As the holiday season approaches, small business owners must leverage new tools and methods to capture consumer attention and maximize sales. According to PayPal's latest 2025 Holiday Shopping Survey, shoppers are increasingly turning to artificial intelligence (AI) and flexible payment options such as buy now, pay later (BNPL) to improve their shopping experience. The results present both opportunities and challenges for small businesses looking to thrive this holiday season.
PayPal's survey shows that 40% of American consumers used AI to shop last year, and 77% plan to use AI tools again this holiday season. This trend has significant implications for merchants looking to optimize their visibility across AI platforms. “Shoppers are moving fluidly between channels, discovering products using AI, returning to stores and choosing flexible payment options like buy now, pay later (BNPL) to make the most of this holiday season,” said Michelle Gill, General Manager of Small Business and Financial Services at PayPal.
Small business owners can capitalize on this dynamic by ensuring their products are optimally presented on AI-driven platforms. This allows them to connect with consumers who are increasingly seeking advice on deals and gift ideas. Notably, 34% of respondents plan to use AI to find the best deals, while 30% will rely on it for product comparisons, making visibility crucial to success.
Equally important is the increasing prevalence of BNPL options, which have moved from a novelty to a common consumer expectation. Half of respondents intend to use BNPL over the holidays, citing affordability and budget control as their top reasons. This payment method can be particularly effective; The survey found that 52% of consumers are more likely to make a purchase if BNPL is available. Highlighting the benefits of BNPL's offering, Gill explained: “When buyers know they can pay over time, they are more likely to complete their purchase.” He added that PayPal data indicates a significant increase in average order value – 91% for enterprises and 62% for small businesses.
Although there are significant benefits to using these tools, small business owners should consider the practical applications and challenges they present. To effectively implement AI, companies must invest time and resources in optimizing their online presence. This includes product listings aligned with AI algorithms, ensuring digital channels are well-curated and easy to navigate.
Additionally, the introduction of BNPL options brings its own set of considerations. Integrating this payment method may require a partnership with a financial services provider, creating a potential hurdle for smaller businesses with limited budgets. Ensuring this payment option is visible throughout the customer journey may also require thoughtful marketing strategies.
Another notable trend from the survey is the resurgence of omnichannel retail. Approximately 64% of shoppers plan to shop in physical stores this holiday season, highlighting the importance of a multi-channel strategy. Companies need to ensure a seamless shopping experience across online and in-store platforms, which can increase customer loyalty and sales. Survey results show that 74% of consumers are more likely to shop at retailers that offer cashback or rewards, making rewards programs a key aspect of customer acquisition.
As the holiday season approaches, small business owners must quickly adapt to these changing consumer behaviors. Those who can combine their online and physical experiences while offering meaningful rewards are likely to foster deeper customer relationships. This strategy is not only for holiday stress, but also for long-term growth.
Given these findings, using AI and offering BNPL could be key differentiators for small businesses. By leveraging technology and the evolving retail landscape, even the smallest businesses can compete effectively during this busy season. For more information about this survey and its impact, see PayPal's original publication in the PayPal Newsroom.