According to analysis from Bain & Company, U.S. retail sales during the upcoming holiday season are projected to top $1 trillion for the first time, largely due to increased inflation and heightened online consumer activity.
Bain & Company released its report on Thursday, forecasting a 4.5% rise in U.S. retail sales for November and December compared with the prior year. The firm identifies inflation as the primary driver, attributing over half of the dollar value increase in nominal sales this season to rising prices.
Digital Shopping Momentum Surpasses In-Store Expansion
Based on a survey of more than 1,100 shoppers, Bain & Company found a substantial difference between digital and traditional retail. Online sales are set to increase by 9% year-over-year, well ahead of the 2.5% anticipated growth for brick-and-mortar stores. The data also show that about 40% of shoppers plan to split their purchases fairly equally between digital and physical channels, with 24% indicating they’ll primarily shop online, and only 13% focusing mostly on physical stores.
Another notable trend in the report is the soaring use of artificial intelligence in holiday shopping. This year, 24% of consumers say they will begin their holiday shopping journey using AI tools such as Google Gemini, ChatGPT, or Claude, up from just 17% last year. This indicates a shifting approach to finding and choosing holiday gifts.
Sobering Factors Counterbalance Retail Optimism
Bain & Company’s findings reveal that despite reaching a groundbreaking sales total, retailers will navigate significant challenges this holiday season. The report mentions high fuel costs, persistent tariffs, increasing credit card debt, global instability, and unpredictable employment trends, all of which could curb consumers’ ability to spend.
“While US retailers have reason to rejoice this holiday season as the industry reaches the trillion-dollar milestone for the first time, there are underlying factors that will temper bottom lines,” Aaron Cheris, a Bain & Company partner and the global retail practice leader, stated.
The analysis also stresses that not every retail sector will see the same pace of expansion. Purchases in electronics, home furnishings, appliances, and food and beverage categories are expected to remain flat. Meanwhile, the strongest growth in both prices and sales volume is anticipated in general merchandise, apparel, accessories, and especially e-commerce.
Retailers Adjust in Response to New Realities
As the holidays approach, retailers are fine-tuning their pricing strategies, promotional activities, and integrating advanced AI technologies to improve the customer experience and differentiate themselves. Cheris underlined the critical role of these tools and approaches for success during this crucial shopping period.
This year’s Bain & Company forecast slightly improves upon last year, when the firm anticipated a 4% year-over-year increase in holiday sales. In 2022, retail sales added up to more than $975 billion.
With retailers already well-stocked for the upcoming season, as noted by Jonathan Gold, Vice President for Supply Chain and Customs Policy at the National Retail Federation in August, stores benefited from an early rise in imports ahead of potential tariff changes. “We had an early peak season this year as retailers brought in merchandise ahead of tariff changes in late July and responded to other uncertainties in the supply chain like the ongoing disruption brought by the conflict in Iran,” Gold explained.
This 2023 holiday period brings a mix of prospects and concerns for retailers, as inflation’s impact on spending is compounded by a further swing toward online and AI-driven shopping behaviors.