A record number of Americans flocked to stores this holiday season, with in-store shopping on the rise as online purchases climbed to remarkable highs. Adobe Analytics reports that consumers spent an impressive $44.2 billion online from Thanksgiving through Cyber Monday, an 8% increase from last year. One standout trend this season is the rapid expansion of Buy Now, Pay Later (BNPL) usage, which accounted for more than $10 billion in holiday spending, reflecting a 9% increase compared to previous years.
To gain insight into how major retailers are navigating mixed economic pressures, BCM’s retail and consumer managing director at S&P Global, Bea Chiem, joined the discussion. Bea noted that retail results have exceeded expectations, with many companies raising their forecasts after managing inventories skillfully despite external challenges such as tariffs. High performing retailers including Walmart, TJX, Macy’s, and Lowe’s have adapted much more effectively than others, revealing a strong pattern in consumer behavior during an uncertain economic climate.
Bea explained that value oriented retailers are thriving, while others like Target and Home Depot are lagging due to weak housing market exposure and strategic missteps. Consumer behavior has shifted notably and now resembles a recession like mindset. Shoppers are making more frequent trips but with smaller baskets, while aggressively searching for deals and value. Even high income consumers have become more price sensitive. Inflation, including price increases of up to 25% since 2020, continues to strain household spending power.
Brands such as Macy’s and Bloomingdale’s have excelled among higher income earners due to significant store investments and elevated shopping experiences. Bea remarked that these upgrades help attract affluent consumers who maintain strong asset values and considerable savings. Rising net worth among this group has contributed to robust holiday activity.
Dollar stores including Dollar Tree and Dollar General are also demonstrating resilience in a softening economy. Bea explained that these retailers increased traffic and profits as more lower income consumers sought affordable options. Dollar Tree’s introduction of multiple price points and enhanced product offerings has allowed the company to effectively serve value seeking shoppers while improving profitability.
As the conversation wrapped up, Bea addressed the anticipated release of inflation figures later in the day. Despite the significant delay caused by the historic U.S. government shutdown, earnings reports from major retailers and commentary during calls present a cautiously optimistic view for the upcoming season. Bea indicated that inflation is likely to remain sticky around 3%, with the full impact of tariffs gradually increasing consumer prices and keeping inflation above the Federal Reserve’s 2% target for the foreseeable future.
In conclusion, this holiday season illustrates a retail environment defined by sharp differences in performance based on adaptability, pricing strategy, and understanding of consumer needs. As economic conditions continue to shift, staying aware of these trends will be essential for retailers and shoppers navigating a rapidly evolving marketplace.
These insights give retailers and consumers a clearer understanding of spending behavior and strategic approaches that matter most in today’s complex financial terrain.