Pricing to drive modest 2025 US holiday retail sales

Consumer polarization is reshaping holiday spending patterns.

In brief

• Retailers face a fractured market — one strategy won’t fit all consumer segments.
• Affluent shoppers will boost spending, while low- and middle-income consumers will feel squeezed by high prices and rising credit use.
• Online sales are expected to grow around 6%, with affluent buyers seeking convenience and value shoppers chasing deals and essentials.

Our EY-Parthenon team forecasts a modest 2.5% rise in nominal US holiday retail sales for the November–December 2025 shopping season. Sales will probably exceed $1.0 trillion, marking another record in dollar terms. But the headline gain will be almost entirely price-driven. With retail price inflation expected to run above 2%, real volume sales are likely to be close to flat compared with last year.

Real disposable income growth has slowed, falling to around 1.9% year-over-year in August, while credit usage is on the rise and savings rates have edged lower — signs that many households are drawing down buffers to maintain spending. In contrast, spending among higher-income consumers remains robust, particularly in travel, dining and recreational services.

This polarization is reshaping holiday spending patterns. While luxury and premium categories may hold up well, mass-market segments are facing headwinds. Retailers cannot rely on a one-size-fits-all strategy. Those targeting more price-sensitive consumers will need to lean into promotional precision, loyalty incentives and smarter assortment curation to sustain demand without eroding margins.

Online shopping is expected to gain further share, rising 5%–6%. But even in digital channels, we expect to see sharper bifurcation: affluent consumers gravitating toward curated convenience-led experiences, and budget-conscious shoppers responding to flash deals and essentials-driven buying.

Retailers will also face cost pressures from multiple fronts — tariffs, labor and logistics — challenging their traditional holiday planning and profit expectations. Those who succeed this holiday season will be the ones who have invested in pricing agility, operational efficiency and data-driven demand planning.

This holiday season will again set a record in nominal sales, but not in sentiment. Price increases will mask the lack of volume growth, and a smaller cohort of high-income consumers will disproportionately drive activity. For the rest, the holidays will feel leaner.

Retailers will need to operate with greater precision — segmenting their customer base, tailoring offers and managing inventory with discipline — to navigate what is shaping up to be a more fractured and price-sensitive holiday season.