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The holiday shopping season is officially here. Shoppers are tapping mobile phones, typing on keyboards, and yes, even going into actual stores in search of gifts to make the darkest part of the year more festive.

It’s also the time of year when many businesses see one of their largest sales bumps. According to the National Retail Federation, the holiday season has driven an average of 19% of total annual sales for the last five years for retailers. And yes, while the ever-present joyful music, bright lights, pine boughs, discounts and holiday events make people want to shop this time of year, marketing messages are also key to these sales. Holiday campaigns, ranging from lights displays to traditional commercials, are a big part of the season. Some of these campaigns are receiving widespread plaudits, like Apple’s tearjerker featuring a father who can hear his daughter sing thanks to the hearing aid feature of his AirPods. And some are inspiring people to change the channel or scroll past, like Coca-Cola’s AI-generated revamp of its 1995 “Holidays Are Coming” campaign.

While this isn’t quite the Super Bowl, the holiday marketing season can be make-or-break for brands, and we’re taking a look at holiday shopping and spending in this week’s Forbes CMO newsletter. We’ve got statistics and projections about what consumers are likely to spend and what it means for brands. E-commerce is a huge engine for sales and marketing, and I talked to Jim Yu, CEO of BrightEdge, about how new AI-related changes to Google’s search results are impacting online shopping this holiday season.

SPENDING PROJECTIONS

It’s high shopping season now, but the projections about how people were likely to spend have been coming out since August. The good news: All predictions have shown more spending this year. The not-so-great news: Many see slower growth than in the past.

According to the National Retail Federation’s annual holiday sales predictions in October, total retail sales are expected to increase 2.5% to 3.5% over 2023 levels. Forbes senior contributor Joan Verdon wrote this is a modest increase but still would be a spending record, with shoppers expected to spend at least $25 billion more than last year. NRF President and CEO Matthew Shay said retailers are fairly upbeat and optimistic about the holidays, even though they’re concerned that shoppers will be more price-conscious.

Deloitte made a similar projection in September, expecting holiday spending to increase between 2.3% and 3.3%. Michael Jeschke, leader of Deloitte’s Retail & Consumer Products Practice, told Verdon in an interview about this forecast that they see a “return to normal spending” in 2024—more in line with the last 10 to 15 years in terms of growth than the previous three, which were all deeply impacted by the pandemic and its after effects. But still, Deloitte found that consumers plan to spend an average of $1,778 this holiday season—8% more than in 2023—with the largest increases on experiences, decor and holiday clothing.

In August, Salesforce predicted online global holiday sales of $1.19 trillion, growth of just 2% from 2023’s $1.17 trillion, wrote Verdon. Adobe’s online forecast, made about a month later in September, predicts a record $240.8 billion in online spending in the U.S., an increase of 8.4% over 2023. Patrick Brown, Adobe’s vice president of growth marketing and insights, told Verdon that they anticipate consumers will do more splurging on bigger ticket items—with more deep discounts on them this year.

The buying spree got off to a rousing start last week. From Thanksgiving Day through Cyber Monday, about 197 million people shopped both in stores and online, according to NRF statistics reported on by Verdon. All of that shopping added up to about $41.1 billion, with online spending for each day in the five-day holiday shopping period setting new records, according to Adobe Analytics data. NRF said Black Friday was the most popular shopping day, with 87.3 million making online purchases and 81.7 million going to stores—the largest number since the pandemic. More than 61 million people went to stores on Small Business Saturday, which has become more popular every year. And Cyber Monday saw 64.4 million shoppers online, with 63% using mobile devices.

NOW TRENDING

While analysts predict that more money will be spent this year, consumers have also borne the brunt of inflation for the last several years. Prices of most items, from food and fuel to gifts and experiences, are still a little more expensive—something that could make a big difference in what people spend.

Forbes senior contributor Sharon Edelson reported on a survey from ESW at the beginning of October that found 61% of consumers said they planned to spend more than $600 this holiday season, but 47% said the high prices of food and fuel would lead them to spend less than they would otherwise.

Salesforce predicted back in August that value will be top-of-mind for consumers this year, with one in five online purchases expected from a Chinese-headquartered shopping app: namely Temu, Shein and TikTok. In August, 63% of consumers had made purchases from one of these apps during the previous six months, and half had already planned to buy from them during the holiday season. Salesforce said TikTok was likely the big winner; its customer base increased 24% between April and August. Amazon hopes to get a piece of that pie, launching a new “Amazon Haul” storefront last month to offer goods directly from Chinese warehouses—meaning they have lower prices but longer shipping times.

However, the recent years of inflation have made consumers much more attentive to price. A study released by consumer research firm Attest last month found that an overwhelming majority of shoppers—83%—think prices this holiday won’t be discounted, even though every retailer tends to claim deep discounts and major sales. In fact, most of those consumers—44.5%—think that prices will be more expensive, while 38.4% believe they will be the same as last year. And more than two in five people said they wouldn’t be buying any gifts this year because they couldn’t afford it.

MARKETING MATTERS

Getting your product in front of a shopper’s eyes is often a make-or-break holiday strategy. And this year, it’s become more difficult for one big reason: the calendar. There are five fewer shopping days between Thanksgiving and Christmas this year. (Hanukkah begins on December 25 this year, so even though the spending for that holiday might not be as large, the shopping days are the same.) The NRF said in October that 45% of shoppers planned to begin their holiday spending before November, and most of them—59%—were doing it to spread out their budget. NRF gave shoppers several options to explain why they were starting to shop earlier, though it doesn’t appear that less time in the “traditional” season was an option, wrote Forbes senior contributor Pamela Danziger.

So far, people seem to be shopping like they’re running out of time. The 197 million shoppers who made purchases between Thanksgiving and Cyber Monday blew past NRF’s estimate of 183.4 million. But platforms are also taking advantage of the compressed shopping period. Preliminary data from e-commerce ad platform Pacvue found that overall spending for brands advertising on Amazon was up 28% compared to last year, writes Forbes contributor Kiri Masters. While brands are paying more this year, Masters writes they’re also concentrating on upper-funnel advertising on the platform, which represents a significant strategy shift.

ON MESSAGE

How Google’s AI Is Shifting The Holiday E-Commerce Playing Field

It’s hard to miss the changes that Google has been making to its search results pages this year, especially when it comes to shopping. As the tech giant continues to improve its AI-powered search results, it’s doing more to impact what it shows to consumers. I talked to Jim Yu, CEO of SEO and content marketing firm BrightEdge, which keeps close tabs on what Google and other search engines are doing. I spoke to him about some of the changes and what they mean for businesses. This conversation has been edited for length, clarity and continuity.

What are some new things Google is incorporating in its e-commerce search results?

Yu: Google’s doing a lot in some of these commerce shopping queries [with] experimentation around YouTube. It makes sense if you think about multimodal content. If you are shopping for the new Sonos, buying a new iPhone or looking for a big screen TV, a lot of times people go to YouTube and find reviews. But it takes a lot of time to watch those videos.

Google’s AI overview automatically goes and looks at the video, watches the video, transcribes the video, then figures out what query is relevant for in search and summarizes. For example, if there are some pros and cons to buying something, it automatically looks at the video, along with regular reviews, and then summarizes that into the AI overview.

This is a very interesting hint into the future of AI. The last 18 months has been around large language models, which have been about just text. From a shopper perspective during the holiday season, you don’t have to watch all that stuff and spend a ton of time researching.

Is it doing a good job of picking credible reviews? I mean, anybody who wants to do a product review can, but I imagine that an editor at Consumer Reports‘ review might carry more weight than one from my neighbor.

I think they’re doing a relatively good job with this. It’s an interesting dynamic because on YouTube they have a lot more signals around content moderation. Bigger picture, you saw this evolution with AI overviews, where in the beginning it was using a lot of Reddit and Quora content—user-generated, creator-generated content, but with maybe less on moderation and authority. With YouTube, there are better controls and guardrails around the authority they ascribe to a creator.

What else has Google changed and added for the shopping season in terms of AI and search results?

There are larger AI overview panels. And by larger, I mean the real estate the AI overview takes now. We have not seen a lot of ads appear. I know they’re talking about that, [and because] the space that the AI overview is taking is increasing, that may be a precursor to having more real estate to add ads into that format.

You’re seeing more of the introduction of AI overviews at the top of search results, and a lot of times, integrating more details around the product so it’s a richer experience if you have a high-intent shopping query.

The product carousel, where in the AI overviews you can actually see different products, went up 300%. It’s not just describing products, describing attributes to consider, talking about the latest trends and things like that, but [it can] go ahead and show you the products that you can click through and buy. Those are going to be very important aspects heading into the holiday season.

What does this mean for CMOs and CEOs?

You’ve got to start analyzing this. If Google is important to your business, which for many people it is, especially as you head into the holiday shopping season, make sure you understand and monitor where AI is showing up in your portfolio of shopping keywords. If you have products [that would be in its] carousels, make sure that the product feeds you’re sending Google are in there, they’re timely, accurate and optimized because it’s pulling that right into the front of the AI. You want your image of your product and the information from your products to show up in that AI overview. And the best chance of that is making sure that you are feeding that directly into Google.

You also want to make sure you are very focused on the quality of the data and the content that you’re sending. Before, nobody was going to page two of the results. Now, you really want to be the trusted, accurate information that’s right in the AI portion at the top of that page.

One other thing I would [recommend], especially for shopping, is visual content. The trend here, especially in commerce, is people don’t just shop by looking at words. People are looking at pictures and videos and things like that. You want to make sure you are the source of that beautiful picture of that product and that is going to be another important element of winning in the AI-assisted shopping experience.

FACTS + COMMENTS

It’s not just Google making big AI-related changes to e-commerce. Walmart is using the technology to make its search bar smarter for enhanced results, while Amazon’s Rufus assistant is a chatbot that helps shoppers drill down into what they want.

42%: Proportion of shoppers who have incorporated ChatGPT into their process, according to a Future Commerce and Bloomreach study

14%: Shoppers who would grade the traditional retailer search bar process with an A, according to a report by e-commerce consultant Constructor

‘Shoppers are clear about what ‘better’ looks like for search and product discovery’: Constructor’s study authors wrote

STRATEGIES + ADVICE

Here’s a ‘gift guide’ for marketers: Seven holiday strategy and storytelling lessons from brands that have done it well.

For fast growth, an involved marketing strategy can be key. Here’s a breakdown of how to make the changes you need to get there.

VIDEO

QUIZ

A new law in Australia could have profound implications for online marketing. What does it do?

A. Requires a large disclaimer on AI-generated images and videos on social media

B. Requires any email sent to customers who are not yet established or inactive to have “Marketing:” at the beginning of the subject line

C. Bans social media for users younger than 16

D. Allows government officials to investigate and potentially remove ads that are deemed clickbait

See if you got the answer right here.