US Holiday Spending Splits Into a 'Two-Speed' Christmas as Wealthier Households Splurge and Lower-Income Shoppers Cut Back

Inside the K-Shaped Holiday: How US Households Are Splitting Their Christmas Budgets

US holiday spending this year is shaping up to be a tale of two very different shoppers. According to a new survey of 2,055 Americans by A&M Consumer and Retail Group, overall holiday spending intent sits at a net -14% — meaning far more people plan to spend less than more compared with last year. That is an 11-point drop from the -3% recorded in the prior year's survey. Yet beneath that gloomy headline, higher-income households are actually planning to open their wallets wider, while lower-income households are pulling back sharply.

The divide is stark. On a net-more basis, higher-income households intend to increase total holiday spending by 18%, with gains across gifts for others (+15%), holiday meals and treats (+21%), entertainment (+13%), travel (+17%) and even gifts for themselves (+4%). The only category where they plan to cut back is decorations (-4%). Lower-income households, by contrast, are cutting on every front: total spending (-26%), gifts for others (-16%), meals (-19%), entertainment (-29%), travel (-36%), gifts for themselves (-34%) and decorations (-43%).

These findings do not necessarily contradict broader industry forecasts. The National Retail Federation expects holiday retail sales to rise 4.2% to $1.013 trillion, and Mastercard Economics Institute projects 5.5% growth in holiday spend — though both note that a significant portion of that increase reflects price inflation rather than higher volumes. As A&M puts it, dollars are likely to rise with prices and affluent spending, even as most households plan to do less.

The survey also reveals how shoppers behave when a desired gift is running low: 37% would buy immediately to avoid missing out, while fewer would wait for a sale. Higher-income shoppers are especially decisive, whereas lower-income shoppers are more likely to seek an alternative. Gifting preferences split by life stage and income — physical gifts remain most common (48%), gift cards appeal more to older and lower-income shoppers, and experiences resonate with younger and higher-income consumers. Channel plans lean digital, with more consumers planning to shop online than in-store.

What the Two-Speed Christmas Means for Retailers' Pricing, Inventory and Channel Bets

Why the K-Shaped Holiday Is More Than a Statistical Quirk

The divergence between higher- and lower-income households is not just a survey anomaly — it reflects a broader economic reality where inflation and interest rates have hit lower-income families disproportionately. For retailers, this means the average basket size may rise even as the number of transactions falls, creating a misleading picture of health. The affluent cohort is driving growth, but their spending is concentrated in categories like travel, entertainment and premium gifts, while budget-conscious shoppers are retreating to essentials and value options.

What the Split Means for Retailers' Inventory and Pricing Strategies

A&M's finding that 37% of consumers would buy immediately if a desired gift is low in stock — and that higher-income shoppers are especially decisive — suggests that in-stock position on key items may matter as much as price this season. Retailers that understock popular premium items risk losing affluent sales to competitors, while those that overstock budget items may face markdowns as lower-income shoppers trade down or drop out. The report's authors explicitly note that in-stock position on key items may matter as much as price. This implies a need for granular inventory planning that segments by price tier and category, rather than a one-size-fits-all holiday assortment.

Channel and Payment Preferences Are Shifting

The survey shows more consumers plan to shop online than in-store, continuing the digital migration. But the split by income and age adds nuance: gift cards appeal more to older and lower-income shoppers, while experiences resonate with younger and higher-income consumers. Retailers with strong digital capabilities and flexible fulfillment options — like buy-online-pickup-in-store or rapid delivery — are better positioned to capture both segments. Those relying heavily on physical footfall may struggle, especially if lower-income shoppers cut discretionary trips.

Where This Leaves the Broader Retail Forecast

The NRF and Mastercard forecasts of 4.2% and 5.5% holiday sales growth, respectively, are not inconsistent with A&M's data. As A&M notes, dollars are likely to rise with prices and affluent spending, even as most households plan to do less. For context, this mirrors the K-shaped recovery seen in other consumer sectors, where premium brands outperform while mass-market and value retailers face pressure. Retailers that can cater to both ends — through tiered product lines, targeted promotions and flexible financing — may find a way to balance the two speeds. Those that lean too heavily in one direction risk alienating a significant portion of their customer base.

How Retailers Should Navigate a Diverging Holiday Shopper Base

The single most important insight: holiday sales growth this year will be driven by affluent households spending more, while the majority of shoppers cut back — meaning retailers must manage two distinct demand curves simultaneously.

For retail executives, the A&M data suggests concrete steps:

• 0–6 months (this holiday season): Prioritize in-stock positions on premium gift items and experiences, as 37% of consumers — especially higher-income shoppers — will buy immediately rather than wait for a sale. Ensure digital channels and flexible fulfillment are optimized, since more consumers plan to shop online than in-store.
• 0–6 months: Adjust promotional calendars to avoid deep discounting on budget items that lower-income shoppers are already cutting. Instead, offer targeted value messaging and gift card options, which appeal more to older and lower-income consumers.
• 6–24 months: Reassess assortment planning to reflect the two-speed market. Consider tiered product lines or private-label value ranges to retain price-sensitive customers while expanding premium offerings for affluent shoppers.
• 2–5 years: Invest in data analytics that can segment customers by income and life stage, enabling more precise inventory and marketing decisions as the K-shaped consumer economy persists.

Metrics to watch: NRF's final holiday sales figures (due in January), Mastercard SpendingPulse holiday data, A&M's follow-up survey on actual versus intended spending, and major retailers' Q4 earnings reports for commentary on income-segmented demand.