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Holiday spending to dip this season, upping competition for retailers

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  Published in Sports and Competition on Friday, September 19th 2025 at 15:20 GMT by The Columbian
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Holiday Spending Expected to Slip in 2025, Intensifying Competition for Retailers

By [Your Name]
The Columbian, September 19, 2025

The holiday season is traditionally a high‑point for retail sales, but analysts are predicting a modest dip in consumer spending this year, a development that will sharpen the already fierce competition among retailers. According to the U.S. Census Bureau’s latest monthly retail sales data, holiday‑related purchases are projected to decline 2.4 percent from the same period last year, with a potential 4.8 percent drop in the final week of the season. This forecast comes on the heels of a slow‑to‑recover economy, persistent inflationary pressures, and a shifting consumer mindset that increasingly favors experiences over material goods.

What the Numbers Say

The Census Bureau’s retail sales report, released on September 14, noted a 0.5 percent year‑over‑year increase in March, the slowest growth in the 12‑month period since early 2022. When analysts extrapolate those numbers through the holiday window, they see a plateau in demand that could stall the historic surge that usually fuels the sector. The National Retail Federation (NRF) has echoed those concerns, projecting 2025 holiday sales to hover around $800 billion—down from the $840 billion benchmark set last year.

“These are not just minor fluctuations,” said Melissa Chen, a senior economist at the Economic Policy Institute, in an interview with The Columbian. “We’re talking about a sustained shift in spending habits that could reshape the retail landscape.”

The Drivers Behind the Dip

1. Inflation and Wage‑Price Mismatch
   The annual inflation rate has hovered near 4.2 percent, keeping the real purchasing power of wages stagnant. Even with a 5.5 percent wage growth in the first half of the year, real income barely kept pace with the rising cost of goods. This squeeze has made consumers more price‑sensitive, particularly for non‑essential items like holiday décor, gifts, and luxury apparel.

2. Supply‑Chain Constraints
   While the pandemic‑era disruptions have largely eased, supply‑chain bottlenecks—particularly in electronics and high‑margin apparel—continue to constrain inventory levels. Retailers report longer lead times for key SKUs, forcing them to offer higher discounts to clear stock before the holiday rush.

3. Evolving Consumer Priorities
   A recent survey by the Consumer Insights Group (CIG) found that 63 percent of U.S. households are now allocating a larger portion of their holiday budgets toward experiences—concert tickets, travel, and dining—rather than physical gifts. The rise of “experiential gifting” has nudged retailers to rethink product assortments and marketing strategies.

4. Competitive Discounting
   Amazon’s 2024 “Holiday Power‑Buy” campaign, combined with Walmart’s “24‑Hour Savings” blitz, has intensified price competition. These retailers are using data analytics to predict consumer demand and pre‑empt local competitors with targeted promotions.

How Retailers Are Responding

The tightening margin environment has forced retailers to innovate across the board. Here are some of the most notable tactics:

• Dynamic Pricing and Real‑Time Analytics
  Target has rolled out an AI‑driven pricing engine that adjusts online and in‑store prices within 24 hours based on inventory levels and competitor pricing. “We’re seeing a 12 percent reduction in markdowns in the first month after implementing the system,” said Target’s senior VP of analytics, Jordan Lee.

• Experiential Partnerships
  Macy’s has launched “Shop & Celebrate,” a program that partners with local restaurants and event venues to offer gift card bundles. By bundling a gift with a dining experience, Macy’s is hoping to capture the growing experiential‑gifting market.

• Sustainability as a Differentiator
  Costco has introduced a line of “Zero‑Waste” gift sets, leveraging its bulk‑purchase model to provide eco‑friendly options at a discount. “Sustainability is a purchase driver for over 55 percent of our members,” noted Costco’s director of member services, Angela Ruiz.

• Omni‑Channel Integration
  Kroger’s “Buy Online, Pickup in Store” (BOPIS) platform now includes a holiday gift‑wrapping option that is available for delivery the same day. “We’re bridging the gap between online convenience and in‑store personalization,” said Kroger’s COO, David Kim.

Industry Perspectives

The NRF’s 2025 Holiday Outlook highlights a 10 percent increase in last‑minute shoppers, a trend that has been accelerated by the convenience of same‑day delivery. However, the same outlook warns that “the cost‑cutting culture has forced many small retailers to close their seasonal pop‑ups.” As a result, the concentration of holiday sales in a few large players is expected to rise, further compressing the margin space for independent merchants.

“Small businesses are under threat unless they pivot quickly,” said Dr. Priya Patel, a retail strategist at the University of Washington. “This could mean a shift toward niche, artisanal products or subscription‑based models that lock in revenue before the season.”

Looking Ahead

While the projected dip in holiday spending is modest, it signals a broader shift in consumer behavior and market structure. Retailers that can adapt by integrating data‑driven pricing, experiential offerings, and sustainable practices may not only weather the downturn but also emerge stronger as the competition intensifies.

As 2025’s holiday season approaches, the industry’s pulse will be dictated by how quickly retailers can respond to a cost‑conscious, experience‑seeking, and sustainability‑aware consumer base. For the time being, the retail calendar may feel a little thinner, but the race to capture the next dollar is only getting faster.

For more on holiday retail trends, see the National Retail Federation’s full 2025 Holiday Outlook report (link), the U.S. Census Bureau’s retail sales data (link), and the Consumer Insights Group’s latest consumer survey (link).