For SMBs, This Holiday Season is Defined by Discipline, Not Discounts

The holiday season has always been a high-stakes moment for small business retailers, even a make-or-break moment for their annual bottom line. However, this year looks different. With shoppers expected to slash holiday budgets by over 10 percent, many small business owners are bracing themselves for a potentially slower season and tighter margins.

According to new research from Xero, nearly one in three small business owners say they can’t afford to run holiday promotions, despite the majority stating discounts are their most effective sales tactic.

It’s a revealing snapshot of the reality many small businesses currently face: the battle to stay financially agile while trying to stack up against the competition. The pressure to perform is high, but the need for smarter, more informed decision-making has never been higher.

While discounts have typically been leveraged by retailers of all sizes to drive holiday sales, this year’s environment is creating limitations to this approach. The survey found that 54 percent of respondents state cost is their main barrier to offering promotions. Furthermore, even those able to offer discounts are facing strain, including managing increased customer traffic (37 percent), executing effective marketing and advertising (35 percent), and maintaining inventory control (32 percent).

This year paints a picture of stress and added pressure that extends beyond just operations. Nearly a third of respondents pointed to stress and burnout as a primary concern this holiday season, another indicator that the traditional hustle and bustle of the season has lost its magic and become unsustainable. Small retailers are no longer just fighting to drive sales; they’re fighting to stay resilient against mounting fatigue and an economy that’s working against them.

Turning Pressure Into Strategy

Against this backdrop, the small retailers that will be most successful this holiday season are rethinking their playbooks. They're moving away from reactive decision-making and toward smarter, data-informed strategies.

Instead of trying to compete solely on discounts, they're focusing on precision and areas they can control — such as understanding where to invest, when to hold back, and how to protect cash flow based on the realities of their unique business.

The first step is gaining clear visibility into their financial positioning before the season peaks. When entrepreneurs have a clear view into their finances, they can identify margin thresholds and design promotional strategies that strengthen their bottom line rather than sink it.

As we get deeper into the holiday season, the retailers that will come out ahead won’t necessarily be the ones offering the steepest discounts. Rather, they'll be the ones with the clearest visibility and control. This mindset will be the difference between just getting through the holiday season and emerging stronger.

Andrew Kanzer is managing director of North America, Xero, accounting software for small businesses.