This holiday season, shoppers will be faced with a retail environment that is influenced by spending differences and changing buying habits. A recent survey by PwC has revealed that shoppers are embracing both tech innovations as well as traditional in-store experiences throughout their purchase journey.
Despite 59% of consumers stating that inflation is expected to affect their holiday spending this year, overall spending is expected to rise 7% to an average of $1,638 per shopper. However, there’s a wide gap between those maintaining a strict budget and those ready to splurge.
Spending trends differ among generations, the survey found. Gen Z and Millennials are leading the way in sustainable shopping, self-gifting and in opting for experiences over physical items. Gen X and Baby Boomers were found to favor convenience and practicality, often choosing gift cards and shopping in physical stores.
The 2024 holiday season will witness strategic spending, personalized experiences and technological integration.
Spending Patterns
Three in 10 consumers (29%) plan to spend less compared to the 2023 holiday season, up 10% from last year — expecting to spend only $776 this season. However, 26% of the consumers were willing to spend more, allocating a considerable $3,076 (a 33% increase in budget from 2023). Notably, 34% of consumers earning more than $65,000 per year plan to spend more, while 21% of those earning under $65,000 say the same, suggesting that the difference in spending patterns is correlated (though not entirely) with the bifurcation in income.
Overall spending is mostly led by Millennials, followed by Gen Z whose holiday budgets are up 59% from the past two years. In comparison, Millennials cited a 22% increase, while Gen X and Baby Boomers plan to cut down their budgets by 9% and 6%, respectively, versus 2022.
Similar to last year, more than half of consumers (52%) who have not yet completed their holiday shopping plan to do so after Thanksgiving. This year, there’s a slight increase (3 percentage points) of consumers planning to shop on Black Friday.
Economic Headwinds Fuel Smart Spending
Holiday spending is expected to increase by 7%, reflecting an increase in consumer activity as well as the lasting impact of inflation and its inflated costs. Although inflation has moderated from its record figure from 2022, the cumulative effect of price increases over the recent years continue to affect spending habits.
This has led to many consumers approaching the holiday season with caution, with 57% mentioning that they are in a strained financial situation. About 85% are considering cutbacks in the next six months, primarily in non-essentials. For many, the decision to cut expenses on non-essential spending helps prioritize holiday spending. This can come as a challenge for sectors whose non-holiday revenues will face increased pressure.
Spending Power of Gen Z
Gen Z emerged as the champion of holiday spending, with 35% of the consumers planning to increase their budgets. Outperforming other groups, Gen Z shoppers have an average spend of $ 1,752 (up 37% from 2023).
As more Gen Z enter the workforce and increase their spending power, retailers are changing the in-store experience to cater to their digital-first preferences. Some 72% of Gen Z consumers consider self-checkout technology important in-store for their holiday shopping. They also note the significance of mobile payments (70%) and brand apps (68%), turning brick-and-mortar into a high-tech playground.
Appeal of In-store Shopping
Brick-and-mortar stores have still not lost their shine, thanks to their experiential appeal, the survey found. Almost one-fifth of consumers rank holiday displays and store atmosphere (22%), holiday-specific products (21%) and making an event out of the shopping trip (17%) as the top three factors impacting their decision to visit physical stores during the holiday season.
Consumers who intend to shop in stores more frequently are also big spenders, averaging $2,307 versus $1,297 for less frequent visitors. Some 63% of consumers who shop in stores more frequently than usual during the holiday season say that self-checkout technology and mobile payment options are important when doing their holiday shopping.
Men Headlining Budget for Tech, Travel
While women led with their holiday spending splurge in 2023, this season men will be outperforming female shoppers, with a projected 13% jump in holiday budgets. Besides electronics (58%) and video games (51%), men are also spending on travel.
About 53% of men intend to travel this season, compared to 40% of women, with 9% of male shoppers considering international holidays.
Prioritizing Savings, Sustainability
About 46% of consumers in the U.S. are planning to travel for leisure within the country this season. Travelers will be using reward redemptions for bookings.
Some 56% of travelers prefer to stay with family and friends, a significant jump from the previous year. This cost-effective option is mostly popular among those feeling the economic pinch, with 63% of consumers who plan to spend less this holiday season and 65% of Baby boomers opting for this accommodation.
Tech continues to play an integral role in enhancing travel experience for those planning to book hotels or rental properties. Contactless check-in, keyless entry and online booking are high on traveler wish lists.
Year Ahead
As consumers adjust their spending due to economic pressures, retailers will also be expected to adapt. From AI-assisted shopping to seamless omnichannel experiences, technological integration is essential to keep up with shopping innovations.
This holiday season and beyond, success will largely depend on offering value, personalization and memorable experiences — both in stores and online. For brands that can strike the right balance between innovation and tradition, this holiday season will prove to be successful, the survey added.