Higher-Income Households
+2.6%
Lower-Income Households
+0.6%
Spending Gap
2.0
Percentage points (widest in 10 years)
Wage Growth Gap
2.6
Percentage points (4.0% vs 1.4%)
Searching for Deals
89%
Of holiday shoppers (Deloitte)
Trading Down on Brands
77%
Of holiday shoppers (Deloitte)
Making DIY Gifts
49%
Of holiday shoppers (Deloitte)
Mobile Share
56.4%
Of online orders (first time over 50%)
The first quarter-trillion-dollar holiday e-commerce season is officially in the books. Adobe Analytics confirmed January 7 that online spending hit $257.8 billion from November through December, up 6.8% year-over-year. And yet: the Conference Board Consumer Confidence Index just posted its fifth consecutive monthly decline, dropping to 89.1 in December. The University of Michigan Sentiment reading sits at 52.9, nearly 30% below year-ago levels. The Expectations Index has now been flashing recession warning signals for 11 straight months.
Something doesn't add up. Or rather, it adds up perfectly once you look at three structural shifts happening underneath the headline numbers: a K-shaped consumer economy that's now quantified, an AI execution gap that's widening, and a labor market transforming in real time. This week's data makes the case that 2026 will reward retailers who execute on proven strategies rather than those still running pilots.
ECONOMIC INDICATORS:
Redbook Index: +7.1% YoY (week ending Jan 4) down from 7.6% prior week
Consumer Confidence: 89.1 (December) fifth consecutive decline
Michigan Sentiment: 52.9 (December) 30% below year-ago
CPI: 2.7% YoY headline, 2.6% core (November)
Sources: FRED, Conference Board, University of Michigan, BLS. Note: October data gaps due to 43-day government shutdown; BEA Personal Income & Outlays delayed to Jan 22.
Holiday Records Hide Structural Shifts
The final holiday numbers exceeded forecasts across the board. Adobe Analytics confirmed $257.8 billion in online spending from November 1 through December 31, surpassing their $253.4 billion projection. The National Retail Federation's forecast of the first $1+ trillion total holiday season appears validated by Mastercard SpendingPulse data showing +3.9% year-over-year growth (versus a 3.6% forecast) and Visa reporting +4.2% growth through December 21.
The channel story continues its predictable arc, but with an inflection point. Online grew 7.4% to 7.8% while in-store managed just 2.9%. Physical retail still commands 73% of total holiday transaction volume according to Visa. The more striking finding: mobile crossed 50% of online transactions for the first time, reaching 56.4% for the full season (up from 54.5% in 2024). On Christmas Day alone, mobile captured 66.5% of e-commerce orders.
Category performance revealed clear winners. Electronics led with $59.8 billion in online sales (+8.2% year-over-year), followed by apparel at $49 billion (+7.4%) and furniture at $31.1 billion (+6.6%). Groceries posted the strongest growth rate at +10.2%. Adobe's analysis of demand surges versus October baselines shows video games spiked +415%, hand tools +395%, and refrigerators/freezers +360%.
Buy Now, Pay Later continued its ascent: $20 billion in total BNPL spending this holiday season, up 9.8% year-over-year. Black Friday hit $11.8 billion (+9.1%) and Cyber Monday reached $14.25 billion (+7.1%), the largest single-day e-commerce total in U.S. history.
What this means: Mobile is now the default shopping channel, not the alternative. Site selection criteria should include digital discoverability (how the location appears in mobile search and maps), parking configurations for pickup customers, and back-of-house capacity for fulfillment. The store's role in the customer journey has permanently shifted.
The K-Shaped Split Gets a Number
Last edition we discussed the confidence-spending paradox. This week, Bank of America Institute data puts a precise number on the underlying bifurcation: the widest income-based spending gap in a decade.
November credit and debit card spending data shows higher-income households growing +2.6% year-over-year while lower-income households managed just +0.6%. That gap reflects wage growth differentials of 4.0% versus 1.4%, the widest in 10 years. The aggregate surveys that show pessimism are averaging two fundamentally different economies into one number.
The behavioral data confirms the split. Warehouse clubs, dollar stores, and off-price retailers outperformed throughout the holiday season while mid-market and luxury department stores struggled with traffic. The pattern is consistent: value-oriented formats are gaining share as stretched consumers trade down.
The AlixPartners "Spending, Disrupted" report, surveying 13,115 consumers across nine countries, found global spending pullback widened to -18 percentage points net intent. They call it a "structural reset of value," not a cyclical dip. Deloitte's holiday survey reinforces this: 89% of consumers searched for deals, 77% traded down on brands, and 49% made DIY gifts.
What this means: Income demographics in trade areas matter more than aggregate sentiment figures. A location that looks strong on paper may underperform if the income mix skews toward stretched consumers trading down. Understanding competitive positioning within that mix (discount versus mid-market versus premium) becomes critical for forecasting tenant performance.
AI Crosses from Pilot to Scoreboard
The holiday season provided the first large-scale proof that AI adoption correlates with sales performance, not just operational efficiency.
NVIDIA's third annual State of AI in Retail survey, released January 7, shows 91% of retail companies actively using or assessing AI, with 90% planning to increase AI budgets in 2026. The outcomes: 89% report AI increasing revenue, 95% report cost decreases. Perhaps most significant: 47% are using or assessing agentic AI, with 20% already having AI agents active in operations.
The sales impact is measurable. Salesforce data found retailers deploying AI agents achieved +7.2% year-over-year sales growth versus +3.6% for those without. That's a 2x performance gap. Adobe reports traffic from generative AI tools to retail sites surged 693.4% year-over-year. AI-influenced sales reached 18% of U.S. online transactions and $262 billion globally.
The major retailers are deploying at scale. Walmart leads with "Wally" (an employee AI agent), "Sparky" (customer-facing GenAI assistant), and an OpenAI partnership providing free AI certification to all workers. Target has integrated ChatGPT Enterprise for internal automation and launched "Target Gift Finder" for customer recommendations. Amazon's Just Walk Out technology added 150 deployments this year (50% of all deployments ever), with costs dropping more than 50% in 18 months. The Seattle Seahawks' JWO shop saw transactions increase 85% and sales per game rise 112%.
The NRF 2026 Big Show (January 11-13) will feature a new "AI Stage" dedicated to practical AI integration. The signal is clear: AI has transitioned from innovation theater to operational necessity.
What this means: AI adoption is becoming a tenant quality signal. Retailers without AI capabilities may struggle to compete on the metrics that drive sales: conversion, personalization, and inventory availability. For portfolio evaluation, understanding a tenant's technology roadmap matters alongside their financial statements.
The Labor Market Paradox
Seasonal hiring collapsed to a 15-year low this holiday season. Yet spending hit records. The disconnect reveals a structural shift in how retail operates.
The National Retail Federation forecast just 265,000 to 365,000 holiday hires versus 442,000 in 2024, a potential 40% decline. Challenger, Gray & Christmas tracked only 372,520 seasonal hires announced in Q4 2025, the lowest since tracking began in 2012. Target notably declined to disclose numbers, instead offering more hours to existing staff.
The January 7 ADP report showed private payrolls grew just +41,000 in December versus 48,000 expected. JOLTS data the same day revealed the hiring rate dropped to 3.2%, the lowest in more than a decade excluding pandemic months. However, retail and construction bucked the trend with job openings trending higher.
Retail job cuts accelerated dramatically in 2025. Challenger data shows 92,989 retail job cuts, up 123% from 41,686 in 2024, making retail the fourth hardest-hit sector. AI-attributed cuts across all industries reached 54,836 in 2025. Major announcements include Target (1,000 corporate plus 800 open roles closed), Amazon (approximately 14,000 corporate roles), and Yankee Candle (900 jobs).
Meanwhile, minimum wage increases took effect January 1 in 19 states, affecting 8.3+ million workers and adding an estimated $5 billion in wages. Washington leads at $17.13/hour (highest state rate); Hawaii saw the largest jump at +$2.00 to $16.00. Seattle now sits at $21.30 and Tukwila, WA at $21.65 (highest in nation). For the first time, more workers live in $15+ minimum wage states than in federal minimum ($7.25) states.
What this means: Wage pressure and automation investment are moving in lockstep. Walmart is targeting 65%+ of stores serviced by automation by FY2026. Cashier positions are down 23% in general merchandise since 2019. For store format planning, back-of-house automation space and self-service configurations increasingly drive operating economics.
The Store Network Recalibration
Coresight Research tracking as of January 2 shows 2025 ended with 8,235 closures versus 5,270 openings, a net loss of nearly 3,000 stores. However, 2026 announcements flip the script: 1,118 planned openings versus 569 planned closures so far.
Expansion leaders for 2026 reveal where confidence is highest. Dollar General plans 450 new stores plus 4,250 remodels. Burlington targets 100 net new stores (including 46 acquired Joann Fabrics leases). Costco will open 35 warehouses. Boot Barn plans 65 to 70 stores (15% unit growth). Barnes & Noble, the bookstore that refused to die, plans 60 new locations. Walmart announced 150+ new or converted stores plus 650 remodels across 47 states.
The pharmacy sector crisis deepens. Rite Aid completed liquidation of all 1,288 stores in 2025. Walgreens is closing 1,200 stores through 2027 (approximately 25% unprofitable). CVS continues multi-year reduction with roughly 270 closures in 2025. This creates both vacancy risk and repositioning opportunity for landlords.
New format experimentation accelerates. Zales launched "The Edit" targeting Gen Z with open layouts and charm bars (four locations opened November-December with two+ more in January). Whole Foods debuted "Daily Shop" small-format stores (Hoboken opened December; Brooklyn coming early 2026). Urban Outfitters' "On Rotation" concept features rotating brand partners. Amazon proposed a 225,000 square foot full-scale retail hub in Orland Park, IL.
Mall transaction activity reached its highest level in 20+ years: 38 malls traded in Q1-Q3 2025, matching all of 2024. Altus Group projects 50+ malls will trade in 2025 (4.9% turnover rate), noting "strongest fundamentals driving investor return" as weakest centers have exited the market.
What this means: The middle of the market continues hollowing out while discount and specialty formats expand. Location strategy increasingly requires picking a lane. The pharmacy closures create significant repositioning opportunity (nearly 2,500 locations vacating through 2027) for tenants who can absorb the space or landlords who can subdivide.
The Execution Year
Three research firm forecasts converge on a similar message. McKinsey's "State of Fashion 2026" surveyed executives and found 46% expect conditions to worsen (up from 39% last year), with tariffs cited as the top hurdle. Forrester predicts three U.S. specialty retail chains will declare bankruptcy in 2026 due to high interest rates, online shifts, and mass merchant competition. Deloitte's holiday survey found 57% of consumers expect the economy to weaken in 2026 (the least optimistic since 1997), with 56% concerned about recession in the next six months.
Yet spending continues despite pessimism. The data suggests consumers have adapted to persistent uncertainty while maintaining purchasing behavior, at least for now. The divergence suggests this is less a year for bold experimentation than for relentless execution on now-proven strategies.
Key dates ahead: the BLS December Employment Report drops January 9 (retail sector is a "wildcard" per RBC Economics). The NRF 2026 Big Show runs January 11-13 with approximately 40,000 attendees and the new AI Stage. December CPI releases January 13. The delayed BEA Personal Income & Outlays (combined October-November) arrives January 22.
One opportunity note: January foot traffic at malls is running +5.5% year-over-year versus January 2024. With 56%+ of gift cards redeemed within six months and 61% of recipients spending more than the card's value (averaging $31.75 extra), the "Q5" window represents meaningful incremental revenue often overlooked in annual planning.
For retail executives and CRE professionals, the message from this week's data is clear: 2026 rewards those who can serve value-seeking consumers across channels, deploy AI beyond pilots, and operate profitably despite margin pressure. The trillion-dollar holiday season is real. So are the structural shifts underneath it. Understanding both is the work ahead.