancements are the new normal in residential real estate now and a crucial part of helping online sales happen. Innovations include:

• Three-dimensional walkthroughs that take you room by room through the residence (Monthly views of these virtual tours have increased 665% on Redfin.com since the pandemic, the company says.)
• Videos of the property, with cinematic features such as slow pans or speeded-up day-into-night views
• Drone shots that show the view from above and the surrounding neighborhood
• Virtual open houses via Zoom or Facetime with an agent who traverses every inch of the property, even flushing toilets or driving around the neighborhood
• Virtual staging, showing rooms with and without furnishings
• Development and optimizing of imagery for social media apps and channels

Many of these features had been showcased in listings before, especially for luxury homes, but their presence increased dramatically in 2020—and at all price points. For Corcoran’s New York City listings, virtual/video tours of homes for sale doubled, from 8.7% of listings in 2019 to 17.6% in 2020; for rentals, they jumped from 0.6% to 6.7% year-over-year, the company told Investopedia via email.

Corcoran moved fast to upgrade its site in other ways: “Specific iconography denoted listings with virtual or 3D tours, and we also added functionality…that allows consumers to search virtual tours across all of our regions with just the click of a button. Finally, we quickly enabled agents to schedule a virtual open house remotely,” says Vice President of Product and Tech Support Alisande Heriyanto.

It helps that various legal and financial aspects of deals can be digitized as well. People can apply for mortgages or other financing via online lenders such as QuickenLoans or Rocket Mortgage. They can furnish down payments or key money through banking or money transfer apps such as Venmo and Zelle, and they can sign contracts via services such as DocuSign. A number of states passed emergency measures during the COVID-19 pandemic that allow for remote closings or notarizationsand 29 states currently have remote online notary laws on the books.

The outlook for online homebuying

Is online homebuying here to stay? Some aspects of it certainly are—like the snazzy visual features. Once people have gotten to expect those, it’s hard to go back to the stilted stills and the obviously stretched-out photos of old. Viewing residences virtually can also be a significant time-saver, as Schleis points out.

In fact, the whole home search process averaged eight weeks in 2020, compared to the 10 weeks it had averaged in the previous five years, according to Brandi Snowden, the National Association of Realtors’ director of member and consumer survey research. The streamlined online approach seems to suit folks, she adds. Customers like being able to find everything that’s available for themselves—instead of waiting for an agent to bring them more options—and moving fast if they see a house they want.

Still, seeing things in person remains important. At Redfin, the requests for video-chat viewings with an agent surged to one-third of all tours at the start of the pandemic, but they have since leveled off at 10% (albeit significantly higher than the 1% they represented in the pre-virus days).

And there probably will be a backing-off on the actual buying. The sight-unseen phenomenon resulted from the unique conundrum of people having the need or “the urge to move—especially since they could work remotely—with it being harder to travel and search,” says Redfin Chief Economist Daryl Fairweather. As the pandemic recedes, so will that problem. At the end of 2020, she predicted that the majority of 2021 buyers would make an offer before setting foot in the home. Now, she thinks it more likely that “sight-unseen offers will drop back, closer to 48% of all homebuyers.”

Car Buying Online

The April 2019 issue of Dismal Science, a business publication of the City University of New York’s graduate journalism school, ran a story headlined “Buying a Car Online … Remains a Distant Reality.” What a difference a pandemic year makes.

Online auto buying is an accelerating trend. Sure, people had been digitally researching their dream wheels for a while, but actual purchasing was more the province of the used-car market. No more. Online sales have spiked to unprecedented levels, according to Automotive News, and 30% of new car sales were completed online, versus just 2% in 2019, according to automotive retail consultancy Haig Partners, as reported by ABC News.

The difference—and the big deal—lies with the auto dealerships. In 2020 these longtime retail dinosaurs embraced digital technology. In a January 2021 survey by Cox Automotive, 69% of dealers surveyed said they added online retailing tools in the past year—all the better to deal with both the constraints of the pandemic and nontraditional, high-tech savvy car providers such as Tesla and Walmart’s CarSaver network. In 2020 Cox itself provided its dealerships with a Dealer Home Services package to steer the car-buying experience into the 21st century. Some 13,000 dealers signed up for it, says Cox Automotive Research Senior Manager Rachelle Petusky—4,000 of them in the first few days.

What does the online experience involve? As with real estate, auto websites and listings now feature better, higher-quality images. There are live chats and expert advice tabs. Increasingly common are video walk-arounds of the vehicle—both prerecorded and live—in which a tablet-armed rep climbs in and out of the car while highlighting features and kicking the tires. Negotiating the price, finessing the options and add-ons, applying for financing, appraising trade-in value of old cars, and the rest of the paperwork all can get done virtually as well, without the client ever setting foot in the showroom. Finally, the car can be delivered right to your home.

It doesn’t have to be a sight-unseen purchase, either. Another new wrinkle is the at-home test drive: A tester model is delivered to you that you can try out for at least 24 hours. Other inducements “to assuage online buying concerns” include expanded warranty periods and longer money-back guarantee return periods—sometimes as far out as 30 days, says Petusky.

The outlook for online car buying

The future for online car buying looks bright. It eliminates many of the annoyances people had with the auto purchase experience. “Consider my mind blown,” writes Joe Bruzek, managing editor of the editorial department of Cars.com, in an article describing his virtual adventure in buying a Volkswagen Atlas from an out-of-state dealer. “I’ve been spoiled” by the whole experience, from the easy, emailed price negotiation with the sales rep to the pickup of the disinfected and plastic-wrapped vehicle. Perhaps the best part: not having to spend hours at the dealership waiting on the finance manager—a particular pet peeve of shoppers.

Consumers had wanted many of these things for years, “but the industry was reluctant,” says Petusky. “2020 gave us a push.” According to another Cox survey, 64% of consumers want to complete more of their buys digitally, and 76% are open to the idea of buying a vehicle completely online. Meanwhile, 80% of Cox’s dealers say they plan to keep and/or augment their digital services, predicting that, by 2025, four out of 10 shoppers will purchase their car entirely online.

It’s possible some enthusiasm could wane if the at-home test drives or longer return policies go. But not much, Petusky thinks: “If you can finance a home online, why shouldn’t you buy the car of your dreams from your couch?”

E-Commerce and Online Stores

E-commerce took a leap forward in the pandemic. According to research by Rakuten, the app that offers cash back with digital purchases, 66% of consumers increased their online spending during the pandemic, and the average order value rose 20%to 40%, says Kristen Gall, president of Rakuten Rewards.

With physical stores closed or off limits, new types of retailers started selling or beefing up their presence: Especially notable, says Gall, has been the success of small, independent brands offering their products directly to consumers—such as shoemaker M. Gemi, eyeglass manufacturer Warby Parker, resale clothier Real Real, Casper Mattress, and food delivery services.

New generations of people started buying online out of necessity but continued out of enjoyment. In Raydiant’s The State of Consumer Behavior 2021 Report, only 46% of respondents said that given the choice, they prefer to shop in person rather than online—a 9% decline from the retail management platform builder’s 2020 report.

Still, reports of brick-and-mortar stores’ death may have been greatly exaggerated. While e-commerce definitely spiked in April 2020, representing 21% of all U.S. retail sales, it declined to 17.5% in June. And by February 2021 it was down to 15% of retail sales—only 2.5% higher than before the pandemic, says Katherine Cullen, the National Retail Federation’s senior director of industry and consumer insights. What’s more, 79% of U.S. consumers said that they missed the social interaction of physical stores during the lockdown, according to a report by research firm GlobalData.

Brick-and-Mortar Stores

When you walk into a store today, the shopping experience is a little different. Though the Centers for Disease Control and Prevention is lightening mask-wearing restrictions on individuals and gatherings as of mid-May, many states and cities are requiring retailers to maintain their social distancing and sanitation protocols. Among them:

• Limiting the number of customers inside at any one time
• Restricting walk-ins, requiring customers to make appointments first
• Taking temperature checks at the door
• Requiring employees and customers to wear masks and refusing entry to those who don’t
• Hand sanitizers everywhere throughout the store
• Cordoning off seating areas or every other fitting room
• Frequent cleaning of high-touch surfaces
• Plastic barriers around the checkout counters
• Adopting contactless payment methods

Except for contact-free paying—which was already getting popular before COVID-19—these restrictions aren’t likely to last. They “are all annoying and, outside of a pandemic, serve no real purpose,” says Neil Saunders, managing director and retail analyst at GlobalData.

The Multichanneling Approach

What is likely to last is what GlobalData calls “multichannelling”: the blending of brick-and-mortar retail and online retail. Retailers are getting smarter about their use of technology, employing it in ways to provide the best of both personal and virtual shopping experiences.

One key innovation is click and collect: Customers make a purchase online but pick it up in the store or at curbside. While some big brands already provided “find at a store near you” services, click and collect blossomed during the pandemic, and it seems to have staying power: 68% of U.S. shoppers say that they are going to make more use of drive-up curbside collection facilities at stores in the future, and almost 60% say they will make greater use of collect from inside store services, according to GlobalData’s survey. Other stores are offering next-day or even same-day delivery after you order online. According to Cullen, smaller retailers in particular say that this allows them to differentiate themselves.

If you can’t get to the store, the store can come to you—via virtual concierge or personal shopper services. At retailers Saks Fifth Avenue and Ralph Lauren, for example, sales reps will set up Zoom chats with clients, showing them preselected merchandise or touring them around the premises.

Along with trying to personalize the virtual experience, retailers are also humanizing their websites. Live chats with a rep are becoming a standard feature. Increasingly common, too, are virtual reality tools that let you “wear” clothes or “place” furniture in your room. The beauty brand Laura Mercier, for example, offers a virtual try on of blushes, lipsticks, and eye shadows, so you can “find your perfect shade in real time.”

Finally, there are financial incentives: free shipping or participating with cash-back services such as Rakuten. Gall has seen stores increasing the cash-back percentage they offer to woo back old customers or to get them to pick up an online order in the store.

The Future for In-Store Shopping

Beleaguered as they’ve been, brick-and-mortar stores may be due for a comeback. According to GlobalData’s research, 89% of retail executives in the U.S. say that physical stores will drive just as many, or more, sales for their business as they did before the pandemic started. And over the next five years, 87% are planning to invest more capital in multichannelling, allowing online and stores to operate seamlessly together.

Some perks, such as free or same-day delivery, may get scaled back for cost, but a lot of these trends, such as contactless pay and curbside pickup, “are actually beneficial for retailers too,” says Saunders, improving efficiency and reducing expenses. “Where there is a win-win situation, there is little reason for retailers to roll back the innovations they’ve put in place over the past year,” he adds.

The Bottom Line

In a single year the ways people shopped and paid for things changed—or seemed to. In fact, many trends already were in place or developing before COVID-19, but they got a decided push with the pandemic, waking up some sleepy industries in the process.

Are the changes permanent? It’s hard to say. While e-commerce is entrenched even further in some ways, live and in-person activities have been much missed. The virtual and the actual will likely coexist, complementing each other better in the future.

Predicting fundamental changes in consumer habits and methods of doing business is always tricky. It’s safe to say, though, as the National Retail Federation’s Cullen notes, “Anything related to convenience or that enhances the shopping experience will have staying power.”