The most wonderful time of the year? Holiday season a mixed bag for 2026

KALAMAZOO, Mich.—The National Retail Federation forecasts that holiday retail sales will surpass $1 trillion for the first time during the 2026 holiday shopping season. But underneath that headline are many factors that add up to a holiday shopping season that is more complex. 

Driving the all-time high in consumer spending is the cost of goods rather than the volume of items purchased. Inflation, gas prices and tariffs are all contributing to a bottom line that represents fewer items at higher price points. Yet shoppers remain resilient when it comes to holiday spending, prioritizing value and comparing costs more than ever before. And companies are investing in both promoting their products as well as giving back this holiday season.

Engaging AI to do the homework but not the buying

Dr. Eric Harvey, assistant professor of marketing

This holiday season, AI has moved from novelty to genuine utility, but mainly as a research assistant—not yet as a buyer, according to Harvey.

Last year, shoppers asked AI for gift ideas and price comparisons. This year, they are starting the journey there. Adobe expects AI-referred traffic to U.S. retail sites to rise 130% this holiday season, and Visa finds 54% of Americans have already used AI for at least one shopping task, up from 47% last year. The work is practical: comparing prices, checking availability, finding discounts and suggesting gifts. 

“Gift discovery has become conversational as shoppers describe the person, the occasion and the budget to AI,” says Harvey. “This lets AI narrow a long list to a few considered options. It’s also opening doors for unfamiliar brands.” 

Forter's survey shows that 43% of survey respondents have discovered or bought from a new retailer because of an AI recommendation, which is significant. “Price tracking is the second big change,” Harvey notes. “AI has become a price watchdog, monitoring items and flagging price drops, with Amazon and Google providing tools that alert shoppers about falling prices or can buy when a target price is hit.”

But the checkout is the current limit for most U.S. shoppers when it comes to AI. Only 23% of Americans trust generative AI to handle a payment on their behalf, and Accenture finds just 8% would let an agent buy independently. 

“Shoppers want AI to do the hunting and the homework, keeping the final choice and the card information for themselves,” says Harvey. “For retailers, the implication is clear that you no longer need to win just the click, you also have to win the recommendation. Accurate product data, verified reviews, transparent pricing and reliable delivery are what an AI agent cites, and what a shopper checks before buying.” 

Forecast chilly but warming for local retailers

Tamara Davis, instructor of management and director of Starting Gate

“For many local retailers in Southwest Michigan that specialize in handcrafted gifts, the holiday season is off to a slow start, but there is considerable optimism for the weeks ahead,” says Davis. “October retail sales were generally disappointing, prompting retailers to be more creative to entice price-conscious consumers through their shop doors.”

Davis spoke to area retailers about how they plan to promote their businesses during this critical season. Paw Paw retailer Whatever Floats Your Boat is kicking off the holiday season while celebrating its second anniversary. The store is open six days a week and features products from 47 local vendors. Shop owner and WMU alumna Beth Taylor, B.S.’89, M.A.’99, says the key to her success is understanding her customers and their price points. The store offers products for every budget, from $1.50 ornaments to $200 custom leather purses. The store’s vendors provide a diverse selection of handmade gifts, home décor, jewelry, specialty foods and holiday items that can’t be found at large retail chains.

To keep shoppers coming back, the store plans to host its annual Hunter's Widow Weekend on Saturday, Nov. 21, a holiday open house featuring vendors who will do a meet and greet with customers. And the store will be doing ongoing collaborative promotions with other Paw Paw retailers, bookstores and restaurants.

WMU graduate Tanya Thompson, B.B.A.’15, MBA’20, founder of The Aroma Labs, reports that sales are currently on pace with 2025 levels. She is relying on influencers from larger markets, including Detroit, South Bend and Indianapolis, who visit the downtown Kalamazoo location to help introduce the shop to new audiences. The business is also using Meta advertising to attract local shoppers and spotlight key product offerings. 

The Aroma Labs will offer a gift-with-purchase promotion throughout the weekend following Thanksgiving, followed by an online Pure Michigan promotional offer later in the holiday season.

“Local store owners are aware that consumers are keeping their budgets in mind and are providing a diverse range of locally made, personalized and experience-focused holiday gifts in an effort to attract shoppers and make the most of the season despite a slower-than-expected start,” says Davis.

Consumers, costs and cutting back: Holiday grocery spending for 2026

Dr. Russell Zwanka, associate professor of marketing and director of the WMU food marketing program

Affordability is the theme of the season when it comes to food, according to Zwanka. “With so much food heading to stores in diesel vehicles and the price of diesel at a historic high, in-store prices are already reflecting increased input costs,” he says. “Even if diesel prices dropped today, most holiday products have already been received in stores at the higher transportation costs.” 

Turkey prices have not skyrocketed from 2025 pricing; however, they went up 44% in 2025, and they're not coming down. Eggs are a bright spot on the grocery list, as prices have plummeted, with flocks rebounding after bird flu drove prices up significantly one year ago. What does this mean for consumers? 

“Cutting back has been happening all year and will continue, which means a continued race to private label brands,” says Zwanka. “Private label has been the story for the last few years. Customers like them and are sticking with them!”

Other trends are impacting food as the centerpiece of the holidays, including GLP-1s. “With record levels of the U.S. population taking GLP-1s, we can expect to feel the impact on food,” says Zwanka. “This doesn't mean sales are decreasing, but consumption is, and the emphasis on protein and fiber will continue.”

Despite all, the holidays are a time for celebration, and Zwanka says that most consumers go into the season with the attitude of "it's the holidays, we're all together, we'll splurge and pay for it in January." By mid-January, shoppers’ attention will shift to health and wellness, with a caveat from Zwanka that Super Bowl parties are a time when calorie and price concerns once again go out the window.

Beyond holiday goodwill: Sustainability as business strategy

Dr. Timothy Palmer, professor of management 

The holidays often provide an opportunity for firms of all sizes to engage in community-based initiatives, from food drives to gift collections to clothing donations for individuals in need. 

“While these programs benefit recipients, they also offer strategic value to the business,” says Palmer. “Community initiatives build esprit de corps among employees while developing leadership, teamwork, communication and project management skills. It’s a win-win: the community benefits and so does the business.”

Critics sometimes suggest these activities are primarily about reputation building. “In my experience, that is rarely what motivates participation,” says Palmer. “Many of these initiatives receive little publicity beyond internal channels. They simply reflect a shared belief that the holiday season is a time for giving. Business is no different.”

That said, while charitable events will undoubtedly persist, Palmer believes firms are increasingly moving beyond traditional philanthropy and charity—what is often associated with corporate social responsibility (CSR). Instead, they are embracing sustainability as a means of simultaneously creating business value and generating positive social impact. “When community engagement is embedded in a firm's sustainability strategy, it is less likely to be viewed as discretionary and more likely to be recognized as a contributor to organizational success,” he says.

One of Palmer's favorite role models in this regard is Indra Nooyi, former CEO of PepsiCo, who famously observed: "CSR is how we spend the money. Sustainability is how we make the money." Palmer notes this as an important distinction. “Both areas can deliver meaningful community benefits, but integrating environmental and social sustainability into business strategy is essential to building organizational resilience and ensuring long-term success.”

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