Holiday Spending Slowdown Looms: Gen Z’s Frugality Signals a Retail Reckoning
A chilling forecast for retailers this holiday season: for the first time since 2020, U.S. consumers anticipate decreasing their spending, according to PwC’s 2025 Holiday Outlook survey. But the headline number – a projected 5% overall decline – masks a far more dramatic shift in behavior, particularly among Gen Z. This isn’t just a pause in spending; it’s a fundamental recalibration of priorities, and retailers ignoring this trend do so at their peril.
The Gen Z Factor: Beyond Economic Pinch
While economic pressures certainly play a role, the pullback from Gen Z (ages 17-28) is striking. They plan to slash their holiday budgets by a massive 23% – more than four times the average consumer. This isn’t simply about having less disposable income; 25% of Gen Z respondents reported their financial situation is worse than last year. However, PwC’s Ali Furman emphasizes this is a “coming of age” moment for the generation. They’re entering adulthood, facing mortgages and childcare costs, and learning to budget. But the shift goes deeper.
“Price is Gen Z’s love language,” Furman stated. Raised in an era of inflation, they prioritize value and transparency like no other generation. This isn’t about being cheap; it’s about demanding a fair exchange. And their expectations, shaped by constant exposure to social media, are incredibly high. They expect brands to quickly adapt to trends – a “social to shelf velocity” that many retailers are struggling to match.
The In-Store Paradox: Foot Traffic Without Sales
Interestingly, Gen Z continues to drive foot traffic to brick-and-mortar stores and malls. Yet, this increased presence isn’t translating into purchases. This disconnect presents a significant opportunity for retailers. Simply having a physical location isn’t enough anymore. Stores need to become destinations – offering unique experiences that justify the visit.
Reimagining the Retail Experience
Furman suggests limited-edition drops, treasure hunts, and collaborations with influencers as potential strategies. Retailers must balance Gen Z’s demand for uniqueness with their unwavering focus on price. Think exclusive in-store events, personalized shopping experiences, and a clear demonstration of value. The traditional retail model is being challenged, and those who fail to adapt will likely see their Gen Z customer base dwindle.
Shifting Shopping Timelines and Gift Preferences
The survey also reveals a shift in when and what consumers are buying. Shoppers are starting their holiday shopping earlier, with 80% expected to be completed by Cyber Monday. This compressed timeline puts pressure on retailers to launch promotions and secure inventory early. As for gifts, gift cards, toys, apparel, and consumable goods are expected to be the most popular choices. Notably, food is emerging as a resilient category, offering affordability, generosity, and a sense of personal care without contributing to clutter – a key consideration for budget-conscious consumers.
The rise of gift cards isn’t just about convenience; it’s a strategic way to manage budgets. A $100 gift card still represents a generous gesture, even if its purchasing power has diminished due to inflation. This highlights the importance of perceived value and flexibility in gift-giving.
The Role of Technology: AI and Channel Parity
Technology is playing an increasingly significant role in holiday purchasing decisions. Approximately 15% of Gen Z and millennials plan to leverage AI to generate gift ideas, signaling a growing acceptance of AI-powered shopping tools. Furthermore, holiday gift shopping is approaching “channel parity,” with roughly equal percentages planning to shop online (51% via marketplaces like Amazon, eBay, and Etsy) and in-store (53%).
While online shopping remains strong, the desire for in-person interaction persists. Nearly half of consumers (48%) are drawn to stores to directly interact with products, while 38% cite promotions and 25% the holiday atmosphere as motivators. This underscores the importance of creating a compelling and engaging in-store experience.
The future of retail isn’t about choosing between online and offline; it’s about seamlessly integrating the two. Retailers must offer a consistent and personalized experience across all channels, leveraging technology to enhance the customer journey.
The coming holiday season will be a critical test for retailers. Successfully navigating this challenging landscape requires a deep understanding of evolving consumer behavior, particularly the priorities of Gen Z. Those who prioritize value, experience, and technological innovation will be best positioned to thrive in this new era of retail. What strategies will you be employing to capture the attention – and wallets – of today’s discerning shoppers? Share your thoughts in the comments below!
