US holiday retail sales to rise 3–5% in 2025: Report

The outlook, based on a comprehensive survey of US consumers, reveals a consumer who is more cautious as inflationary pressures take a toll on household spending. The '2025 US Retail Holiday Outlook' by global consulting firm AlixPartners also revealed a bifurcation between higher-income households and lower-income ones.

In this year’s study, high-income consumers (those making more than $100,000 per year) are the primary drivers of increased spending this holiday season. Over 30 per cent said they plan to spend more this year, while less than 20 per cent of other income groups intend to increase their budgets. The gap between low- and high-income earners was also seen in prior AlixPartners research that showed 31 per cent of higher-income shoppers expect to increase their spending this year (especially on travel and leisure) versus 16 per cent of lower-income households.

The data also showed that about 80 per cent of consumers polled said they plan to spend the same or less this year than last, with 35 per cent anticipating a reduction in spending (which is a 35 per cent increase from last year). The expected decline in spending follows an uptick in retail sales earlier this year as consumers went on a spending spree ahead of anticipated higher prices due to tariffs. Over the past year, shoppers faced ongoing inflation but had shown resilience and continued to spend — until now.

“This year, overall, retailers face a consumer who is more cautious and frugal,” said Bryan Eshelman, partner and managing director in the retail practice at AlixPartners. “They will be on the prowl for deals, and retailers will need to be creative, online and in-store, with how they lure in shoppers. Markdowns need to be carefully executed. And regardless of income, shoppers are prioritising value and want the best bang for their buck.”

Furthermore, the study found that nearly 40 per cent of the polled consumers stated they intend to buy 50 per cent or more of their holiday purchases on sale. In addition, the findings revealed significant generational differences in consumer sentiment. For example, Generation X consumers are significantly more promotion-driven (48 per cent) when compared to younger Generation Z consumers (30 per cent).

“Like last year, shoppers sought promotions to relieve the pressure of higher prices and the rising cost of living,” Eshelman said. “However, younger generations are less likely to respond to traditional promo activities and are now looking for everyday values. Younger generations are even leading when it comes to the switch from traditional grocery stores to club stores.”

Eshelman said older generations are accustomed to high/low pricing strategies and are trained to wait for sales. But this doesn’t work for younger generations such as Millennials and Generation Z. To better engage shoppers, retailers and brands will need to deploy promotional strategies that include personalisation and other tactics.

Households are planning to start their holiday shopping even later this year, with only 35 per cent saying they will begin before Halloween (which is down 3 percentage points from last year). The post-pandemic shift back to in-store shopping is decelerating, with online shopping expected to increase slightly this year. Of those polled, 67 per cent of consumers intend to make 30 per cent or more of their purchases online.

"The 2025 holiday retail season is shaping up to be a challenging one, with consumers remaining highly cautious and price-sensitive," said Sonia Lapinsky, partner and managing director and leader of fashion retail at AlixPartners. “Retailers will need to adapt to these evolving behaviours by focusing on value, optimising inventory management and leveraging integrated channel strategies to meet consumers wherever they choose to shop. Understanding the nuances of consumer sentiment and tailoring offerings, especially for high-income households who are still willing to spend, will be crucial for success."

The AlixPartners 2025 US Holiday Shopping Survey included a national representation of 1,000 US consumers (ages 15 and above) across all regions, demographics, and income levels.

ALCHEMPro News Desk (RR)