As the holiday season approaches, retailers are forced to face a familiar and increasingly complex pressure: to maximise volume during the year’s most critical sales period, while acknowledging that consumers are more price-conscious than ever.
For some retailers, holiday sales are make-or-break and can represent up to 26% of total annual sales. However, the residual effects of inflation and uncertainty around tariffs are leaving shoppers increasingly cautious about spending. More than two fifths of consumers are concerned that gifts will be more expensive this year, and they’re not wrong. Our research among retailers reveals that four out of five plan to increase prices to offset tariff impacts.
With 30% of consumers expecting to spend less this peak season than they did last year, many are changing their buying behaviours and shifting to intentional purchasing. Therefore, it’s critical that retailers can make timely and precise pricing changes to protect profits.
It is a delicate balance between profitability and consumer sensitivity. To strike it well, just like Ebenezer Scrooge, retailers must face past mistakes, accept present realities and embrace future opportunities.
The ghost of Christmas past: Ineffective discounts
While retailers will have to offer discounts to entice price-sensitive consumers to spend, the big flashy discounts that were once staples in the holiday playbook have the potential to erode profit. Of course, promotion events like Black Friday and Cyber Monday will remain a major opportunity for retailers. In fact, this year, Cyber Monday is expected to remain the most important online shopping day of the season.
Yet, traditional holiday blanket promotions and one-size-fits-all discounts are built on flawed assumptions rather than actual consumer and product behaviour. When retailers guess what shoppers want, or simply repeat what worked five years ago, they waste promotional investment, erode margins, damage brand equity and train customers to wait for deeper discounts.
Instead, to build a profitable promotional strategy when implementing promotions, retailers need to take a smarter and more nuanced approach that allows their pricing strategies to respond to the market conditions of the times.
The ghost of Christmas present: Manual processes
The season belongs to retailers who deliver promotions that feel personal, timely, and reflect actual consumer price sensitivity. However, for any business with a price catalogue in the thousands, the complexity of managing sophisticated price adjustments across channels, customers, products and markets is easier said than done. Our research shows system limitations are the second biggest barrier to pricing agility, beaten only by fear of customer pushback.
While businesses have undergone digital transformation in many areas, from CRM to people management, pricing and promotion management have faced years of underinvestment and slow digitalisation. Many pricing teams are shackled by painfully manual processes and continue to endure tools that simply can’t keep pace with the demands of today’s market; more than half (53%) admit it takes weeks or months to implement price changes.
Managing pricing data manually costs time and is prone to human errors, preventing retailers from responding to market shifts with the speed needed to stay competitive.
The ghost of Christmas future: AI insights
With only a few critical weeks to secure their annual performance, retailers need the tools to be able to surface the insights to make surgical pricing decisions faster and systems that seamlessly automate changes. Ensuring these critical decisions are made with maximum effect relies on advanced analytics and AI tools. Like Dickens’ spirit showing Scrooge the world as it actually is, AI-powered pricing technology demonstrates real-time consumer behaviour and product performance with enhanced accuracy.
Allowing AI to analyse granular signals including cost swings, regional differences and sales volumes, retailers can identify what will sell, where, when and at what price point, instead of relying on seasonal averages. These insights allow retailers to make impactful decisions on which products can withstand higher pricing levels without affecting volume versus those with thinner margins and more price sensitivity. Without this, retailers risk increasing prices on the wrong products, deterring customers from purchasing and damaging brand reputation, or discounting prices to subsidise existing intent and eroding profits.
Christmas morning for those who transform
Peak season is the ultimate test of pricing sophistication. Success will hinge on mastering AI-powered approaches to attract price-conscious shoppers while protecting profits. The spirits have visited and the retailers who deploy technology that enables their pricing strategies to react to the market and consumer reality will pull ahead this Christmas.
