Holiday shopping in the USA and Canada is showing early shifts in spending patterns that promise a transformative season for retailers, one defined by surging e-commerce, inflation-driven behaviors, and the outsized influence of social media, according to the Mastercard Economics Institute (MEI) 2025 holiday forecast. While inflation remains a key contributor to headline retail growth, consumers’ changing preferences and retailers’ evolving strategies are shaping a much more nuanced holiday landscape.
- E-Commerce Surge Outpaces In-Store Growth
- Total Retail Expansion and the Impact of Tariffs
- Gift Cards Rise as Shoppers Navigate Inflation
- Health and Wellness: Tech-Driven Gifting Booms
- Experiential Gifting and Canadian Shoppers
- Gen Z and Social Media: The Viral Fashion Effect
- Looking Ahead: Retail’s New Reality
E-Commerce Surge Outpaces In-Store Growth
E-commerce is again set to outdistance traditional brick-and-mortar shopping this season. The MEI projects online holiday sales in the U.S. to grow 7.9% year over year, compared to just 2.3% for physical retail stores. Similar trends are expected north of the border, with projected online retail growth in Canada at 5.3% versus 2.5% in-store. While inflation is a significant driver of these increases, potentially more so than actual sales volume, shoppers are seeking digital convenience, choice, and value, amplifying the ongoing shift to online-first holiday shopping.
Total Retail Expansion and the Impact of Tariffs
Across all channels, total U.S. retail sales (excluding autos) are expected to rise 3.6% from November 1 to December 24, 2025. Canadian retail sales are on track for 2.8% year-over-year growth. One wild card is tariffs—retailers face difficult choices about absorbing cost increases or passing them onto consumers, creating pricing uncertainty heading into the peak shopping period.
Gift Cards Rise as Shoppers Navigate Inflation
With prices climbing, many shoppers are expected to gravitate toward gift cards—offering both flexibility and a way to manage rising costs for loved ones. MEI forecasts an above-normal use of gift cards this season, with as much as a third of annual gift card spending happening in December and January. Bookstores, toy stores, and health, beauty, and medical supply retailers see even higher seasonal swings, with up to 38% of category gift card spending clustered in the holiday and immediate post-holiday months.
This trend signals that some of the monetary impact of the holidays will spill over into 2026 as recipients use their cards, further shaping retail cash flow and inventory planning for the new year.
Health and Wellness: Tech-Driven Gifting Booms
The hottest gifting categories are increasingly powered by technology and wellness. Spending on new fitness brands (think AI-powered gym equipment, personalized workout mirrors, and smart health trackers) soared 30% year over year from 2023 to 2024, outpacing conventional fitness club spending (up just 5%). Holiday sales for these health and wellness tech brands have outperformed the rest of the year, rising 4.5 percentage points from 2018 to 2024.
Experiential Gifting and Canadian Shoppers
Canadian consumers are increasingly prioritizing experience-based gifts—travel, dining, and leisure—over physical products. The shift is attributed to rising goods prices, which have made experiences seem more valuable and emotionally rewarding. Businesses in hospitality and entertainment are poised to capture a rising share of holiday budgets, while traditional retailers may need to add experiential elements or new value propositions to keep pace.
Gen Z and Social Media: The Viral Fashion Effect
Social media continues to be a powerful driver of youth spending—especially among Gen Z. In the past six months, spending on viral “teen and tween” fashion brands surged 25% year over year in the U.S., compared to roughly 5% across all apparel.
This trend intensifies during holiday periods and clusters most strongly in large college towns, with Mastercard’s data pointing to places like Ohio University and Indiana University leading viral fashion adoption.
Gen Z shoppers, influenced by relatable online personalities and real-time trends, are expected to shape not just which products sell, but the very channels and moments when retailers connect with young consumers.
Looking Ahead: Retail’s New Reality
With digital outpacing in-store sales, experiential and tech-driven categories booming, and social media fueling viral trends, the 2025 holiday season will be defined by agility and experimentation. Retailers who pivot quickly, offering digitally discoverable, value-driven, and influencer-bolstered gifts, stand to win share in a time of rapid industry transformation.
