Why it matters:
- Retail spending could be down 10% from a year ago, according to Deloitte research, as shoppers are wary of inflation and concerned of an economic downturn.
- Many consumers are expected to be watchful of discretionary purchases and use tools such as AI to find gifts and save money.
- Convenience is also important to consumers, leading retailers such as Target and Meijer to promote their stores as one-stop holiday destinations, just as craft retailer Michael’s partners with Shipt to offer same-day delivery service, and Kohl’s launches “My List,” a digital, personalized gift-shopping feature.
Retailers are preparing for a no-frills holiday shopping season in which consumers are expected to focus on the essentials and keep a close eye on their discretionary spending.
As a result, retailers including Costco, Target, Kohl’s, and Michaels are tailoring their strategies for this year’s holiday season with a nuanced approach to value and an appeal to the convenience and experiences they offer.
Retailers have so far this year withstood a nonstop barrage of new tariffs, lingering inflation, and increasingly cautious consumers. As the year-end holiday season kicks off, some analysts predict that brands will have to work harder than ever to win over shoppers amid an air of economic unease. Adding to the potential for subdued spending is the relatively late Thanksgiving, which leaves just 27 days of shopping, beginning on November 28 (Black Friday) and lasting through Christmas Eve on December 24.
Critical this holiday selling season: Meet shoppers where they are ‘digitally, socially, and emotionally’
This year’s Deloitte Holiday Retail Survey found that shoppers of all income levels are especially attuned to value this year, and that extends beyond pricing and promotion to include quality, trust, and meaningful experiences.
“For retailers, this holiday season isn’t just about offering deals; it’s about meeting shoppers where they are digitally, socially, and emotionally,” the report said. “Winners will likely be those who stand out by providing value, offering seamless technology to reduce friction, and delivering experiences that feel worth the spend.”
The report estimates that average shopper spending this year will be down 10% from a year ago, to $1,595, vs. $1,778 in 2024, which includes spending on both retail goods and holiday experiences.
More than three-fourths of shoppers surveyed—77%—said they expect higher prices for holiday goods this year, and 57% said they expect that the economy will weaken in the next six months, which is the weakest outlook since Deloitte began tracking consumer sentiment in 1997.
Adobe predicts that AI traffic to U.S. retail websites would surge by 520% this holiday season, compared with a year ago when the first material surge in AI use was recorded.
AI alters the holiday shopping and product recommendation landscape
Also changing the merchandising landscape for retailers this season is the increasing adoption of artificial intelligence by consumers to help them secure the best prices and find the right gifts for the people on their shopping lists. Research from Adobe found that more than a third of consumers report having used an AI-powered service for online shopping, including 53% who used it for research, 40% for product recommendations, 36% for finding deals, and 30% for gift inspiration.
Amazon, for example, just launched a new generative AI feature dubbed, “Help Me Decide,” which aims to enhance product recommendations by explaining why a shopper should buy an item based on their browsing, search, and purchase history in a bid to offer transparent, conversational guidance.
Adobe predicts that AI traffic to U.S. retail websites would surge by 520% this holiday season, compared with a year ago when the first material surge in AI use was recorded. Its use is expected to peak in the 10 days leading up to Thanksgiving, the report found.
[Read more: How Brands Are Using AI to Optimize Digital Out-of-Home Advertising]
Seizing opportunities ‘to engage both premium and value-focused shoppers across segments’
At Costco, the company is not giving as much display space to discretionary holiday items this season, the company said in a recent conference call with analysts.
Costco shoppers have been “very choiceful in their spending on discretionary items,” said Gary Millerchip, Executive VP and Chief Financial Officer, adding that this year’s seasonal product mix will “look a little different from years past.”
Ron Vachris, President and CEO, said the retailer cut back on discretionary items for the holidays to focus on some seasonal basics and to make room for some high-ticket items that appeal to customers that have the resources to spend on discretionary products such as new furniture, saunas, and backyard sheds.
“Our buyers, when we were booking for this holiday season, really had to evaluate all the discretionary items, the toys and the trim and the decorations and those kind of things, and made decisions based on the necessities and what they felt they needed to be in,” Vachris said. “Christmas trees…we really thinned down that whole category, and we thinned down a lot of the additional seasonal areas as well.”
Costco’s shift to making room for more high-ticket items reflects the bifurcation of the economy, as described by Placer.ai, which monitors retail foot traffic.
“Luxury and off-price apparel are both outpacing overall retail, reflecting a deepening bifurcation of consumer behavior,” the company said in a recent report. “And this December, the affluence gap between the two categories is expected to expand further, underscoring opportunities to engage both premium and value-focused shoppers across segments.”
Retailers blend value and convenience
Target is taking a multipronged approach to meeting customer demands this holiday season, including a strong focus on value. It is touting a wide range of gifts for as little as $5 and “thousands of toys” priced under $20.
The company is also seeking to lean heavily into convenience, expanding next-day delivery to 35 markets ahead of the holiday shopping season and expanding its assortment of new and exclusive items to enhance its appeal as a potential one-stop destination. This year it will carry 20,000 new items—twice as many new items as last year—and several exclusive new items across the store.
Regional supercenter operator Meijer is also blending value and convenience for the holidays by touting its status as a place where shoppers can fulfill all their holiday shopping needs. The retailer is also aiming to attract budget-conscious shoppers with a 2025 Toy Guide that focuses on value, with categories for gifts under $10, $20, or $30.
“We know families are busy and budgets are stretched, so we are focused on keeping prices low and making it easy for parents to get amazing gifts for everyone on their list,” said Becky Bronkema, VP of Hardlines at Meijer, in a statement. “Meijer is truly a one-stop shop for the holidays.”
In fact, data technology company Experian cited convenience as one of three keys to success this holiday season, along with relevance and trust.
“From browsing online to buying in-store, shoppers want the fastest, easiest, and most cost-effective fulfillment options,” Experian said in its 2025 Holiday Spending and Trends Insights report, conducted in partnership with GroundTruth.
Craft retailer Michaels is also tapping into consumer demand for both value and convenience. The retailer, which touts the value and experiential aspects of making homemade gifts and decorations, has launched a partnership with third-party delivery specialist Shipt—a division of Target—to offer same-day delivery from more than 1,100 Michaels stores nationwide.
“This partnership comes just in time for the busy crafting and decorating season ahead as members are looking to create everything from … harvest-themed centerpieces, holiday trimmings and heartfelt gifts,” said Katie Stratton, Chief Growth and Strategy Officer at Shipt, in a statement.
Focusing on omnichannel
Kohl’s, meanwhile, has tapped into the omnichannel nature of holiday shopping by adding a “My List” feature on its website and mobile app. Customers can tap the heart icon on any product to build a personalized shopping list, rename and organize their picks, and share their list with others.
That strategy conforms with what Experian and GroundTruth described as consumers’ preference for using digital channels to conduct research and physical stores to make their final purchases.
“Despite the continued rise of e-commerce, the in-store experience remains a critical part of the holiday journey,” Experian said in its holiday trends report. “GroundTruth data shows that 80% of consumers still prefer the in-store experience, often finding items online and then going to brick-and-mortar locations to see the products in person before making purchases.”
Kohl’s has also introduced some new experiential elements into its holiday marketing strategy this year, including a new holiday game called Kohl’s Holiday Quest that features opportunities to win daily prizes and a grand prize of $100,000. Other prizes will appear on Black Friday and throughout December, the retailer said.
CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.
CO—is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. Chamber of Commerce, here.
Interested in a small business membership?
Find out how the U.S. Chamber of Commerce can help your company grow and thrive in today's rapidly-evolving business environment. Connect with our team to learn how a small business membership can benefit your bottom line and help you achieve your goals.
