Prices are up at the gas pump, grocery bills are raising eyebrows, and Americans are leaning on credit. With gloomy consumer sentiment making headlines, it’s understandable why retailers are bracing for a less cheerful holiday in 2026. But the outlook is brighter than it seems: While consumers say they’re stretched, they’re still spending. Consumption is up, back-to-school was robust, and even the much-discussed debt “crisis” may be less dire than it looks. Taken together, these signs point to a busy holiday season.
Much of the holiday is already ‘baked,’ with inventory and promotions largely set, but there is still time to nail down marketing plans. To capture market share of the growing holiday spend, retailers need to understand shopper motivations and account for how AI is reshaping the way customers engage with them. Over the past two years, AI has gone from an occasional research tool to a critical part of discovery infrastructure, and it is now table stakes for competitive advantage. The latest innovations go even further, with AI platforms now capable of executing online purchases.
We’ll be releasing our full Global Black Friday Report on November 4th. As a prelude to that, this article provides an outlook for the holiday season informed by this year’s consumer spending data, responses from our annual holiday survey, and current retail trends—including how AI shopping is reshaping retail.
Consumer Spending Is Robust Despite Gloomy Sentiment
People are tired of high prices and they’re expressing frustration, but the engine of commerce is hardly idling. Consumer sentiment and actual spending are telling two different stories. The signals are gloomy: the New York Fed’s Center for Microeconomic Data found that 42% of households said in September they were worse off than a year agoi, and the University of Michigan’s monthly survey reported consumer sentiment of 48.1 in September, nearly the lowest reading in the survey's 74-year historyii. Nonetheless, spending keeps climbing. Retail and food services sales were up 6.0% (±0.5 %) in August vs. a year earlieriii,while real GDP grew at a 2.2% annual rate in Q2 2026iv.
The diverging storyline doesn’t stop there. Not only is spending up, but it has also broadened beyond the historical pattern of being led by the wealthiest cohort, with growth now extending into the middle and lower segments as well. According to September data from the Bank of America Institute, total card spending rose 4.5% year-over-year in August (3.7% excluding gas), more than four times the average growth rate of 2025; and although wealthier households led spending growth earlier in the year, lower-income households’ spending growth has picked up over the past few months, edging past the other cohorts. By August, the “K-shape” in card spending had essentially closedv.
What explains the seemingly paradoxical stories? Our view is that consumer sentiment is low because sticker shock arrives in daily doses. Most consumers aren’t reading economic data around inflation and consumption data; rather, they’re reading gas and grocery prices at the very moment they pull out their wallets. Meanwhile, headlines have reinforced the dire mood by framing credit card delinquency as a “crisis” indicator but the picture is actually more nuanced. The 30+ day delinquency rate across all commercial banks is roughly 2.9%vi. That’s well above the stimulus-driven lows of 2020-2022, but far below the 2009 peak of roughly 7% and below pre-financial-crisis norms of 4.5-5%. Zoom out and look at the bigger picture, and delinquencies appear to be normalizing after an outlier period, not spiking into crisis range.
So what’s to come this holiday season? Back-to-school spending and category-level data from our Black Friday Survey show how spend is likely to play out. To prepare, retailers should understand what matters most to their customers, and how AI will have an outsized impact this year and what that means for them.
Back to School Spend Offers an Early Read at the Holiday Season
Back-to-school spend offers a preview of the holiday season: demand is strong, and more than ever, value determines who captures it. The National Retail Federation (NRF) projects combined K-12 and college back-to-school spending will hit a record $146.8 billionvii, up 14.5% from $128.2 billion in 2025. But the dollars are flowing to retailers that deliver real value and communicate it clearly. Target saw wish list creation rise more than 50% and back-to-school page conversation rise nearly 20%, with 95% of school supplies priced at or lower than last yearviii.Walmart says shoppers are responding strongly to its price investment, including 14 core school items priced below 2019 levels, which drove traffic, ticket, and unit volumeix. Not only are mass merchants seeing traction with low prices and discounts; off-price retailers such as Ross Stores saw comparable store sales rise 10% for the quarter (on top of a 2% gain last year), driven by an increase in new customers and higher engagement from existing customersx.
Spend Anticipated by Category
Shopping intentions have grown since last year, with 85% of US consumers planning to shop the Black Friday sales event, a 2% increase vs. last year. Adult clothes and shoes are the top category for every generation, with purchase intent up across all age groups vs. 2025, led by Boomers (+7 pts) and Millennials (+4 pts). This category may be seeing boosts due to the roughly 16 million active GLP-1 users in the US, many of whom are refreshing their wardrobes for a new fit. Consumer and mobile electronics remain the #2 category for nearly every generation, though intent is easing slightly after the post-pandemic replacement cycle: a surge in 2020-21, a lull, a rebound in 2024-25, and now a modest pullbackxi. At the other end, travel continues to draw only a small share of shoppers in every generation, a sign that shoppers are still prioritizing products over experiences this holiday season.
Retail AI Adoption: Evolution Over the Past 2 Years & Why This Year Is Different
AI shopping has moved from experiment to infrastructure. Using AI to shop has steadily increased over the past two years—even after the initial surge from 2024-2025, AI traffic continues to grow month-over-month and year-over-year, with the latest Adobe data showing a +62% YoY increasexii.
This growth in usage has been matched by a parallel evolution in capability. While consumers initially turned to AI for shopping inspiration and research, advancing technology and retailer collaborations with AI platforms have expanded what the technology can do. For example, partnerships with Google and ChatGPT through open product feeds and Google’s Business Agent increasingly improve the customer experience of researching and comparing products and deals; likewise, they boost consumer discovery of new brands. Additionally, AI is now baked directly into Google Search at scale: AI Overviews alone had over 2.5 billion monthly active users, with AI Mode surpassing one billion, as of August 2026xiii. Meta’s latest innovation, Muse, can execute purchases in chat. This rapidly expanding scale signals the outsized impact AI will have this year, and our Black Friday survey results support that read.
What will make this year so different? It’s about even more users and transformative new capabilities. Not only are more consumers than ever planning to use AI to shop this holiday season—56% intend to shop with Gen AI this Black Friday, up from 51% in 2025 and 35% in 2024—but AI is now able to compare retailer products and promotions at a rate and volume never before possible. Consumers are aware of this too, reporting these as their top two anticipated use cases this season (see Exhibit 3). Additionally, those already using AI say it makes shopping better, faster, and more efficient.
Because of this, the competition for the consumer’s wallet has never been higher. As AI increasingly mediates the path to purchase, it’s no longer just about standing out to the consumer, it’s about standing out to the algorithm shaping their choices. Categories that require heavier research, including big-ticket, spec-driven purchases like appliances, electronics, and furniture will feel this shift most acutely.
Additionally, retailers aren’t just competing with their usual top competitors this season. Our latest research shows that in 46% of purchases where AI plays a role, it introduces a brand the consumer wouldn’t otherwise have considered, and 63% of AI-assisted journeys expand the shopper’s range of brand consideration. This is because AI evaluates products differently than humans do: with no inherent brand loyalty, it can outrank based on other qualities such as AI-readability, product reviews, and third-party sentiment.
What Retailers Need To Do Now
With the holiday season coming up quickly, many of the pieces are already in place. But there are still a few moves that retailers can make to improve their odds of winning the consumer wallet: leading with value, marketing to both humans and agents, and keeping physical stores relevant.
1. Lead With Value and Demonstrate It Clearly
Leading with value will be what separates winners this season. Value has consistently proven to be a stronger driver of purchase than affordability: nearly 70% of consumers say they won’t buy a product, even if they can afford it, if it doesn’t feel like strong value. Price gets a product into consideration, but value closes the sale, and value means more than a low price tag. It’s the combination of product quality and price. The relative importance of each part of that combination depends on the product category.
The power of value depends on communicating it clearly. According to our 2026 survey, not all discounts land the same way with shoppers, even when the math works out similarly. Steep discounts on select items, free shipping, and simple store-wide percentage-off deals all remain strong performers—but a smaller, no-strings-attached offer can actually feel better to a customer than a deep discount buried under a list of exclusions. Retailers should prioritize offers that are simple and easy to trust over technically deeper but more complicated ones, since clarity is often what actually drives the sale.
2. Market to Both Human Shoppers and AI Platforms
Winning this holiday season means marketing to two audiences: human shoppers and the AI assistants increasingly researching and recommending on their behalf. AI agents behave quite differently in that they show much less brand loyalty and compare deals much more quickly, relying on structured, machine-readable data rather than persuasive copy. Complete, readable product data is the baseline, since incomplete or inaccessible listings are ranked low or never surface at all. Agents also favor sites with rich educational content (guides, specs, how-to material), so retailers should build visible category expertise. It’s helpful to organize content around holiday occasions like gifting and upgrading, because it helps that content appear earlier in discovery-led journeys. But being listed is only the starting point: because agents re-evaluate price and availability constantly, competitiveness depends on an always-on product and content feed, not a single campaign.
Retailers also need to look beyond their own channels. AI engines draw on third-party sources, including reviews, news, and social media when deciding what to recommend and trust. This matters even more during the holidays as deal-focused content proliferates. A competitor with stronger reviews or third-party presence can win the recommendation—even with a weaker offer—so a strong owned-data foundation is not enough.
3. Keep Physical Stores Relevant
Even as AI reshapes how shoppers discover and research products, it can’t put a product in their hands. Stores let customers see, try, and take home a product the same day. For example, Apple lets shoppers test devices side by side, and Sephora lets them sample products before they commit. Retailers that lean into this advantage give customers a clear reason to visit, and knowledgeable associates help shoppers choose on the spot.
Stores also create community and exclusivity that online channels struggle to match. Doorbusters, in-store-only promotions, and early-access events make shopping an occasion, drawing customers in for the experience as well as the deal. Paired with brand moments like immersive displays and pop-up activations, stores become destinations worth the trip.
Conclusion
While gloomy consumer sentiment and robust spending are telling two different stories, one thing is clear: consumers are spending, and we are set for a robust holiday season. To win this year, its imperative that retailers focus on value, engage with AI-powered search, and ensure their teams are ready to deliver a phenomenal in-store experience. For a deeper look at the retail insights that can help retailers win this holiday season, stay tuned for our full Global Black Friday Report to be released November 4th.
