Holiday shopping trends: 3 key insights for retailers

As the holiday shopping season draws near, the usual turmoil begins to unfold. Shoppers dash through stores on Black Friday like Santa’s elves trying to meet the toy deadline, online carts fill up as fast as a child’s wish list for Santa, and retailers prepare as best as possible for the annual rush. The holiday season is a magical yet frantic time for consumers and businesses alike, with the promise of gifts, deals, and festive spirit—but also intense competition and soaring customer expectations.

For retailers, it’s a prime time to maximize revenue and build lasting customer relationships, but they need a clear plan to navigate the holiday shopping frenzy. Relying on tradition isn’t enough anymore as the needs change as quickly as Santa’s sleigh. Technology powered by AI is rewriting the rules, consumers are savvier than ever, and personalization is the magic touch that can turn a frantic shopper into a loyal customer.

The Talkdesk 2024 Holiday Survey questioned 1,500 American consumers and 400 retailers about their views on AI and how it contributes to enhancing the holiday shopping experience. The data we gathered from the survey unwrapped three key trends that are shaping this year’s holiday shopping season.

1. Consumers are still spending despite economic uncertainty.

This year’s holiday shopping trends reveal that spending is expected to show resilience despite economic challenges. Consumers are still likely to open their wallets as three in four (71%) Americans plan to spend more or the same amount on gifts as in 2023, highlighting the importance of delivering exceptional customer service during this busy period. With half of the shoppers (52%) concerned they can’t afford quality gifts and nearly three-quarters (74%) indicating that they’re relying on AI to help them find the best deals, integrating AI into customer service and shopping platforms is crucial for driving stronger sales and enhancing customer satisfaction.

Consumers expect smooth, enjoyable shopping experiences, and as they shop for the holidays, timely, efficient, and personalized support should be top of mind for every retailer. An AI-powered customer experience platform analyzes preferences and behavior to provide tailored recommendations and support, reinforcing its importance as 51% of consumers expect to buy more products due to an AI-enhanced shopping experience. Whether it’s suggesting relevant products, resolving issues with online orders, answering questions about product availability, or guiding them through flexible payment options, AI plays a crucial role in shaping the overall shopping experience by providing seamless customer support, quick resolutions, and proactive assistance. High-quality customer service can make the difference between a satisfied, returning customer and a frustrated one who walks away and takes the business somewhere else.

2. Personalization vs. privacy: Finding the balance with AI.

Consumers expect brands to understand their needs, preferences, and shopping habits to receive personalized holiday customer service. However, personalization extends far beyond simply offering a discount or a one-size-fits-all recommendation. Tailored product suggestions based on browsing history or dynamic pricing models that cater to specific customer segments are key drivers of loyalty and repeat business. More than half (56%) of surveyed retailers using an AI-powered solution believe it will provide a competitive edge during the critical holiday season.

However, as much as consumers enjoy personalized experiences, they are also increasingly aware of their data security. The holiday shopping trends survey reveals that a vast majority (63%) are concerned that scammers might use AI to produce fake photos, mimic voices, or generate fake audio clips to commit fraud. However, only 29% of retailers implementing AI have experienced biased or inaccurate results. Retailers must adopt strategies that find a balance between delivering personalized shopping experiences and respecting consumer privacy, such as:

• Transparent data practices. Transparency is the foundation of building trust. Retailers need to open and clearly explain how they collect, store, and use consumer data.

• Offer value in exchange for data. Consumers are more willing to share their data if they feel they are getting something valuable. 75% are receptive to sharing personal preferences for a more personalized experience.

• Consent and control. Allowing consumers to control what data they share and how it’s used. Offering clear opt-in mechanisms, giving customers the ability to manage their preferences, and ensuring data security are all ways to establish trust while delivering a more personalized experience

• Use of ethical AI. Ensure that data is used responsibly and does not infringe on consumer rights. 55% of consumers state that more rigorous AI regulation is needed in holiday shopping to protect their interests. Ethical AI can help predict consumer needs without being invasive.

3. AI: Key differentiator for consumer and retailer experiences.

AI is the retailer’s new competitive advantage in navigating holiday shopping trends. Retailers focus on enhancing customer experience through various AI applications, such as using predictive analytics to identify spending trends (61%), optimizing product pricing and promotions (51%), and using chatbots to assist customers (58.5%). Additionally, AI-powered solutions can automate many retail operations, from managing supply chains to optimizing shipping and logistics, saving time, reducing costs, and allowing retailers to operate more efficiently during the busy holiday season. Consumers see their shopping experience enhanced by AI through personalized recommendations, chatbots, and virtual shopping assistants.

Despite the growing trend, some retailers are not leveraging AI technology for their holiday season customer service operations. According to our survey,  the main reasons for this include a lack of worker expertise in AI (57.50%), data privacy or security concerns (55%), and being outside their comfort zone (52%).

Addressing these challenges is key for retailers looking to stay competitive, and Talkdesk Retail Experience Cloud™ can help facilitate this transition. It is a purpose-built, cloud-native, and integrated customer service platform to help retailers delight shoppers, empower employees, and drive business growth.