Retail Dive Trendline on The state of holiday shopping and the consumer

Consumers in 2026 are poised to continue the behavior patterns encountered by retailers all last year: hypervigilant about spending — but willing to spend nevertheless. It’s familiar by now, but not necessarily easy to fathom, especially since even some higher-income consumers are hesitant to open their wallets.

Retailers finished off 2025 surprisingly strong, despite signs of spending weakness and low consumer sentiment. December retail sales rose more than 4% year over year in the segments covered by Retail Dive, wrapping up a holiday period with similar growth. The increases were not just driven by inflation, as volumes in December rose a respectable 1.4%, per GlobalData research.

But the past isn’t necessarily prologue. The headlines about U.S. consumers continue to be downbeat this year, with analysts warning that a cooling labor market and softening wages could undermine spending. Consumer sentiment in January sank to its lowest point in more than 10 years, according to the Conference Board.

“For 2026 I see the consumer being functional but fragile,” said Gregg Katz, Esri’s global business industry solutions lead for real estate. 

Understanding the ‘K-shaped economy’

Consumers are also fractured, in some surprising ways.

Much has been made of the K-shaped economy, where lower-income households struggle with higher prices and a slowing job market while higher-income consumers shrug those challenges off. But that is an overgeneralization, according to recent research from Katie Thomas, who leads the Kearney Consumer Institute.

There are indeed cohorts of wealthy consumers who are thriving no matter the economy or their personal choices, and low-income consumers who struggle to pay for the essentials and are devastated by increases in rent and grocery prices. But geography, expectations and/or lifestyle choices are leading some wealthier households to feel financially stretched, while certain lower-income households that live within their means feel more secure, she found. 

“K economy analytics tend to blend these divergent consumer behaviors together and then spread them like the data equivalent of peanut butter across a series of demographic cohorts, creating an ‘average’ consumer who does not, in fact, actually exist,” Thomas said in emailed comments. “This helps explain why at a time when consumer sentiment is low, spending can appear healthy.”

A more holistic budget

This is why so many consumers across income levels are clipping coupons and trading down to cheaper alternatives, Katz said. Low-price leader Walmart has boosted its market share largely thanks to wealthier households.

Nearly 40% of U.S. consumers say they’re shopping for goods on sale, using coupons or discount codes or cooking at home, according to research from Numerator. A third say they’re spending less overall.

Some are even delaying major milestones like marriage or home buying, Katz said. This is part of an emerging pattern where U.S. consumers are taking a more holistic view of their budgets, according to Meghann Martindale, director of market intelligence for retail at Avison Young.

“So it's not just the goods that I'm buying,” she said. “I'm lumping that in with my spending, because I have to orchestrate my budget a lot tighter. What are the experiences, and what are the subscriptions, and what is the travel, and what is the family’s experiences and Disney World trips and all that.”

Headlines aren’t helping

There is evidence that where there is upheaval in the U.S., retail sales suffer, and 2025 inked its share of disquieting headlines.

Traffic and sales at shopping centers along the northern U.S. border run by Simon Property Group are down because “Canadians are really pissed off” and there’s been “a little bit of sales disruption in certain markets where there were a lot of ICE [border control] activity,” CEO David Simon told analysts. 

Similarly, last year fires in the Los Angeles area and then border patrol activity later in the year hurt traffic and sales in Southern California, according to research from Avison Young. Such events, much like weather events, add to a sense of uncertainty and instability in areas where they’re happening, Martindale said.

“You can't discount the impact that that has on people psychologically — where they feel safe, where they want to shop,” she said. “We always talk about macroeconomic headwinds, rightfully so — the job market, inflation, what's going to happen with the tariffs and rate cuts this year and all of that other stuff. But we have so many more microeconomies now, and microevents — things that are impacting swaths of people around the country.”