December 31, 2025
ekaterinaphoto/Depositphotos.com
What Lessons Can Be Learned From Physical Retail’s Dominance This Holiday Season?
Overall spend increased by a significant 4.2% year-over-year this holiday season, according to the results of the Visa Consulting & Analytics Retail Spend Monitor. The report also contained other potentially surprising data points — perhaps most notably, that physical retail stores had captured 73% of total spend, with e-commerce retailers snagging the remainder (27%).
“Whether shoppers were upgrading their tech, refreshing their closets, or stocking up at one-stop shops, retailers delivered seamless shopping experiences both in stores and online,” Wayne Best, chief economist for Visa, said.
“This season also marked a turning point, with artificial intelligence shaping how people discover products, compare prices, and interact with offers. This led to a more informed, more intentional consumer, ensuring they could stretch their discretionary spending,” he added.
However, even despite this showing from physical retail operations, e-commerce companies also notched improvements: Online retail spending saw an uptick of 7.8% in 2025 versus 2024 over the holiday period, attributed to the convenience factor as well as a slew of early-season offers.
Other findings pulled from the report:
- Global markets also saw growth in retail sales for the holidays this year: Australia showed growth of 5%, Canada 4.4%, South Africa 7.9%, and the U.K. 3.6%.
- Consumer electronics took the category sales crown, with fashion not far behind: Highlighting the importance of tech devices in the AI-era, Visa registered growth in U.S. retail electronics sales of 5.8%. Meanwhile, clothing and accessories sales stateside improved by 5.3% over 2024’s figures.
- Home goods showed resilience with U.S. shoppers: Furniture and home furnishings managed to eke out a slight 0.8% sales improvement, which Visa suggested reflected “a consistent seasonal demand.”
- By contrast, home improvement as a segment showed some weakness: Per Visa, building materials and garden equipment sales cooled off by about 1%.
Visa Economist Weighs in on U.S. Consumer Spending This Holiday Season, Growth of AI Influence in Retail Moving Forward
Further comments delivered to CNBC by Michael Brown principal U.S. economist at Visa, delved deeper into what these data points suggest.
“The underlying surprise here… is that consumer spending is holding up reasonably well in light of softer consumer confidence than we had this time last year and a number of headwinds and concerns about inflation,” Brown said, pivoting to underscore the growing influence of AI in the retail sphere.
“We are seeing consumers use AI in a big way in comparison shopping and then helping to narrow down that perfect gift. This is the first holiday shopping season where roughly half of the consumers in that survey responded that they are going to leverage AI for one of those two tasks,” he added.
Brown also noted that real spending growth was more modest than the broader growth statistic mentioned above, once inflation was calculated into the mix — after allowing for inflationary pressure, real spending growth YoY was ~2.2% for 2025’s holiday retail season.
BrainTrust
Scott Benedict
Founder & CEO, Benedict Enterprises LLC
Recent Discussions
Discussion Questions
What lessons, or takeaways, should be considered following the release of Visa’s data on physical retail spend this holiday season? Do you believe these figures are accurate?
Do you believe that popular narratives surrounding the coming decline of physical retail’s importance are overstated, given this latest data point? Why or why not?
What do you think the centrality of AI to the future retail business in the commentary offered up by Brown and Best?
Poll
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The fact that physical (still) accounts for the large majority of sales shouldn’t surprise anyone here on RW! (if if does, you weren’t paying attention in class 🙁 ) Far more important is whether/not the relative shares are stabilizing, and even with that a single data point doesn’t mean much.
Whether 4.2% is “significant” is strictly a matter of opinion: if it is – as I assume it is – in nominal dollars it’s not inflation adjusted, so (combined w/ population growth) it’s essentailly static.
And there you have it: 2025 is going, going, go…. Welcome 2026!
I think the lesson from Visa’s holiday data isn’t that physical retail is somehow “back” at the expense of digital, but rather that the entire retail ecosystem is more intertwined than ever. Yes, foot traffic and in-store sales tallied strong results this season, and those figures — when corroborated with broader point-of-sale and consumer spend data — seem credible as part of a resilient spending environment. But it’s equally clear that a significant share of those physical transactions were influenced by digital discovery, research, and pricing, whether it was checking inventory online before a store visit, engaging with mobile offers, or reviewing social proof before purchase. Treating physical and digital as binary winners or losers distracts from the reality that modern consumer journeys — especially during the holidays — are blended, fluid, and omni-moment by nature.
Because of this, I believe the oft-heard narrative that physical retail’s importance is declining is overstated when it’s framed as a zero-sum battle between channels. Online retail set records again this holiday, and in many cases, those purchases were fulfilled in-store or influenced store traffic; equally, many in-store buyers started their journeys online. The true story of 2025 (and heading into 2026) is one of integration and complementarity, not competition. Shoppers don’t choose “digital or physical” — they choose optimal experiences, and retailers that orchestrate both well are the ones winning the day.
On AI’s role going forward — as underscored in commentary from Brown and Best — the centrality of AI isn’t about replacing one channel with another, it’s about augmenting every phase of the customer interaction across channels. AI can personalize discovery online, optimize inventory for faster in-store fulfillment, tailor real-time offers at the point of interaction, and help associates deliver richer, more informed service in both channels. The future of retail isn’t physical versus digital; it’s physical and digital elevated by smarter, real-time orchestration. Framing the conversation around channel rivalry misses the bigger opportunity: using data and intelligent systems to unify experiences so that whether customers start online, in a store, or somewhere in between, their journey feels seamless and value-driven.
“integration and complementarity”
It’s up to retailers to do the best they can, in spite of backend operational issues.
An honest appraisal of your own business is needed… are the true retail basics being met (before buying into an “ai” add-on). Reading their social, CS and reviews channels are imperative to knowing what consumers call out as a short coming. (eg inventory accuracy, store hours, shipping/pick up communication)
Consumers will always be a bit ahead. I had a self awareness this shopping season…of my increased frequency of checking websites while in store (for inventory & pricing from all sources). As a consumer, the end goal was still the end goal. All channel= intuitive.
I am not sure this is news. Physical stores have always accounted for the vast majority of sales. And by 2030, they will still account for over 70% of sales. Of course, what matters to the consumer is that they have a choice or where and how to shop. As to holiday growth: it looks reasonable in value terms but take out inflation and volumes are very meagre. But, it’s not a disaster.
Talk about a misleading headline!!!!! Online sales growth actually outpaced physical stores this holiday season. While brick-and-mortar will continue to exist (close to 70% in the near future), the trend toward online has been, and will continue to be, clear.
The real headline should be…” after allowing for inflationary pressure, real spending growth YoY was ~2.2% for 2025’s holiday retail season.”
Physical retail performed well this holiday season because it continues to meet core customer needs. Customers value seeing products, taking them home the same day and feeling confident at the point of purchase. When stores are stocked and easy to shop, they naturally become the place where decisions are made.
That behavior explains how digital and AI fit into the picture. Customers increasingly research and compare online, then complete the purchase in the channel that feels most reliable. For retailers, this shifts the focus to execution. Inventory accuracy, availability and simple fulfillment determine if stores capture that demand. Physical retail holds its position when digital insight and store operations work as one.
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The fact that physical (still) accounts for the large majority of sales shouldn’t surprise anyone here on RW! (if if does, you weren’t paying attention in class 🙁 ) Far more important is whether/not the relative shares are stabilizing, and even with that a single data point doesn’t mean much.
Whether 4.2% is “significant” is strictly a matter of opinion:
if it is – as I assume it is – in nominal dollars it’s not inflation adjusted, so (combined w/ population growth) it’s essentailly static.And there you have it: 2025 is going, going, go…. Welcome 2026!
I think the lesson from Visa’s holiday data isn’t that physical retail is somehow “back” at the expense of digital, but rather that the entire retail ecosystem is more intertwined than ever. Yes, foot traffic and in-store sales tallied strong results this season, and those figures — when corroborated with broader point-of-sale and consumer spend data — seem credible as part of a resilient spending environment. But it’s equally clear that a significant share of those physical transactions were influenced by digital discovery, research, and pricing, whether it was checking inventory online before a store visit, engaging with mobile offers, or reviewing social proof before purchase. Treating physical and digital as binary winners or losers distracts from the reality that modern consumer journeys — especially during the holidays — are blended, fluid, and omni-moment by nature.
Because of this, I believe the oft-heard narrative that physical retail’s importance is declining is overstated when it’s framed as a zero-sum battle between channels. Online retail set records again this holiday, and in many cases, those purchases were fulfilled in-store or influenced store traffic; equally, many in-store buyers started their journeys online. The true story of 2025 (and heading into 2026) is one of integration and complementarity, not competition. Shoppers don’t choose “digital or physical” — they choose optimal experiences, and retailers that orchestrate both well are the ones winning the day.
On AI’s role going forward — as underscored in commentary from Brown and Best — the centrality of AI isn’t about replacing one channel with another, it’s about augmenting every phase of the customer interaction across channels. AI can personalize discovery online, optimize inventory for faster in-store fulfillment, tailor real-time offers at the point of interaction, and help associates deliver richer, more informed service in both channels. The future of retail isn’t physical versus digital; it’s physical and digital elevated by smarter, real-time orchestration. Framing the conversation around channel rivalry misses the bigger opportunity: using data and intelligent systems to unify experiences so that whether customers start online, in a store, or somewhere in between, their journey feels seamless and value-driven.
“integration and complementarity”
It’s up to retailers to do the best they can, in spite of backend operational issues.
An honest appraisal of your own business is needed… are the true retail basics being met (before buying into an “ai” add-on). Reading their social, CS and reviews channels are imperative to knowing what consumers call out as a short coming. (eg inventory accuracy, store hours, shipping/pick up communication)
Consumers will always be a bit ahead. I had a self awareness this shopping season…of my increased frequency of checking websites while in store (for inventory & pricing from all sources). As a consumer, the end goal was still the end goal. All channel= intuitive.
I am not sure this is news. Physical stores have always accounted for the vast majority of sales. And by 2030, they will still account for over 70% of sales. Of course, what matters to the consumer is that they have a choice or where and how to shop. As to holiday growth: it looks reasonable in value terms but take out inflation and volumes are very meagre. But, it’s not a disaster.
Talk about a misleading headline!!!!! Online sales growth actually outpaced physical stores this holiday season. While brick-and-mortar will continue to exist (close to 70% in the near future), the trend toward online has been, and will continue to be, clear.
The real headline should be…” after allowing for inflationary pressure, real spending growth YoY was ~2.2% for 2025’s holiday retail season.”
Physical retail performed well this holiday season because it continues to meet core customer needs. Customers value seeing products, taking them home the same day and feeling confident at the point of purchase. When stores are stocked and easy to shop, they naturally become the place where decisions are made.
That behavior explains how digital and AI fit into the picture. Customers increasingly research and compare online, then complete the purchase in the channel that feels most reliable. For retailers, this shifts the focus to execution. Inventory accuracy, availability and simple fulfillment determine if stores capture that demand. Physical retail holds its position when digital insight and store operations work as one.