Not so long ago, Thanksgiving dinner was a time to create a battle plan for the ritual Black Friday 5 a.m. doorbuster sales. Thankfully, that dehumanizing ordeal is largely a relic, giving way to more distributed promotions from retailers and an accelerating trend toward online shopping.
This season will look even more different, with consumers feeling the pinch of inflation and economic uncertainty, wider adoption of tools like social media and artificial intelligence to make shoppers smarter, and the proliferation of credit options that could spell trouble. Anyone nostalgic over the Sears Catalog?
Forecasts for holiday spending are all over the map. The National Retail Federation, whose forecast is most often cited, believes that retail sales in November and December will surpass $1 trillion for the first time ever, an increase of about 4% over last year. Predictions from Visa and Adobe peg the growth rate at 4.6% and 5.3% respectively. All agree that most of that increase will be due to inflation and tariffs, and that unit sales are likely to rise minimally or not at all.
Some others are less sanguine. Consulting firm PwC expects a 5% decline versus 2024 led by a 23% drop in spending by Gen Z. The dourest prediction comes from the Conference Board, whose members anticipate a 6.9% drop in sales year over year. Much of the disparity can be attributed to differing macroeconomic assumptions for the remainder of the year, but all surveys reveal an expectation by consumers of higher costs and slower economic growth.
One consistent theme shared by all retail analysts is a greater consumer focus on value in the face of higher prices, particularly since the discounting season is now so widely dispersed over the calendar. Meanwhile, retailers may be less aggressive and more targeted in discounting this year as they cope with higher input costs. And shoppers will continue to embrace new modes and technologies this year would befuddle Sam Walton, but of which he would likely approve.
Mobile dominates online sales: Roughly one quarter of all holiday shopping this season will be online, hardly a surprise. But according to the annual Adobe holiday shopping forecast, 56% of all online sales will be on mobile devices, taking the lead over desktops for the first time. Adobe further predicts that 80% of all purchases that utilize a buy now, pay later platform will be mobile device transactions.
AI goes mainstream: Industry experts predict that over half of all holiday shoppers will use some form of artificial intelligence in the pursuit of the perfect gift. Large language models like ChatGPT and Google’s Gemini are lending a hand in several ways, including suggesting gift ideas. Users can prompt an AI model with specific criteria like age, profession, interests, hobbies, favorite foods, pets and so on. They can also include contra criteria like “hates green” or is allergic to wool. Some applications now include built-in gifting assistants.
AI is also a powerful tool for comparison shopping. According to PayPal, shoppers are using it to help them identify the best deals, and to compare product features across brands. Retail traffic referred by generative AI platforms is already up 300% this year. Upload a photo and ask the application to find the best price.
Consumers are increasingly turning to augmented reality as well, as merchants offer the ability to visualize a product in their home or virtually try on an article of clothing. And watch for more “agentic” AI apps that act as your agent to execute transactions on your behalf based upon criteria you have provided.
Social media platforms get in on the act: This year will set a new high watermark for purchases influenced by or conducted directly through social media channels, especially among younger consumers in Generation Z. Instagram, Facebook, TikTok and Pinterest currently predominate the social commerce space, but Reddit is the fastest growing channel according to Adobe. Analysts predict social commerce will top $100 billion in the U.S. this year.
More debt: A recent survey by the Journal of Accountancy finds that 42% of U.S. adults intend to go into debt this year to pay for holiday shopping and travel. Furthermore, over half of those borrowers do not expect to pay off the balance immediately but plan to incur interest expenses. NerdWallet adds that of those shoppers who used credit cards last Christmas, 31% have still not paid off the balance.
Buy now, pay later will be a major factor this year, as half of all holiday shoppers plan to use deferred payment plans, according to PayPal. The attraction for sellers is obvious: Use of buy now, pay later increases value of the average sale by 20% to 40%. For buyers, the benefits are more ambiguous. Roughly 6 in 10 users are considered subprime borrowers (FICO scores below 620), and about the same percentage “stack” multiple loans. As retailers ramp up their offerings, shoppers should guard against falling deeper into the debt trap.
Retailers tighter fisted with discounts: While consumers are feeling the pinch of inflation, so are merchants. Average tariff rates on goods imported to the U.S. have increased sixfold since January, costing the average family over $1,000 in 2025. But according to most economists, only about 50% to 60% of the increased tariff costs have been passed on to customers. Retailers are absorbing the difference, at least so far, leaving less margin for splashy sales promotions during the holidays. And while the big guys like Walmart, Target and Amazon have raised prices between 5% and 12% so far this year, smaller merchants with lower pricing power have been caught in the middle with less room to deal.
Sellers remain cautiously optimistic about the holiday shopping season, while they adapt to a changing landscape and a more demanding consumer armed with greater information than ever. This Thanksgiving, ask ChatGPT to find the perfect ugly sweater for Uncle Roy, and raise a glass to not waking up at 4 a.m. on Friday.
Christopher A. Hopkins, CFA, is a co-founder of Apogee Wealth Partners in Chattanooga.