Online Holiday Spending Trends: What Small Businesses Need to Know
As the holiday season approaches, online spending is projected to increase significantly, with estimates suggesting a jump of 5.3% year over year, totaling around $253.4 billion in the U.S. This increase reflects consumers’ eagerness to take advantage of discounts and the growing trend of using artificial intelligence-powered chatbots for shopping assistance. Though this growth is notable, it’s slower than last year’s 8.7% increase, indicating a shift in consumer behavior and a more cautious economic outlook.
You may be asking yourself why we are covering retail, yet a massive amount of government contracts is out there for retail products such as office supplies, clothing, furniture, swag bag trinkets and much more. Balancing your revenue between retail sales and government contracts can be a strategic advantage your company can use to reduce reliance on holiday trends.
A prime example is our client Npact Apparel which we got HUBZone certified and landed them a $250k project right off the bat with the Air Force. It’s important to plan ahead as a small business owner while balancing risk and reward. Keep this top of mind as we dive into the numbers.
Here are some big-ticket items government entities contract out:
- Apparel including branded shirts, jerseys, uniforms and hats
- Specialty items can be swag, merch, mugs, clips and so much more
- Office supplies varies from pens and stationary to signage, business cards and flyers
- Furniture is a big one since all office need it and government workers are mostly back in office
Understanding the Shift in Consumer Spending
According to a recent report by Adobe Analytics, which tracks more than 1 trillion visits to U.S. retail websites, consumer spending during the holiday season is being influenced by various factors. While shoppers are eager to celebrate the holidays, they are also mindful of rising prices and economic uncertainties. Adobe’s director of digital insights, Vivek Pandya, noted that “consumers are embracing the opportunity to stockpile goods to mitigate potential price volatility“.
This shift in spending habits means that while online sales are expected to grow, the boost in online spending may not translate into a significant increase in overall holiday sales. Adobe estimates that about 1 in 4 dollars spent during the holiday season will be online, making it essential for small businesses to optimize their online presence.
The Shift in Retail Landscape
Rite Aid’s closure highlights a larger trend in the retail landscape where convenience and online shopping are increasingly favored by consumers. According to a report by McKinsey, e-commerce has grown significantly, pushing traditional retailers to adapt or risk extinction. As an SMB owner, it’s essential to consider how your business can pivot to meet changing customer preferences.
For those of you who might not have registered for the System for Award Management (SAM) or the General Services Administration (GSA), now is a good time to explore these avenues. Government contracting can be a lucrative path for small businesses, especially those with unique services and products that cater to federal needs.
Key Trends for SMBs to Watch
1. E-commerce Growth: Although online holiday spending is increasing, it is below the 10-year average of roughly 13%. Retailers should focus on improving their e-commerce strategies to capture more market share.
2. Discount Levels: Adobe predicts discounting levels will remain similar to the previous year, with electronics expected to see discounts peak at 28% off, down from 30.1% last year. Small businesses can benefit from planned sales events to attract customers during this critical shopping period.
3. Mobile Shopping Surge: Mobile devices are becoming the primary avenue for online shopping, accounting for 56.1% of online spending. This is a substantial increase from 40% in 2020, indicating a need for businesses to ensure their websites are mobile-friendly.
4. AI-Powered Shopping: There is a growing trend of consumers using AI-driven chat services to assist with their shopping needs, with expectations for AI traffic to rise by 520% year over year. Small businesses can leverage this technology to enhance customer interaction and streamline the shopping experience.
Strategies for Small Businesses
As a small business looking to thrive during the holiday season, consider implementing the following strategies:
– Enhance Your Online Presence: Optimize your website for mobile users and ensure a smooth shopping experience. Consider adding AI chatbots to provide real-time assistance to customers.
– Create Targeted Promotions: Develop discount strategies that align with consumer expectations. Utilize data analytics to understand which products are most likely to attract buyers during the holidays.
– Stock Up on Popular Items: Anticipate consumer demand by stocking up on popular holiday items. The holiday shopping surge often leads to increased sales in specific categories like electronics, toys, and clothing.
– Utilize Social Media Marketing: Engage with your audience through social media platforms. Running holiday-themed campaigns can increase visibility and drive traffic to your online store.
– Consider Government Contracting: If you are a small business in sectors eligible for government contracting, explore opportunities through programs such as 8(a), VOSB, SDVOSB, and HUBZone. These paths can provide additional revenue streams and support during the holiday season. Visit Select GCR to learn more about how we assist businesses like yours.
Adapting Your Business Model
As Rite Aid exits the retail space, it’s a reminder that adaptability is vital for survival. Analyze your business model and consider incorporating e-commerce or service-oriented solutions that can cater to both consumer and government needs.
Additionally, consider how you can leverage online platforms to reach broader audiences. Whether you’re selling products or providing services, having an online presence can significantly increase your visibility and revenue potential.
“USMGC (U.S. Medical Glove Company), successfully fulfilled its $63.6 million capacity building contract from the U.S. government in Q1 of 2025, remains the only nitrile glove manufacturer to meet the stringent requirements established by its government contract”
Benefits of Government Programs
Participating in government programs can provide numerous advantages for small businesses, especially those owned by veterans, women, or minorities. These programs often offer:
– Access to Federal Contracts: The government is one of the largest consumers of goods and services, and small businesses can benefit from these opportunities.
– Financial Assistance: Grants and funding opportunities can help you scale your operations during peak seasons.
– Networking Opportunities: Connect with other businesses and government agencies that can provide valuable resources and support.
If you’re interested in government contracting or want to learn how to navigate the complexities of government programs, our resources are tailored for your needs. Check out our articles for insights and guidance on securing government contracts.
Conclusion
The holiday season is a crucial time for small businesses, and understanding the trends in online spending can help you position your business for success. By embracing e-commerce, optimizing your marketing strategies, and considering government contracting opportunities, you can tap into the potential for growth during this festive season.
Stay informed, adapt to consumer trends, and take advantage of the resources available to support your business.
Sources
2. PwC Consumer Spending Survey
3. Bain & Co. Holiday Spending Forecast
For more information on how government contracting can benefit your business, visit Select GCR and tap into our suite of services designed to help you succeed in the government marketplace.
