Back-to-school wrap-up: Cautious, value-driven holiday season forecasted

Back-to-school retail spending showed that consumers remain cautious, value-driven and strategic with their budgets amid persistent inflation and tariff-driven cost pressures. The summer data and trends may provide business leaders with a preview of the upcoming holiday season, while also offering insight into how to win over shoppers and capture sales in an uncertain market.

A look back on back-to-school

Consumers started early and made fewer trips but spent more per visit this back-to-school season, according to RetailNext. Retail stores experienced a 2% to 3% decline in foot traffic in July and August compared to the same period last year. But sales remained steady and spending per shopper increased, despite a lower number of items per basket.

Shoppers strategized to avoid potential price increases caused by tariffs and take advantage of promotions, private-label products and bundles to further stretch their budgets. But the declines in traffic were smaller compared to earlier in the year, demonstrating the importance shoppers place on the back-to-school season.

Still, overall back-to-school spending, including online spending, is expected to reach $39.4 billion for K-12 and $88.8 billion for college, both up slightly from last year, according to the National Retail Federation. Online retailers and department, discount and clothing stores remained top back-to-school shopping destinations.

Implications for holiday spending

Higher prices and fewer items purchased will correlate with slower growth in holiday sales, as shoppers trade down from premium gifts and weigh every purchase carefully. Shoppers are expected to continue consolidating purchases, splurging selectively on high-value gifts, and actively seeking promotions.

The back-to-school spending patterns can provide actionable insights for the upcoming holiday season and put businesses in the best position to capture sales.

Lessons for retailers

Early promotional strategies capture early budget allocations. Longer and earlier competitive discounts from major retailers online led price-sensitive shoppers to spend more during the back-to-school season, and families shopped earlier than ever before. Therefore, holiday campaigns should also start early to capture planned spend before it is diverted. Loyalty should be rewarded with VIP events and tiered perks.

Tiered discounting and product bundling drive basket size. Retailers can incentivize consumers to spend more per trip and per transaction with escalating discounts and product bundles that align with budget-conscious shoppers’ desires. Bundles are especially effective for gift buyers looking for value and convenience.

Targeted price reductions are more effective than blanket discounts. Broad markdowns can harm margins, particularly when tariffs have already increased costs. Instead, data-driven pricing that leverages multiple affordability options and higher-margin private-label products enables retailers to compete without eroding profitability. Tiered products help customers understand quality differences while offering choices that fit various budgets and demographics.

Convenience is a priority. While price sensitivity has increased, consumers continue to prioritize convenience. Retailers that offer fast and easy ordering options through digital apps, along with flexible delivery options—such as buy online, pick up in store; curbside; and same-day delivery—save customers valuable time. During the holidays, time-pressed shoppers value convenience and are willing to pay higher prices for time-saving options.

Additionally, providing multiple payment options can break down barriers for customers to spend.

Monitor potential tariff changes. Consumers have demonstrated their awareness of tariffs’ potential to cause price increases by pulling forward spending before tariffs take effect. Retailers that track upcoming trade policies and anticipate demand fluctuations can plan their inventory, marketing and pricing strategies accordingly to maximize sales.

Adapt to changing product searches. Artificial intelligence-driven search is transforming the way consumers discover products. Consumers are increasingly relying on AI platforms, including those built into some retail apps, to provide more personalized, fast and relevant product search results. These platforms are changing the landscape of traditional ad-based promotions. Voice and visual searches, such as uploading a photo to find similar products, provide a more intuitive and interactive process.

Social media influencers were 10 times more likely than regular social media users overall to convert shoppers, and deeper discounts in categories such as electronics, appliances, sporting goods, personal care and apparel prompted many shoppers to trade up to higher-end items, according to Adobe Analytics.

With over half of Gen Z and 39% of all consumers using AI for product discovery, according to Salesforce, retailers that ensure their products are presented effectively will benefit from higher conversion rates.

The takeaway

The interplay of economic uncertainty, changing trade policies, a cooling job market and shifting consumer priorities makes 2025 one of the most complex retail environments in recent years. The back-to-school season has shown businesses how consumers are adapting, and these insights enable more innovative planning for holiday campaigns. The holiday season will be less about volume and more about precision.

Businesses should carefully manage their prices and product mix with discipline and targeted promotions, integrate seamless omnichannel shopping journeys, and invest in technology-driven personalization. The winners will tailor their offers to meet cautious yet ready-to-spend consumers and deliver value through every touchpoint.