Shifting marketing, payment patterns this holiday season

The holiday shopping season is upon us, and several new studies point to strong sales, as well as shifting payment preferences and a penchant for AI. "The holiday season is the most critical time of year for small businesses, accounting for up to half of annual sales for 60 percent of owners," said Smita Wadhawan, chief marketing officer at Constant Contact.

The company, which provides digital marketing tools to businesses, just published its Small Business Holiday Outlook, based on surveys of 1,800 small business owners and 2,400 consumers in the United States, UK, Australia and New Zealand. The report revealed that while optimism remains high, businesses are strategically adapting to economic pressures and evolving consumer behaviors to maximize holiday sales.

Small businesses are amping up marketing efforts, the report revealed. Notably, in the United States the number of businesses launching entirely new marketing campaigns quadrupled from 7 percent in 2024 to 33 percent in 2025.

Social media marketing is perceived as the most impactful channel for holiday success by 40 percent of businesses surveyed, significantly outpacing email marketing at 18 percent. Discounts and sales remain the most effective promotional strategies; the survey found more than half (51 percent) of businesses offering promotions. That's good news for consumers, 70 percent ofo whom said they actively seek out deals and promotions.

Small business loyalty

The survey also found that consumer loyalty to small businesses remains exceptionally strong, with 72 percent of those surveyed saying they shop at the same small businesses each holiday season, and 88 percent indicating they are likely to become repeat customers after the holidays.

The 2025 Consumer Holiday Spending Study, just published by The Strawhecker Group and the Electronic Transactions Association, found similar loyalties to small businesses. Nearly half (48 percent) of consumers surveyed indicated they try to stay loyal to small businesses, regardless of checkout experiences. Thirty-six percent would be swayed to shop at a small business if they knew the business offered their preferred payment and checkout features.

Rural consumers tend to be more loyal to small businesses regardless of checkout features, the TSG-ETA study revealed.

Payment preferences are a mixed bag The TSG-ETA study also provided insights into consumer preferences for different payment methods. For example, the study found that person-to-person payment applications are used more frequently by urban consumers, with nearly half using them regularly, compared to 29 percent of suburban consumer and 24 percent of rural shoppers.

Similarly, urban consumers are more likely to use QR codes to pay for purchases than their counterparts in suburban and rural markets. Seventy-two percent of rural consumers said they have never used QR codes to pay for purchases, compared to 64 percent of suburban shoppers and 48 percent of those in urban markets.

A similar disparity was found with regard to digital wallet usage. While more than half of urban shoppers said they regularly use digital wallets, less than half of suburban and rural shoppers have even tried using digital wallets in the past year.

The TSG-ETA study also pointed to significantly more loyalty and purchase intent when urban consumers are faced with embedded payments. And while a third of consumers surveyed said they would be swayed by new payment technologies that had improved security features, 31 percent are not open to new technology regardless of security, incentives, clearer terms or educational resources.

AI, BNPL will play major roles

Meanwhile, PayPal just released results of its 2025 holiday shopping survey, and it points to a lot of consumer interest in using AI. In fact, 77 percent of consumers surveyed said they plan to use AI for holiday shopping this year, underscoring the need for merchants to optimize visibility where consumers are searching. The survey also found significant interest in using payment methods like buy now, pay later. In fact, half of those surveyed said they planned to use BNPL this holiday season.

"Shoppers are moving fluidly across channels, discovering products through AI, returning to stores, and choosing flexible payment options like buy now pay later to maximize this holiday season," said Michelle Gill, general manager of small businesses and financial services at PayPal. "Merchants that enable seamless experiences and deliver value at every touchpoint will not only thrive this holiday season, but build stronger, long-term customer loyalty."

Shoppers are turning to AI for inspiration and to make purchasing decisions. Forty percent of Americans, led by 61 percent of Gen Z and 57percent of Millennials, reported having used AI to assist with purchases in the past year. One in five said they do so regularly.

Better than three in four (77 percent) of past and potential AI shoppers plan to use it as a shopping assistant this holiday season. Top ways they plan to use AI include finding the best deals (34 percent), comparing products (30 percent) and discovering gift ideas and recommendations (26 percent).

Resurgence of in-store shopping

PayPal said its survey found consumers plan to take more paths to purchase this holiday season than in past years, signaling the return of omnichannel retail. "Consumers expect seamless experiences, meaningful rewards, and value – and merchants that connect every channel will capture both sales and long-term customer relationships," PayPal said in a statement. Specifically, the survey revealed:

• A resurgence of in-store shopping, with 64 percent of consumers saying they planned to shop in-store and 41 percent indicating they would shop both online and in-store.
• 28 percent plan to shop primarily online.
• Rewards drive decisions about where Americans shop; 74 percent said they are more likely to shop with merchants offering cash back or rewards.

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