Despite a background of geopolitical strife and swiftly shifting tariffs, consumer spending stayed strong in the 2025 holiday season, but that bottom-line total obscured some fundamental shifts in American retail patterns, according to speakers on a panel at the Retail Industry Leaders Association (RILA) show this week.
An overall trend that has continued from past years is the dominance of the country’s top three mega-retailers, which gobble up the lion’s share of U.S. retail consumption growth, said Simeon Gutman, Managing Director, Retail Equity Analyst, Morgan Stanley.
While total U.S. consumer spending is huge—measured at about $5 trillion excluding automobiles and gasoline—most of it is already committed to certain channels and categories, so smaller retailers can typically capture their gains only in the annual incremental growth of that total number. And that increment can be frustratingly small after the mega-retailers have taken their share, he said.
However, a newer trend putting pressure on retail patterns is the growing split between high-end, discretionary spending and low-end daily shopping, panelist Steve Begley, Senior Partner at McKinsey & Company, said. Over the 2025 winter peak, that widening gap—often referred to as a “K-shaped” spending curve—produced strong spending for high-end goods (like golf clubs or beauty & fashion items) and low-end goods (like packaged chicken breasts) but produced sinking spending for mid-range items like consumer electronics.
To cope with those changes, many companies are increasing their spending on artificial intelligence (AI) to improve forecasts and simulations. That approach holds great potential, but very few retailers have yet seen concrete results. In describing retailers’ approach to using AI, the panelists used phrases like “moving through a dark room,” “taking baby steps,” and “keeping the training wheels on.”
