U.S. Holiday Retail Sales to Top $1 Trillion for First Time, Bain Says

U.S. holiday retail sales will cross $1 trillion for the first time this season, growing 4.5% year over year, according to Bain & Company's annual forecast. Inflation, not volume, accounts for most of that growth, making actual unit gains thinner than the headline number suggests.

Bain projects that roughly 70% of holiday spending will come from in-store sales, even as e-commerce continues to gain share. Consumer wallets are getting help from higher tax refunds, which are up $43 billion this year, or 17% year over year. But that cushion is shrinking: Bank of America estimates half of that benefit has already gone to higher gas prices, which have significantly squeezed budgets.

The categories hit hardest by inflation-driven unit declines include food and beverage, furniture, and health and personal care, Bain found.

The forecast lands against a gloomy backdrop. The Conference Board reported Tuesday that consumer confidence fell in September to its lowest level since 2014, with respondents citing worries about inflation and the jobs outlook.

Deloitte sees an even bigger season. It expects holiday retail sales to reach $1.7 trillion this year, and it expects consumers to get more creative about how they spend — hunting for discounts and markdowns.

"As they look to get more out of their dollars, we continue to see value-seeking behaviors across income levels, including switching among brands and retailers and using promotions to manage spending," said Natalie Martini, vice chair of Deloitte and U.S. retail and consumer products leader. "These behaviors are expected to shape how consumers approach holiday shopping this season."

Adobe's holiday shopping report echoes that view. It expects value-first shopping to power growth and share this year, and it projects buy now, pay later spending will hit a record $21.3 billion as consumers become more intentional with their money.

Shopping behavior is shifting in other measurable ways. Consumers are checking out with smaller baskets but making more frequent trips, especially for groceries, according to AlixPartners' holiday projections report. They are also trading premium brands for private-label alternatives and buying fewer, higher-quality items.

"Consumers are not cutting back evenly across every category," said Sonia Lapinsky, leader of fashion retail at AlixPartners. "They are becoming more selective about self-gifting and looking for ways to preserve quality while staying within their budgets."

Artificial intelligence will shape discovery and purchasing this season. Adobe reports AI-driven traffic to retail sites grew 127% year over year in August, and it expects growth of 130% year over year overall through the holiday season and 141% on Thanksgiving.

PwC's holiday report finds 29% of consumers plan to use AI somewhere in their holiday shopping this year, up from 22% last year. Usage is diverse: 75% of shoppers use AI to research products and 55% use it to compare prices.

But the checkout moment still belongs to humans. PwC noted that while the appetite to explore through new technology is strong, most people are still not buying products directly through AI platforms.

"For now, AI is the modern equivalent of a knowledgeable friend at the mall, not the cash register," the PwC report read.

For retailers, the season's trillion-dollar headline will reward those that price aggressively and meet value-seeking shoppers wherever they research — in stores, on apps, or in chat with an AI assistant.