The National Retail Federation (NRF) is projecting that holiday retail sales will top $1 trillion this year for the first time.

Sales are forecast to be 3.7-4.2% higher than last year, which is comparable to 2024’s gain of 4.3%. Other projections also call for significantly higher sales totals, though somewhat lower than the pace of increases that were typical prior to the pandemic.

NRF surveys indicate that consumers plan to spend $890.49 per person on average this year on holiday gifts, food, decorations and other seasonal items. Although part of the increase is the result of inflation, it’s still notable that the total is the second highest in the 23 years the survey has been conducted.

While consumers are still spending, they are somewhat concerned over the continuing uncertainty. They expect higher sales prices, and many anticipate that the economy will weaken next year. The federal government shutdown has also played a role, with delays in federal spending also reducing overall demand.

As a result of consumer anxiety, there is a greater emphasis on specials, less pricey brands and other mechanisms to save. Retailers are facing a customer base that is grappling with cost escalation in other products, and many are financially stretched, cautious and price conscious. Younger generations have been particularly affected and are expected to spend less than somewhat older consumers.

Shopping patterns continue to evolve as well. Ecommerce is growing, but the pace is not as rapid as it was a few years ago. People are returning to physical retail stores in larger numbers, drawn by the experience, ability for hands-on selection and return policies.

Hybrid shopping is also gaining ground, with research and reviews online, but buying (or at least picking up) in a store. Shoppers (particularly younger ones) are using more social media, influencers, and AI tools in the decision process. Simultaneously, retailers are using AI in evaluating and determining pricing patterns.

Although hiring forecasts by the NRF project 265,000-365,000 roles for the season (which is well below the 442,000 that occurred last year), 2025 appears relatively healthy overall. Retailers that offer both high value and the ability to accommodate the flexibility consumers demand are likely to outperform others.

The holiday season is undoubtedly crucial to the retail industry, typically comprising almost 20% of annual sales. This year has been particularly challenging, as retailers have been navigating tariffs, inflation and lagging consumer confidence.

Shoppers are understandably cautious, dragged down by inflation, tariff fears and lingering uncertainty. A major escalation in any of these patterns could disrupt overall spending. While there are real risks, resilience appears to be sufficiently strong to support a solid, if not spectacular, holiday shopping season. Stay safe.

Dr. Ray Perryman, president and CEO, has 40-plus years of experience in developing systems, analyzing complex problems and communicating effectively.