Consumers are looking to curb their holiday spending for the first time since 2020, influenced by economic pressures. Retailers, however, are looking to increase sales by deploying AI strategies to reshape how far they can push transactions in their favor. This unique intersection will play out as retailers battle to reshape consumer behaviors and garner their share of transactions while consumers battle to protect their pocketbooks.

Projections for U.S. holiday sales are slowing compared to recent years. Deloitte is predicting 2.9-3.4% increase (compared to 4.2% last year), while eMarketer predicts a slower growth of 1.2% over last year. This translates to $1.36 trillion to $1.62 trillion range.

PwC, however, is projecting a 5% decline, with average spend per person dropping to $1,552 per person. Within that figure, gift spending is expected to drop by 11%, with 84% of consumers trying to cut back on how much they spend over the next several months due to rising prices.

And so, with these highly debated predictions, what will draw consumer attention? Value. Value-driven shopping will be a key theme this holiday season, with consumers searching for affordable options and discounts. ​According to a recent PwC survey, 78% are seeking less expensive alternatives, and as they wait for pricing cuts, searches for terms like “discount” and “coupon code” will continue to climb. And in attempt to stick to their budgets, gift cards are in the plans for many with 52% of respondents saying they plan to use gift cards for friends and 47% to family members.

As consumers hunt for value, technology will be activated to help them shop smarter. AI is definitely on the minds of consumers, looking for daily deals, ways to stretch budgets and find the perfect gift and the lowest price; digital innovation will be a big part of how they create solutions for their shopping lists (and pocketbooks).

Given the rapid increase in tech-driven shopping behavior, AI agents are expected to influence 21% of holiday orders — reflecting a 39% increase in those who have used it previously. This significant shift is driven by retailers integrating AI into various aspects of shopping, making product discovery and decision-making more efficient and engaging.

With growing adoption, shoppers using AI tools spend more time at their online destination and show higher engagement than those from traditional channels, suggesting better product guidance and education. Consumers use generative AI mainly for research (55%), product recommendations (47%), deal finding (43%), and inspiration for unique gifts (35%). Despite benefits, only 43% trust AI chatbot information, and 40% have abandoned purchases due to inaccurate AI recommendations or poor chatbot experiences, highlighting ongoing concerns about reliability and data privacy.

While AI will likely outperform other channels in digital conversion and transaction growth, physical stores will continue to dominate the retail sales environment. Offline retail will account for over 75% of transactions, and while it continues to erode slowly, its solid hold on consumers is key to year-end success. In-store experiences will need to evolve. Integrated pricing strategies will need to be offered and honored. And discovery opportunities will need to exist both online and in-store.

Retail therapy continues to be a holiday ritual, and the experience of holiday shopping — making lists, finding inspiration, hunting for the perfect gift, seeking out the best deal – will happen like clockwork. Retailers and consumers alike will make the most of those five critical days between Thanksgiving and Cyber Monday and we will be watching closely to see how well retailers and AI agents expose the consumer pocketbook, which retailers delivered the best value, and who wins in the end — consumers or retailers.