Holiday retail sales are expected to top $1 trillion as inflation boosts growth

• Savings accounts are up $43 billion (17% year-over-year), but roughly half has already been consumed by higher living costs, squeezing consumer budgets
• Categories most affected by inflation with declining unit sales include food and beverage, furniture, and health and personal care products
• AI adoption in holiday shopping is growing rapidly, with 29% of consumers planning to use AI tools (up from 22% last year), primarily for product research (75%) and price comparison (55%) rather than direct purchases

Holiday Retail Sales Expected to Exceed $1 Trillion Amid Inflation

Holiday retail sales are projected to surpass $1 trillion for the first time this season, representing 4.5% year-over-year growth according to Bain & Company. However, inflation accounts for most of this increase, with actual unit growth remaining thin. Deloitte forecasts higher total retail sales of $1.7 trillion.

Consumer Behavior Shifts

Despite strong top-line numbers, macroeconomic pressures are reshaping shopping patterns. Consumers are increasingly value-driven, seeking discounts and switching between brands and retailers across income levels. Shoppers are making more frequent trips with smaller basket sizes, particularly for groceries, while shifting from premium to private-label brands. The focus is on fewer, higher-quality purchases rather than broad spending cuts.

Financial Context

Consumer savings have increased $43 billion year-over-year (17% growth), providing additional spending power. However, approximately half of these gains have been absorbed by inflation and higher costs. Consumer confidence fell to its lowest level since 2014 in September, with concerns about inflation and employment outlook. Categories most affected by inflation-driven unit declines include food and beverage, furniture, and health and personal care.

Emerging Trends

In-store sales are expected to drive 70% of growth, though e-commerce continues gaining share. AI adoption is accelerating, with 29% of consumers planning to use AI for holiday shopping (up from 22% last year). AI-driven traffic to retail sites grew 127% year-over-year in August, expected to reach 130% growth through the season. However, consumers primarily use AI for product research (75%) and price comparison (55%) rather than direct purchases, with AI serving as a discovery tool rather than a transaction platform.