In its annual US retail holiday forecast, Bain & Company predicts sales growth to slow this holiday season. The firm forecasts a subaverage 3% growth in US retail sales—significantly lower than the 5.2% ten-year average. However, interest rate cuts from the Federal Reserve could help to bolster consumer confidence in the months ahead.

In-store sales to remain relatively flat, growth will vary across categories
Bain estimates US retail sales will reach a total of nearly $941 billion during November and December.

The firm predicts in-store sales will remain relatively flat, at a growth rate of just 0.5% year-over-year, the lowest rate since the Great Recession, with the strongest instore growth coming from general merchandise (excluding department stores), clothing and accessories, and grocery. Bain expects department stores, sporting and hobby stores, and furniture, building and gardening stores will experience negative single-digit growth.

Despite dropping slightly this year, Bain predicts nonstore sales to grow 9.5% year-over-year, driving about 90% of the growth.

Headwinds pose a challenge, but some tailwinds may boost sales 
Bain's proprietary Consumer Health Index reveals US households across all income cohorts reported worsening fiscal outlook, with upper-income households who represent more than 50% of spending, reporting the steepest declines.

Retailers continue to face challenges that may stifle holiday sales this season, as shoppers allocate more of their wallet to costly non-discretionary spending—including housing and healthcare—and face growing credit card delinquency rates and lower savings rates.

"It's been a relatively slow year for US retail, as consumers have grappled with rising costs and growing unemployment," said Aaron Cheris, partner in Bain & Company's Retail practice. "Yes, we saw stronger-than-expected retail sales in August, but that's mostly due to expectations being so low. August sales actually saw a deceleration from July. Nonetheless, interest rate cuts and a strong stock market performance could help to bolster consumer confidence, potentially contributing to at least modest sales growth. If retailers want to beat these gloomy expectations, they will need to get an early start, emphasizing value and finding ways to delight shoppers during a stressful season."

5 tips for retailers to outperform this holiday season

1. Emphasize value, no matter the price point
2. Entice consumers with intuitive search tools, personalized marketing, relevant gift lists, and timely promotions
3. Showcase exclusive products, collections, brands, and partnerships
4. Delight shoppers during a stressful season with upskilled holiday staff and more fulfillment options, including fast shipping and easy returns
5. Make omnichannel easier — utilize excess store capacity to meet digital demand