Let AI Be the Gift That Keeps Giving This Holiday Season

Holiday sales in November and December typically comprise roughly 20% of U.S. retailers’ annual sales, according to the National Retail Federation (NRF). In the UK, the total value of Christmas retail sales is estimated to be GBP 84.9 billion, or about 19.9% of annual volume. For grocery retailers, who see increases in in-store traffic and revenue due to the seasonal spike in family meal and celebration purchases, the percentage of annual sales represented by the holiday period is often much higher.

The 2024 season is shaping up to be one of the most lucrative yet for retailers. The NRF projected that holiday spending in the US will increase this year to between $979.5 billion and $989 billion. This reflects a growth of up to 3.5%, which is slower than 2023’s 3.9% growth but enough to set a new record high for holiday sales. Grocery stores will be one of the beneficiaries of this growth, with the same NRF survey finding that 46% of consumers list supermarkets as their top destination for holiday spending, just behind department stores (49%) and discount stores (48%) among brick-and-mortar retailers. British consumers also flock to grocery outlets, making 488 million trips to supermarkets in the four weeks leading up to Christmas in 20232.

Of course, not all projections are quite so optimistic, especially from the consumer perspective. Despite leveling or decreasing inflation rates in the US and globally, consumers remain cost-conscious when considering holiday shopping. The September 2024 consumer digest published by 84.51° found that 44% of consumers are concerned about their budgets when considering holiday spending this year, and 43% plan to shop at stores offering the steepest discounts this season. Retailers know this persistent sensitivity to cost; a Deloitte survey of retail executives found that 76% believe most consumers value lower prices over brand loyalty. The report goes so far as to recommend that in a value-focused environment, retailers should lean into loyalty programs and provide the visible value and convenience that shoppers are looking for.

The emphasis on loyalty programs is not misplaced. Holiday-specific loyalty initiatives can generate significant excitement among shoppers, help grow sales beyond the expected holiday surge and create differentiation from competing retailers. They can also lay the groundwork for long-term engagement.

Based on experiences with retail partners across sectors and geographies, we estimate that retailers invest around 30% of their total promotional budget at key holiday times. What specific tactics can retailers employ to ensure that the budget pays dividends both during the all-important holiday season and throughout the year? Integrating seasonal offers into existing loyalty program frameworks—and crafting them to encourage year-round interactions—is the secret to maximizing their effectiveness.

Personalization and Gamification in Seasonal Loyalty Incentives

To do this, retailers need sophisticated loyalty strategies that leverage connected omnichannel data to generate personalized promotions and gamified experiences. Specifically, they should pursue tactics like:

• Introduce loyalty initiatives that enable customers to “lock” or “bank” points based on spending during non-holiday periods but become redeemable during the season. This offers participants added value – and a reason to visit stores – during the critical holiday period and an incentive to spend with the retail brand year-round.
• Gamify holiday-specific initiatives to extend holiday shopping into the new year and encourage new product and category discovery. Gamification, which can include challenges, spending targets for additional bonuses, or product/category-specific thresholds, can keep customers engaged longer.
• Create committed engagement throughout the year with major holiday perks. A well-publicized, long-awaited and high-value holiday offering can encourage customers to stay loyal to a retail brand and participate in year-round programs simply in anticipation of the big holiday special.

For each of these tactics, delivering personalized offers that meet each customer’s needs helps ensure broader appeal and higher engagement beyond the holidays.

Retailers That Are Seizing the Season

Personalization is a central strategy for several high-performing retailers deploying hybrid seasonal and year-round loyalty campaigns.

Loblaw, Canada’s largest retailer, offers a seasonal version of its PC Insiders Challenge; the program encourages customers to purchase a range of products from a seasonal category by offering points on each suggested purchase and bonus points when all products are completed. This gamified initiative encourages new product discovery and often extends the redemption cycle beyond the holiday period, driving year-round engagement.

Woolworths Australia’s Bank for Christmas initiative includes a feature that locks customers' points accounts so they can only redeem during the holiday period, helping customers budget and encouraging visits to Woolworths’ stores during this critical time. Rather than stretching a holiday-specific program’s utility or value until after the season, Bank for Christmas enables customers to make everyday purchases throughout the year and create added value when they need it the most – during the holidays.

UK retailer Liberty’s popular Liberty Beauty Advent Calendar, which sells out nearly every year, is an example of an established seasonal initiative that gains year-round relevance through integration with Liberty’s broader loyalty and subscription strategies. Subscribers of The Beauty Drop, the retailer’s unique “stored value” subscription service, get exclusive early access to the Advent Calendar and the ability to apply their monthly fee as a discount, a significant perk for highly engaged customers. The Beauty Drop invites subscribers to deposit £25 a month into a beauty savings account and, in return, receive four free Beauty Discovery boxes a year, along with free shipping, offering exceptionally high value for customers while simultaneously providing a reliable revenue stream for Liberty.

The Gift that Keeps on Giving

All three examples show how loyalty-integrated holiday initiatives can pay dividends in customer engagement and spending throughout the year. They also show how winning tactics can encourage consumers to choose one retail brand over another in an incredibly competitive period. Points banking or locking initiatives, gamified loyalty incentives and anticipated annual events – the Bank for Christmas, PC Holiday Challenge and Liberty Advent Calendar programs, respectively - show that personalized, loyalty-integrated incentives can be the gifts that keep on giving long after the holiday season ends.

Most obviously, retailers want to keep customers engaged beyond the high-volume period at the end of the year; that’s their ticket to sustainable growth and long-term financial health. But while some are already employing strategies to reach this goal, others are engaging in the same holiday tactics that have worked in the past.

Is your retail brand handcuffed to tradition or committed to spreading the spending spirit beyond the season?