Don’t Expect Massive Holiday Sales Growth This Year
After years of post-pandemic surges, U.S. holiday retail sales growth is expected to return to more modest levels in 2025. Analysts predict a moderate increase in spending, aligning with long-term historical averages but falling short of the robust gains seen in recent years.
Deloitte forecasts overall holiday retail sales will grow between 2.9% and 3.4% for the season, with total spending projected to reach $1.61 trillion to $1.62 trillion from November 2025 to January 2026. This marks a slowdown from 2024’s 4.2% increase, which totaled $1.57 trillion. Similarly, Bain & Company estimates a 4% year-over-year increase for November and December alone, with total sales exceeding $975 billion—still below the 10-year average of 5.2% growth.
E-commerce continues to outpace physical retail, with online sales expected to rise by 7% to 9% year-over-year, reaching $305 billion to $310.7 billion. This growth, while slower than previous years, underscores the enduring shift toward digital shopping. Nonstore sales, including mail order, are projected to contribute half of the overall sales growth, further solidifying e-commerce’s role as a key driver of the holiday retail landscape.
Despite the moderation in growth, there are signs of resilience. Disposable personal income (DPI), a critical factor in retail spending, is expected to grow by 3.1% to 5.4% this season. This increase could help stabilize consumer spending, even as inflation and high household debt weigh on budgets. Inflation, in particular, plays a dual role: while it may lead to fewer purchases, it also increases the dollar value of sales, potentially boosting retail revenue even if buying volume remains flat or declines slightly.
Consumer behavior is also evolving. Many shoppers plan to cut back on everyday essentials to allocate more funds for holiday purchases. Additionally, the use of AI and other tools for deal-hunting is on the rise, reflecting a more strategic approach to online shopping. Two anticipated interest rate cuts could further bolster consumer confidence, even if they don’t immediately expand disposable income.
In-store shopping is showing signs of recovery, with Bain predicting a 2.75% year-over-year increase in physical sales. Categories like clothing, accessories, and health and personal care are expected to perform particularly well, with growth exceeding 5%. However, sectors such as electronics, appliances, and furniture may see declines, highlighting the uneven nature of the retail recovery.
Digital channels remain the strongest growth engine, driven by convenience, promotional offers, and a wide selection of products. While online sales growth is slowing compared to the double-digit spikes of previous years, e-commerce continues to be a critical area of opportunity for retailers.
For retailers, the key to success lies in delivering value and adapting to shifting consumer preferences. While e-commerce performance offers significant opportunities, businesses must also navigate a landscape of cautious spending influenced by inflation, debt, and economic uncertainty. Despite lower consumer sentiment, history suggests that holiday sales often exceed expectations, creating a potential bright spot for retailers who can effectively balance affordability and innovation.
Holiday Sales Growth to Be Driven by E-Commerce and Rising Incomes
Nonstore sales, including e-commerce and mail-order purchases, are expected to play a pivotal role in driving holiday retail growth. These channels are projected to contribute **half of the overall sales growth**, despite the pace of expansion slowing compared to previous years. This underscores the continued shift toward online shopping, even as growth rates stabilize.
The interplay of inflation and consumer spending remains a critical factor. While higher prices may lead to fewer purchases, they also elevate the dollar value of sales, potentially boosting retail revenue. This duality, as noted by Deloitte’s Brian McCarthy, positions inflation as both a challenge and an opportunity for retailers. The ability to maintain sales volumes while navigating price-sensitive consumers will be key to success.
Consumer strategies are evolving, with many shoppers adopting more tactical approaches to holiday spending. The use of AI and other digital tools for deal-hunting is becoming increasingly prevalent, enabling consumers to maximize their budgets. This trend reflects a broader shift toward more strategic and value-driven purchasing behaviors.
The anticipated **two interest rate cuts** could further bolster consumer confidence, even if they do not immediately translate to higher disposable income. This psychological impact may encourage shoppers to spend more freely, creating a potential upside for retailers despite economic uncertainties.
The retail landscape is expected to be uneven, with certain categories outperforming others. Clothing, accessories, and health and personal care products are forecast to grow by **5% or more**, driven by pent-up demand and shifting consumer priorities. Conversely, electronics, appliances, furniture, and garden supplies may experience declines, as these categories are more sensitive to economic uncertainty and inflationary pressures.
The competition between in-store and online shopping continues to evolve. While e-commerce remains the fastest-growing channel, in-store sales are regaining momentum, with a projected **2.75% year-over-year increase**. This reflects a gradual return to pre-pandemic shopping habits, with consumers increasingly valuing the tactile experience of in-person shopping.
For retailers, the path to success lies in striking a balance between physical and digital channels. While e-commerce offers significant growth opportunities, retailers must also invest in creating engaging in-store experiences. Additionally, delivering value through personalized marketing, competitive pricing, and efficient supply chains will be critical in capturing holiday sales.
Despite the cautious outlook, there is room for optimism. History suggests that holiday sales often exceed expectations, even when consumer sentiment is subdued. Retailers that can adapt to changing consumer behaviors, leverage digital platforms effectively, and emphasize affordability are well-positioned to thrive in this environment.
Conclusion
The 2025 holiday retail sales are expected to see moderate growth, marking a return to pre-pandemic levels. E-commerce will remain a key driver, with online sales projected to rise by 7-9%, while in-store shopping shows signs of recovery. Despite inflation and economic uncertainty, consumer resilience and strategic spending behaviors offer opportunities for retailers. By balancing affordability, innovation, and a strong digital presence, businesses can navigate this challenging yet promising landscape and potentially exceed holiday sales expectations.
Frequently Asked Questions
What is the expected growth rate for 2025 holiday retail sales?
Deloitte forecasts a 2.9% to 3.4% increase in holiday retail sales, with total spending projected to reach $1.61 to $1.62 trillion.
How significant is e-commerce in holiday sales growth?
E-commerce is expected to rise by 7% to 9%, contributing half of the overall sales growth, with online sales reaching $305 to $310.7 billion.
How will inflation impact holiday spending?
Inflation may lead to fewer purchases but could also increase the dollar value of sales. Retailers must balance price sensitivity with revenue goals.
What strategies are consumers adopting for holiday shopping?
Consumers are cutting back on essentials, using AI tools for deals, and allocating more funds for holiday purchases, reflecting a more strategic approach to shopping.
Which retail categories are expected to perform well?
Clothing, accessories, and health/personal care are projected to grow by over 5%, while electronics and furniture may see declines due to economic uncertainty.