With the 2024 holiday season wrapped up, it’s time to take a closer look at the numbers and understand what drove this year’s better-than-expected consumer spending.
Mastercard SpendingPulse, which tracks all payment methods, including cash and debit cards, reported a 3.8 percent increase in holiday sales (excluding automotive) from November 1 to December 24, surpassing earlier expectations of 3.2 percent growth. Notably, the final five days of the season captured a significant 10 percent of total spending as consumers took advantage of promotions from the November and Black Friday shopping period.
Further supporting this strong performance, Adobe ’s January 7th report revealed that U.S. retail sales climbed to $241.4 billion from November 1 to December 31, representing an 8.7 percent increase over the previous year.
Why did this happen? Let’s dive into the possible key drivers behind these impressive results.
Resilience in Consumer Confidence
Despite lingering concerns about inflation and the potential for economic slowdowns, consumer confidence remained strong throughout the 2024 holiday season. Job creation has slowed, but layoffs remain low, and the number of job openings continues to slightly exceed the number of unemployed individuals, providing stability in the labor market. Moreover, real wage growth has continued its positive trend, with nominal wage growth still surpassing pre-COVID levels and outpacing the current inflation rate, which has also moderated.
These factors gave holiday shoppers the confidence to spend, especially on discretionary items like electronics, clothing, and experiences. Additionally, two rate cuts by the Federal Reserve in November and December provided consumers with further financial security, encouraging them to shop with less hesitation.
Digital-First Shopping Boom
E-commerce had already been growing year-over-year, but it saw a significant uptick in the 2024 holiday season—online retail sales went up 6.7 percent (RETAILDIVE).
With the holiday season being shorter in 2024, shoppers turned to digital channels even more, taking advantage of the convenience of online shopping, curbside pickup, and fast delivery options. Key promotional events like Black Friday and Cyber Monday also saw substantial online activity. Retailers who embraced a digital-first approach were able to capture a larger share of the market, mitigating any challenges from slower in-store traffic.
While the overall trend of e-commerce growth is nationwide, RETAILDIVE noted certain cities that are embracing digital shopping in a particularly big way. Tampa and Phoenix, for example, led the charge with impressive double-digit growth—10.6 percent and 10 percent, respectively. Close behind them were Minneapolis (8.9 percent), Dallas (8.4 percent), Charlotte (7.9 percent), Orlando (7.8 percent), and Houston (7.6 percent). Dallas and Houston are also among the country’s top five largest urban areas, highlighting a shift toward online shopping in key U.S. urban markets.
Deep Discounts and Strategic Promotions
Retailers became even more strategic with their pricing and promotional strategies, offering deep discounts that encouraged earlier and more frequent shopping. In response to the shorter shopping season, many brands began offering deep discounts earlier than usual, spreading promotions throughout the holiday period rather than concentrating them around Black Friday. This extended discount period allowed consumers to shop at their own pace, alleviating the pressure of last-minute holiday spending.
The competition between major retailers and the rise of “Buy Now, Pay Later” (BNPL) services also encouraged higher spending, allowing consumers to purchase higher-priced items with less immediate financial strain. This season, the use of BNPL reached a record high, driving $18.2 billion in online spending. This marks a 9.6 percent year-over-year increase, contributing $1.6 billion more than the previous season (Adobe).
AI Applications in Retail
AI undeniably played a key role during the 2024 holiday shopping season, taking the retail experience to new heights and driving impressive sales.
Using data from browsing history, past purchases, and shopping behavior, AI helped retailers personalize product recommendations, making it easier for shoppers to discover exactly what they want—leading to more purchases. From AI-powered recommendation engines to customized email marketing, these tailored experiences not only boosted conversions but also encouraged repeat business.
In addition, AI’s dynamic pricing capabilities allowed retailers to adjust prices in real-time based on demand, competition, and inventory levels. This flexibility attracted price-sensitive shoppers, ensuring competitive pricing throughout the season. Furthermore, AI analyzed consumer behavior to optimize promotional strategies, ensuring discounts and sales were launched at the perfect moments for maximum impact.
Holiday retail sales exceeded expectations in 2024 thanks to a combination of factors, and it’s clear that these same factors will likely continue to shape future holiday shopping seasons.
