Holiday Retail 2025: A Season of Selective Shoppers and Demonstrably K-Shaped

The numbers are in for the first seven weeks of the 2025 holiday shopping season, and they tell a familiar story; one of cautious consumers, selective spending, and a retail landscape that continues to separate into clear winners and losers.

According to data released by Visa Consulting & Analytics, holiday sales rose 4.2% from November 1 through December 21, a slower clip compared to the 4.8% increase during the same period last year. When adjusted for inflation, that growth becomes a more modest 2.2%, down from the inflation-adjusted 3% gain in 2024. As Visa’s principal U.S. economist Michael Brown told the Associated Press, “It’s certainly not a spectacular season. It’s sort of an average holiday season given concerns about macroeconomic growth, inflation.” I would agree. I’m still somewhat shocked we have growth after inflation at all.

But here’s where it gets interesting and where the real story lies beneath the headline numbers.

The Selective Shopper Has Arrived

This season’s consumer isn’t cutting back across the board. They’re making strategic choices. According to Visa’s data, electronics emerged as the hottest category with sales rising 5.8%. Clothing and accessories accelerated at a 5.3% pace, up from a 4.1% increase last year. Meanwhile, holiday home décor, predominantly made in China and more affected by tariffs, saw just a slim 0.8% sales gain.

The message from consumers is they’re willing to spend on items that matter, particularly gifts under the tree, while pulling back on discretionary categories like ornaments and decorations. This aligns with what IHL Group has been tracking across our retailer surveys. Consumers are making value-driven choices, and retailers who understand this shift are capturing disproportionate share.

The Channel Reality: Physical Stores Still Dominate

Despite all the breathless commentary about e-commerce dominance, Visa’s data confirms what IHL research has documented for years: physical stores remain the backbone of retail. According to Visa, 73% of holiday payment volume occurred in physical stores, while 27% happened online. E-commerce sales rose 7.8% for the first seven weeks of the period, but stores continue to command the lion’s share of transactions.

IHL Group’s 2026 Retail Transformation Study tells a consistent story. Over the past five years, an average of 89% of retail revenues show a store component in fulfillment. Traditional in-store purchases still account for 48% of revenues, but the picture has become far more nuanced. BOPIS/Click & Collect has more than doubled in the past five years to 9% of sales. Local store delivery has doubled to 10%. Ship-from-store has tripled to 12%. (Note: IHL data includes restaurants and C-stores that the Visa data does not so naturally the stores are more involved.)

The Technology Divide: Leaders Pull Further Ahead

What Visa’s aggregate data doesn’t reveal, but IHL Group’s research does, is the growing chasm between retail leaders and laggards. This isn’t just about holiday performance; it’s about structural advantages that compound over time.

According to IHL’s research, retailers leveraging AI/ML solutions have witnessed remarkable results, with sales increasing 2.3 times and profits growing 2.5 times compared to non-adopters over the last two years. Profit leaders allocate 97% more of their revenue to AI spending compared to profit laggards and dedicate 67% more of their IT budgets to AI initiatives.

The performance gaps in omnichannel execution are even more stark. IHL data shows that sales leaders have 150% more of their sales via BOPIS than sales laggards. Profit leaders demonstrate 182% more revenue from BOPIS than profit laggards. In local delivery—an increasingly critical channel—profit leaders show 315% more revenue from this channel compared to profit laggards.

Strategic Sophistication Separates Winners from Survivors

Here’s the finding that should keep retail executives up at night: profit leaders are 13 times more likely to have a comprehensive AI strategy compared to laggards, while laggards are 167% more likely to have no defined strategy at all.

The speed of adoption matters too. Sales growth leaders are 482% more likely to identify as early technology adopters compared to sales growth laggards. They’re also 379% more likely to be fast followers, suggesting that speed of technology adoption directly correlates with market performance.

The Path Forward

As we approach the final days of the holiday shopping season (with the day after Christmas and the Saturday after Christmas among the top ten busiest shopping days according to Sensormatic) retailers should be thinking beyond this year’s numbers.

IHL Group’s research shows expectations for 2025 and 2026 remain encouraging. Respondent retailers indicate annual sales growth projections of 6.8% and 7.1% respectively for total sales, with profitability increases of 5.7% for 2025 and 7.2% expected for 2026. E-commerce shows a CAGR of 9.1% from 2022-2026, while store sales growth remains impressive at 6.6% CAGR for the same period.

But those averages conceal a bifurcating industry. Leaders’ e-commerce growth outstrips all others. From a digital standpoint, growth expectations for average retailers look more like laggards than leaders. And growth for laggards looks insufficient for survival.

The Bottom Line

This holiday season isn’t about whether retail is healthy, it’s about which retailers are healthy. The 4.2% headline growth from Visa masks a marketplace where technology-forward, omnichannel-optimized retailers are pulling further ahead while others struggle to keep pace.

The National Retail Federation expects total sales over November and December between $1.01 trillion and $1.02 trillion, up 3.7% to 4.2% over last year that lines up pretty strong with this Visa data. Those trillion-dollar numbers sound impressive until you realize that $100 in March 2020 buys the same amount of goods as $126 today. Consumers continue to experience budget-stretching price increases on just about every product in retail.

For retailers still debating their technology roadmap, still uncertain about AI investment, still hesitant to optimize their omnichannel capabilities—the message from this holiday season is clear. The window for catching up is closing. The leaders aren’t waiting.

Sources: Visa Consulting & Analytics (December 2025); IHL Group 2026 Retail Transformation Expanded Study; IHL Group “How Retail Leaders Outperform: What We Learned from 400 Brands”; National Retail Federation; Sensormatic.