This Holiday Shopping Season, Consumers Are Extra Divided as Retailers Push Sales

If you noticed holiday decor going up and “All I Want for Christmas Is You” playing in stores well before Halloween this year, that was no coincidence.

Retailers are pushing holiday sales — including Black Friday deals — earlier than ever before, largely due to economic uncertainty caused by tariffs, inflation and changing consumer spending habits. The uncertainty, too, is leading to a certain bifurcation in retail.

“I’m shocked every year at how much earlier sales come,” said Shaun Pappas, an attorney at Midtown-based law firm Starr Associates, which focuses on retail. “But this year seems like it’s as early as it’s been. At some point we’ll be shopping for Christmas in August.”

Indeed, stores like Best Buy, Target, Walmart and Kohl’s rolled out early-season promotions as soon as late September this year (and Black Friday discounts way before the post-Thanksgiving shopping stampede). It’s crazy, but it also seems to be working — early sales have already driven a decent amount of foot traffic to stores and malls.

Retail foot traffic in U.S. downtowns rose 0.8 percent month-over-month in October, while shopping malls saw an increase in foot traffic of 2.4 percent, offering retailers some “holiday hope,” according to a recent report from MRI Software.

“Promotionality is going to be the key driver for consumers this holiday season,” said Elizabeth Lafontaine, a retail analyst at foot traffic tracker Placer.ai. “That’s really going to be when consumers want to come out. … Consumers are really trying to be keyed and glued into when those promotions are going to be taking place to try to make sure that they’re driving as much value as possible.”

Plus, the earlier retailers start pushing holiday sales, the more money they could make. In fact, the National Retail Federation predicted retail sales in November and December will grow between 3.7 percent and 4.2 percent from 2024, translating to total spending between $1.01 trillion and $1.02 trillion. That’s compared to last year’s total spending of $976.1 billion.

So, whether you’re already stuffing your Christmas stocking with gifts or you’re taking after the Grinch this holiday season, it seems like there’s no stopping early holiday sales.

But we also can’t forget why those sales are happening in the first place. The threat of higher costs and delayed shipments caused by ever-changing tariffs are all but forcing small retailers and low-income consumers to save money and prioritize big-box sales and early discounts.

Meanwhile, a lot of higher-income consumers are taking a different approach amid all the hubbub — they’re essentially kicking back and relaxing, as those financial burdens don’t really fall on their shoulders.

“Holiday sales will likely surpass last year’s by a low single-digit margin, but capturing that growth in today’s highly bifurcated consumer environment will be more challenging than ever,” said Brandon Svec, national director of U.S. retail analytics for CoStar.

In that lies possibly the biggest obstacle facing today’s retailers — what Placer.ai calls a “two-tier economy” among consumers.

According to a new report from Placer.ai, affluent shoppers are driving profit growth in the luxury sector, while budget-conscious shoppers seek deals at value-oriented stores. In other words, the bifurcation between the two classes of consumers will grow even starker this year as low-income shoppers are forced to balance “needs versus wants” amid unsteady financial conditions.

“The two-tier economy essentially references a phenomenon that we started to see emerging in early 2025 that has really kind of exploded over the past few months, and it’s really similar to what we’ve called the bifurcation of consumers,” said Lafontaine, an author of the report.

“We see [affluent consumers] continue to have high levels of discretionary and disposable income and high levels of price elasticity, meaning that even as prices are going up, we’re not necessarily seeing them change their consumption habits,” Lafontaine added. “On the opposite end of the spectrum, what we’re seeing with lower- and middle-income household shoppers is that they are becoming much more financially constrained as the year has gone on, leading them to start to change some of their retail behaviors and look for high levels of value orientation.”

That consumer divide is clear in store performance, as both luxury and off-price apparel retailers are currently outpacing overall retail.

High-end spots like luxury department stores, specialty grocery stores and fine-dining restaurants are experiencing “steady traffic” this year compared to last year, Placer.ai’s report said. Luxury department stores saw a year-over-year increase in visits of 3.8 percent during the second quarter of 2025, while speciality grocery stores saw an 8.1 percent increase and upscale restaurants saw a 4 percent increase.

Meanwhile, off-price retailers and dollar stores are also seeing large increases in visits, at 6.6 percent and 3.7 percent, respectively, according to the report. Value-driven grocery chain Aldi has even seen total visits rise from 4.3 percent in 2022 to 5.7 percent in 2025 to-date, Placer.ai said.

Plus, a retail report from Newmark found that secondhand and consignment clothing stores saw a 10.7 percent increase in visits year-over-year during the third quarter, largely due to younger shoppers “trading down” and turning to more affordable resale and consignment options.

It’s all a result of money-conscious consumers plagued by financial burdens — such as skyrocketing credit card debt and worsening home affordability — increasingly looking for the lowest prices amid tariff-related cost increases.

“Consumers are entering the season both price-sensitive and well-informed, and retailers must navigate an earlier promotional calendar while driving sales and protecting already razor-thin margins,” Svec said. “That’s a tough balancing act and one that demands a highly strategic approach to markdowns.”

For now, though, retailers seem to be doing fairly well, especially if demand for space in New York City is any indication. Popular Manhattan shopping neighborhoods such as SoHo and the Upper East Side have continued to see steady leasing, with SoHo seeing a total of 45,022 square feet leased during the third quarter of 2025 and the Upper East Side seeing the most deals completed with 11 transactions, according to a report from CBRE.

“New York City’s retail environment has been extremely vibrant, and we’ve seen a lot of lease-up,” said Jackie Totolo, a senior managing director at Newmark. “There’s demand from every sector. Prices have been driven up so high where it becomes unaffordable, but I think that we’ve seen stabilization, which has created tremendous more demand. … I think that good areas keep getting better, and we continue to see that grow.”

In terms of retail tenants signing those leases, food and beverage tenants have dominated Manhattan’s retail market lately in both lease volume and number of deals, according to CBRE’s report. The category saw more than 121,000 square feet leased across 35 transactions during the third quarter, with the largest being bakery Bread & Butter’s deal for 12,000 square feet at 525 Lexington Avenue.

But one of the largest recent retail leases in the city came just after that third quarter, when Chelsea Piers Management, which manages the sprawling Chelsea Piers Sports & Entertainment Complex, signed a lease for 48,833 square feet at GFP Real Estate’s 200 Varick Street in Hudson Square in early October.

“Experiential types of retail have also been big, like membership clubs or gyms,” Pappas said. “But, just in general, it seems like brick-and-mortar is coming back to the point where even online stores want a physical footprint. During COVID, a lot of those stores shut down, and there was a lot of vacancy. But if you look down Madison Avenue and at the Upper East Side, a lot of those vacancies are being filled.”

Still, the growing bifurcation of consumers is also evident in the city’s recent retail leasing, in that both luxury brands and off-price brands are taking chunks of space off the market.

For example, high-end health and wellness brand Life Time took 52,000 square feet at 10 Bryant Park, while Swiss luxury watchmaker Rolex is opening a new store in Williamsburg, Brooklyn. On the other end, Mott Haven Discount signed a deal for roughly 10,000 square feet for its first Bronx location, while dollar stores — specifically Dollar Tree — are doing better than ever in terms of sales.

While the gap between consumers deepens, it remains to be seen which end consumers in the middle of the market — i.e., in New York, those households that make between $56,385 and $168,156 annually as of this year — will shop on. Do they splurge and go for luxury brands, or guard the piggy bank and stick to deals and discounts?

“It’s definitely macroeconomics driving all of this,” Totolo said. “We’ve seen prices increase, and consumers are sensitive to that. What we will see in the holiday season — which has been pulled forward — is steeper discounts driving sales from a gross perspective. … The aspirational category may not be getting hit because the top is only shopping at the top, and the bottom is shopping at the lower ends.”

So the question remains: How can retailers appeal to all types of consumers, no matter their income level? There’s a lot of possible answers, but according to Svec, retailers need to create a sense of urgency to get all kinds of shoppers through their doors.

“While the value shopper is focused on price and timing, the affluent consumer continues to prioritize experience and quality,” Svec said. “This widening divide makes it difficult to appeal to both ends of the spectrum, but retailers that can create a sense of buying urgency, while staying relevant to both audiences, will be the biggest winners of this holiday season.”

Early holiday sales — especially ones that have an expiration — are a good way to create that sense of urgency, but they also pose the risk of overwhelming customers, according to David Wachs, founder of handwritten notes service Handwrytten.

“We saw holiday jingles come before October,” Wachs said. “It’s frightening. We’re all going to be so burnt out on ‘Have a Holly Jolly Christmas.’ I think if you push sales super early, you’re going to be drowned out by the cacophony of everybody else pushing sales super early.”

Wachs’s answer on how retailers can appeal to all consumers this year is simple: Get creative.

“Brands really need to get very creative to find ways to appeal to the consumer on an emotional level, and throwing more against the wall is not an emotional connection,” Wachs said. “You have to do multiple things to get in front of that consumer, and you have to pivot right when everybody’s pivoting left.”

One of the ways to do that is by sending handwritten notes to customers to show appreciation and loyalty, which Wachs’s Handwrytten company helps to provide.

Handwrytten works with a variety of companies, ranging from large fashion houses to department store chains to dog food brands. Through its personalized handwritten notes, Wachs said his company has generated a 17 times greater response rate from customers compared to emails or print advertisements.

And, while creating a sense of urgency and getting creative with branding certainly works, Lafontaine said she thinks the best way for retailers to appeal to all customers this holiday season is to provide them with a sense of value or experience.

“It’s not just about having the cheapest price or having the deepest discounts. It’s also about providing value to consumers,” Lafontaine said. “Sometimes that’s through convenience and expedited delivery times, or a great in-store experience or great customer service. There’s a lot of different ways that retailers can continue to provide value to consumers that aren’t just those price reductions. Those elements are also very important to consumers when they’re thinking about what retailers they are going to visit during the holiday season.”

Offering something unique to a consumer that they cannot get elsewhere — whether that’s a limited time offer, a unique product or a great collaboration — are also ways that “retailers can really win” because they’re creating a competitive advantage, Lafontaine added.

But, again, we still need to remember the reason why retailers are pushing all these strategies. The Trump administration’s tariffs are threatening to dramatically raise wholesale costs for retailers, as well as disrupt supply chains and shipping routes.

Currently, Canada is facing a 35 percent tariff on goods exported to the U.S., while Mexico is facing a 30 percent tax. China, meanwhile, has been threatened with a more than 100 percent tariff, though Trump has since lowered it to the baseline 10 percent tax. It appears those stiffer tariffs are on hold through Halloween next year.

All told, as of late October, tariffs were found to have raised overall retail prices by about 4.9 percent relative to the pre-tariff trend, according to nonprofit research think tank Tax Foundation.

The price jacks and import disruptions are certainly affecting luxury retailers in the U.S., who largely source their products from overseas. For example, Rolex watches are exclusively made in Switzerland, which faces a 15 percent tariff on goods exported to the U.S. Meanwhile, the vast majority of Hermès products — especially leather goods like purses — are made in France, which also faces a 15 percent tax.

In response to the tariffs, a lot of retailers are pulling their inventory forward during early holiday sales, with the hopes of making enough profit to source their products again. But a smooth process isn’t always guaranteed.

“There’s a lot of ripple effects with tariffs, and it all depends on how you manufacture your goods and what your ultimate margins are,” Totolo said. “I think ultimately, what it has made retailers do is be over-prepared. … I think everyone is really doing a tremendous amount of due diligence to see how they can make it profitable and how it doesn’t have to end up on the consumer.”

Despite their best efforts, retailers — and shipping companies alike — are already facing complications from the tariffs.

Shipping brand ShipStation, which is owned and operated by shipping software solutions company Auctane, helps thousands of e-commerce businesses — including UPS, FedEx, Amazon, Etsy and eBay — manage and streamline shipping and fulfillment processes. But it’s run into issues recently.

“The big complication caused by tariffs is it makes shipping harder, as well as all of the declarations and all of the codes you have to put in and the paperwork you have to file with importing and exporting now,” said Travis Rimel, vice president of product at ShipStation.

“Doing any sort of import or export with shipping is more complicated, and all of the requirements are being adhered to far more stringently, so that just makes the shipping process harder and more time-consuming,” Rimel added. “So that’s one big area of concern and anxiety, just the complexities of international shipping.”

In addition, in response to heightened demand from consumers, many carriers are applying surcharges and raising their prices to keep promises such as faster delivery. What that means for companies like ShipStation’s clients, however, is labor increases, fuel surcharges and carriers covering the costs.

“What we see with our merchants and our small businesses, is they may absorb costs to their supply chain, but then look to cut them elsewhere,” Rimel said. “That’s really the formula we see for those who can weather the storm, so to speak, and that means they are looking to maybe cut some of their marketing spends. They’re looking to get leaner in other places to get through this period of uncertainty and uncontrollable costs.”

Some of ShipStation’s businesses have fared better than others in the face of tariffs. Just by nature of scale and size, larger e-commerce businesses such as Amazon have been more resilient than smaller merchants, Rimel said. It also really comes down to supply chains and where these companies are sourcing their products.

“Smaller businesses and customers are feeling it more, and it’s all to do with margins and the ability to pivot supply chains,” he said. “The other factor I would throw in there is not having the working capital.

“What we see is the businesses that are able to change and pivot and have some form of capital do well, but there’s going to be other places where it just hurts,” Rimel added. “And I think we’re going to see consumers vote with their wallets and not spend.”

The on-again, off-again nature of Trump’s tariffs are certainly causing a lot of uncertainty in the U.S. retail industry, and it seems like the storybook won’t be closed anytime soon

In the meantime, it remains to be seen how consumers — on both ends of the financial spectrum — will spend their money during the busiest shopping season of the year. If it’s up to Wachs, he bets most shoppers will “store their nuts for winter.” 

Isabelle Durso can be reached at idurso@commercialobserver.com.