The state of holiday shopping and the consumer

The upcoming holiday will be shaped by economic pressures.

This season, 82% of consumers say they will try to save on groceries and other essentials to cover their holiday expenses, according to Inmar Intelligence’s 2025 Holiday Commerce Forecast. 

Some categories are non-negotiable for the holidays, even if it means cutting back elsewhere, per the report. Those categories include gifts for family (45%), gifts for children (35%) and holiday traditions or experiences (28%), among others. 

Holiday shopping is expected to be almost equally split between physical and digital channels in 2025, with over 70% of U.S. consumers shopping online and 65% visiting stores in person. 

Last year, inflation caused the majority of Americans (85%) to cut back on discretionary holiday spending, with 50% of people saying they are still experiencing economic difficulties. However, consumers are not going to abandon the holidays, but will instead pick their priorities when it comes to spending. 

“Higher costs and holiday pressures mean shoppers will make more intentional trade-off decisions in every category,” according to the report. “Every dollar will be scrutinized — but spending won’t drop.” 

Consumers will use a mix of savings formats, including digital and paper coupons, instant redeemables and direct-mail discounts to make their budgets stretch, per the report. Over half (55%) of survey respondents said that discounts, coupons or promotions influence their purchasing decisions, while 43% pointed to conveniences like curbside pickup and fast shipping. 

Additionally, consumers won’t shop through one channel, but will use several as decisions are being made. Four in 10 survey respondents said they will use their phone to check prices or reviews while in-store, and nearly the same proportion (38%) will look at products online before buying in-store.  

“Today’s purchase journey is increasingly nonlinear, and for the holidays, discovery and purchase will not happen in the same channel or at the same time,” according to the report. 

While more than half (59%) of respondents said they plan to buy their gifts in-store, 50% said they also plan to buy their gifts via mobile devices. Shoppers are also turning to their computers (31%) and social media platforms (15%) to purchase gifts. 

It remains to be seen whether this year’s shopping behaviors will mirror the 2024 holiday shopping season. Between Nov. 1 and Dec. 31, 2024, online retail sales saw an 8.7% jump year over year to $241.4 billion, according to an analysis from Adobe Analytics. By contrast, Mastercard’s SpendingPulse report, which reviewed purchases between Nov. 1 and Dec. 24, noted that in-store sales saw a 2.9% bump from the previous year, but online sales grew by 6.7%.

Consumers are starting early and utilizing AI tools this holiday shopping season, according to Klaviyo’s report.

More than half of shoppers plan to use AI to compare prices, find products and get personalized recommendations during the Black Friday-Cyber Monday weekend, according to a Klaviyo report.

Four in 10 consumers plan to shop during the Black Friday to Cyber Monday weekend. But 20% of consumers have already kick-started their holiday shopping, making their first purchases between June and August.

Within North America, 24% of shoppers expect to make their first holiday purchase in October, followed by November (21%) and September (15%), the global survey of 7,000 consumers found.

“Our data shows that consumers aren’t just shopping earlier, they're shopping smarter,” Jake Cohen, head of industry and insights at Klaviyo, said in a statement. “They expect brands to meet them with timely offers, personalized recommendations, and seamless experiences no matter the month or channel.”

Thirty-percent of consumers say they will use AI tools to find deals and compare prices, while 20% will use it to search for products and 11% will use it to check reviews.

The findings support other research that signals some consumers are willing to use AI for their shopping journey. A PwC survey published in June found that one-fifth of back-to-school shoppers anticipated using AI to look for online discounts. But AI adoption is still in its early days: A YouGov poll released last month found that 43% of Americans had heard of AI shopping assistants, but only 14% had ever used one. 

Other research suggests that AI tools may have played a role in increasing holiday season sales last year. In its analysis released last December, Salesforce predicted that AI would lead to more than $200 billion in holiday sales, up 12% from 2023.

As inflation remains present and global tariffs are enacted, consumers are seeking products that offer value as much as a good price. 

Ongoing economic headwinds are pushing consumers to seek out value that goes beyond just low prices, according to a new survey report from Deloitte that tracked 900,000 data points across 290 consumer brands over three years.

While value and price can be linked, up to 40% of consumers say their perception of a brand’s value stems from factors other than price. The report found that brands that prioritize providing value to customers have higher purchase intent and are capturing more share.

Value-seeking consumers expect to spend 40% to 50% less this year on discretionary categories like clothing, personal care, home furnishings, household goods and entertainment while increasing their purchases of essentials, such as housing and transportation, per the report. 

A recent survey from UserTesting in March found that shoppers in the U.S., Australia and United Kingdom were willing to pay on average 25% more for their favorite brands.

"Consumers are more discerning than ever, weighing the value they receive with their purchases,” Mike Daher, vice chair and U.S. consumer industry leader at Deloitte, said in a statement. “And while low-income earners may look for value out of necessity, higher-income households increasingly put value at the top of their shopping lists.”

The research came out at a time when several brands — including Lululemon and Nike — have instituted mild price hikes due to the uncertainties around tariffs

“As economic uncertainty lingers, consumers across demographics actively seek brands that deliver value, whether through quality, trust, friendly attitudes, or a combination thereof,” Daher said. “No matter the industry sector, MVP brands that get pricing right and boost consumer perceptions of their value will be well positioned to attract consumers, increase their margins, and build long-term loyalty."

The death of stores had already been a much-discussed idea by the time the pandemic hit, cratering foot traffic across the industry and leading many retailers to file for bankruptcy and shutter large portions of their fleet. E-commerce secured an even bigger role in customers’ lives as a result and retailers invested heavily in their online capabilities to meet new needs.

But years later, stores are not dead. In fact, foot traffic has largely returned to 2019 levels, according to PwC’s U.S. Retail Leader Kelly Pedersen. There are also fewer vacancies than in previous years and younger generations are embracing the in-store shopping experience, even if they aren’t buying there.

“It is a different type of traffic and a different type of purpose,” Pedersen said, noting that conversion rates are down despite traffic growth. “That's just really indicative of people going to stores for different reasons than to just purchase, right? They're going into them to return. There's a solid, bigger shift toward browsing.”

The level of turnover at malls and shopping streets can also be evidence that a new generation is making its preferences known, according to Michael Brown, a partner and Americas retail leader at Kearney. He sees it as a good thing because it means new shopper needs are surfacing. It’s also, in part, a factor of younger companies like DTC brands searching out shorter leases or pop-up style agreements, Pedersen noted.

All this to say, physical retail is still healthy, even in a world with higher levels of online purchasing. In fact, an Experian report found in-store shopping for the holidays held relatively steady from 2022 to 2023, with around two-thirds of sales done in stores between October and December. Nearly half of the shoppers it surveyed planned to head to stores this year.

And especially at the holidays, there’s something about physical shopping that AI recommendation services and personalized websites just can’t provide.

“When it comes to the word ‘shopping,’ it really takes place in the physical world because that's where you really go, you look, you feel, you touch, you engage and you decide eventually what you're going to buy,” Brown said. “You may buy it later in the store or you may just buy it online — so I think there is really a difference between shopping and actually buying. And I think we see shopping still [has] so high levels of people going to the stores to have those experiences.”

What online changed (or didn’t)

Over the past decade, holiday shopping preferences across stores and e-commerce have effectively swapped places. The 59% of shoppers who planned to buy holiday gifts in stores in 2015 has shrunk to a projected 45% this year, while those who expected to shop online grew from 41% in 2015 to 55% today, according to PwC. 

It’s a noticeable tilt toward e-commerce, but not nearly as high as the 61% that looked online in 2020 during the exceptional circumstances of the pandemic. And in fact, the projected percentage of in-store shoppers in PwC’s survey this year increased for the first time since 2021. Black Friday, too, saw a rare spike in popularity, with a 3% increase in respondents planning to shop on the banner holiday, which tends to be an in-store event. That’s the first time that metric has grown since 2018. It still only amounts to 22% of shoppers, though, down sharply from the 59% who planned to shop on Black Friday a decade ago.

Interest from shoppers spans different buying environments as well. While there is a trend toward high-street shopping during the season, Pedersen said a lot of traditional malls are seeing higher traffic again as well, courtesy of the large swaths of the country that moved out to the suburbs during COVID.

But e-commerce retailers and social media platforms are also finding innovative ways to reach customers, including through the industry’s favorite buzzword of late: AI. Etsy, for example, recently introduced an AI gift recommendation service, while Amazon launched AI shopping guides and a virtual holiday shop to entice customers.

Pinterest debuted a personalized gift feed on its platform, alongside a series of gift guides curated by celebrities and publishers.

Efforts like these can work, “if the algorithms are right and you can really be hit with something that you've always looked for — you want it, maybe you had a pattern of trying to find those things,” Brown said. “I think the challenge that there always is with online is the screen in front of you is only like 10 by 12, and you can only see so much. But when you go out and you look at the physical retail environment, it all opens up, right? You get peripheral view. You get long-distance view … online, it's hard to do that.”

That said, online isn’t without its benefits. It’s great for mission shopping, according to Brown, referring to when a customer already knows what they want. And there are different times during the season when e-commerce channels have more sway with shoppers. Social media, DTC and emerging marketplaces (think Temu and Shein) are more successful at the start of the season, according to a report from Boston Consulting Group, when shoppers have more time to find the perfect gift and aren’t as stressed about price and delivery times.

Retailers can make their websites more enticing as well, with festive banners or by offering the same promotions that they do in stores, like a free gift with purchase. But Pedersen admitted it’s difficult for retailers to mimic the joy of shopping in person.

“Other than us at some point having true VR headsets where we're walking through a store and experiencing that way, it's pretty hard,” Pedersen said.

And during the holidays in particular, shoppers are looking for that.

The joy of shopping

What makes the holidays different than any other time of year? At its most basic level, it comes down to gifting. Customers prowling through a shopping street or mall during those critical fall months are looking not for themselves (at least not primarily), but for others. That means discovery shopping is critical, and that’s where stores thrive.

“What's successful this season is really having unique and differentiated products and an experience where consumers think they're really winning or they're getting that special deal,” Brown said, noting that off-price players have done this particularly well. “It's a little bit of that pursuit and uniqueness and surprise of what I can find in your store. Because if I know exactly what I'm looking for, then it's easy for me to shop online.”

Customers might make a lot of purchases online, but when it comes to discovering what gifts to give, shoppers of all generations turn strongly to physical stores. In a report by PwC, every generation except for baby boomers said visiting stores in person was their top way to discover gifts. For boomers, it was second only to talking to friends and family. Both of those methods — the flesh-and-blood variety — landed significantly higher than the third all-around highest, which was online marketplaces.

“Sometimes you just see how busy the store is, and you say, ‘Well, now I’ve got to go see it,’ right? There's that crowd attraction,” Brown said. “Even as much as we'd all like to stay away from more lines at the register when you're there, that means something's going on there. And again, you can't really see that and experience that online.”

There’s a psychological reason as well: Shopping during the holidays can be a lot of fun. Winter milestones like Christmas, and the act of indulgent spending that often goes along with them, can serve as a way to cheer ourselves up during the darkest times of the year. Stores decorate their windows, blast seasonal tunes and waft pine or peppermint fragrances into the air. And much like the scents of pumpkin spice can tap into nostalgia and remind shoppers of fond memories, the right sensory stimulation can make holiday shoppers view a store more fondly.

Even spending money on others makes people happier than spending on themselves, Happiness Research Institute CEO Meik Wiking told Retail Dive.

“People just generally like to go to the stores during this time of year, it puts them in the mood. They go get some hot chocolate or something from one of the food stands. There's just something about it,” Pedersen said.

Some retailers are answering that call. Macy’s, for example, hosted a holiday market at its Herald Square flagship, alongside its usual holiday window displays and Santaland experience. Target offered in-person “Wonderland” events as well, with shoppable brand experiences. Others, like Anthropologie, are taking a pop-up approach to create holiday-specific shopping environments.

The opportunity to do more than just shop at the holidays — to go out to eat, for example — is key to a thriving shopping center. Outside of the usual Santa visits and sale offers, retailers could try more creative ways of bringing people in as well, like exclusive brand launches or a loyal customer night, according to Brown and Pedersen.

“These things should really be called consumer engagement centers and it needs to be a mix of consumer activities,” Brown said, much like a downtown shopping area meets many different needs. “It should be about shopping, entertainment, food, social gathering points for the community.”

Some of these trends are already happening in malls across the U.S., according to Brown. And based on the interests of younger generations, in-store shopping could continue to grow. Of all the generations PwC studied, Gen Z leaned the heaviest toward shopping in stores to discover new gifts, at 60%. They do have expectations around digital components, like self-checkout technology and brand apps, but they’re interested in going to stores. And their spending power is rising.

“Gen Zs and Gen Alphas are big in-store visitors — they go to stores a lot,” Pedersen said. “I think this trend of more in-store shopping based on those generations is going to continue for the next few years because it’s just proven that the Gen Zs and Gen Alphas like to be in store more than the millennials. So I think we see a lot more of this.”

U.S. shoppers are willing to go into credit card debt and will use buy now, pay later services to afford purchases this upcoming holiday season. At the same time, consumers are already indicating that they will be choosier with their purchasing decisions.

More than a third (37%) of Americans regard buying gifts as more important than their credit card balance this holiday season, according to an Invoice Home survey of 2,000 consumers conducted by Censuswide. 

Twenty-five percent of respondents said they plan to use buy now, pay later services to navigate holiday spending and 16% will use ChatGPT or another AI tool. About one in five millennials (19%) and Gen Z (20%) plan to use BNPL services to pay for their holiday expenses, the survey found. 

Nearly half (47%) of respondents expect to spend most of their purchases this holiday with Amazon, and nearly a third (32%) will shop at big-box retailers like Walmart and Target. Meanwhile, 18% plan to shop with small businesses, according to the survey.

“This data shows that consumers aren’t shifting away from spending but being strategic in how they spend and in how they’ll afford the season,” Petr Marek, co-founder and CEO at Invoice Home, said in a statement. “With rising costs being out of many businesses’ controls, now is the time to ensure your customer experience is flawless from the moment they begin interacting with you.”

Even as consumers plan to spend, there is a growing intolerance of price increases, according to the survey. Half of respondents said they won’t shop with retailers that increase their prices, up from 25% in 2024. 

As consumers search for better value this holiday season, brands and retailers are divided on raising or maintaining prices. While J.C. Penney and The Home Depot plan to hold their prices steady, Walmart and Lululemon warned of higher prices to cope with tariffs. Meanwhile, E.l.f. Cosmetics said it plans to increase its prices by $1.

As brands prepare for the holiday shopping season, consumers are tightening their purse strings.

Consumer sentiment in the U.S. declined in August amid rising costs and economic anxiety, according to recent McKinsey’s ConsumerWise research. Only 41% of consumers are optimistic about the U.S. economic conditions, down 3 percentage points from May.

While the rate of consumers pessimistic about the economy decreased 4 percentage points to 21%, the number of consumers who said they had mixed sentiment about the economy swelled to 38%.

A majority of consumers expect to spend around the same amount on essential goods, such as baby supplies and meat and dairy, as last quarter, according to McKinsey. But when it comes to semidiscretionary items, like fitness and wellness services, and discretionary items, like international flights, cruises and sports equipment, many consumers intend to reduce spending.

Inflation and rising prices are consumers’ leading concerns, while tariff concerns have eased from last quarter, according to the survey of more than 4,000.

Forthcoming global research from Qualtrics XM Institute also highlights price sensitivity. It found that consumer concerns about rising prices grew more than any other concern year over year, according to Isabelle Zdatny, head of thought leadership at Qualtrics XM Institute.

“What was top of mind and what they were most worried about, absolutely seems to be pricing concerns and pricing sensitivity,” Zdatny said. “Better prices was a big impetus to begin spending, and then good value for money was a big reason why people kept spending and staying with a company.”

This cautious sentiment is expected to have a notable impact on holiday shopping.

Consumers are looking to start their holiday shopping earlier to avoid high markups. More than one-quarter plan to start shopping before October, with millennials leading the charge. Shy of half of U.S. consumers plan to spend as much during the holidays as last year, while about one-quarter intend to spend less.

“Retailers may see a shift toward value-driven shopping, as consumers actively seek discounts, promotions, and lower-cost alternatives for gifts,” Kari Alldredge, leader of McKinsey's consumer growth work in North America, said via email. “As a result, this holiday season could be more subdued, with shoppers focusing on stretching their budgets and finding ways to celebrate without overspending.”

Alldredge says that while discretionary items will still play a role in gift-giving, McKinsey’s data shows a growing trend toward more practical gifts and essentials. 

“A lot of the discretionary spending cuts are going to come from those like easy to switch industries,” Zdatny said. “So I think it's a question of: how do you turn what could be a very transactional relationship into something that's more relational over the long term? 

The key, she said, is showing value, especially beyond just that initial purchase. 

Best Buy, for example, has a “total care package,” where it offers unlimited tech support, replacements, store credits, Zdatny said. The message is: “We care about you, and we are going to make this right over the long run,” she said.