Dive Brief:
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Holiday spending is set to reach a record $1,638 per shopper this year, a 7% increase from last year and 15% above 2022, according to PwC’s outlook report. Consumers remain selective, though, with 59% saying inflation is likely to impact their budget and 57% saying their finances are strained, per the report.
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Nearly 30% say they’ll spend less at the holidays this year compared to last, 10% more people than in 2023 and the highest percentage recorded by PwC. About a quarter will spend more, down 9% from last year and the lowest recorded, except for pandemic-era 2020.
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Stores continue their post-pandemic comeback, with 45% of consumers planning in-store purchases, up 2% from last year and the most since 2019, (but down 14% versus 10 years ago). And 22% plan to shop on Black Friday — 3% more than 2023 and the first increase since 2018, but a far cry from a decade ago when nearly 60% did so.
Dive Insight:
Inflation factors into the robust holiday spending increase reflected in this PwC survey, but the results nevertheless suggest that retailers will do well this season in terms of volume, according to Kelly Pedersen, partner and PwC Global Retail Leader.
While Gen Z consumers enjoy brick-and-mortar shopping, especially on high streets away from the mall, other forces may send holiday consumers to stores, including concerns about getting gifts on time during what is a condensed shopping period after a late Thanksgiving, Pedersen said by video call.
“I wouldn't be surprised if the in-store traffic this holiday season is a pretty big boon, because of people just generally returning to stores more and there’s some pessimism towards getting deliveries in time,” he said.
Even with inflation falling for months now, consumers remain selective about their discretionary spending and are primed to be very price-conscious at the holidays, according to PwC. The survey shows the sharp differences in plans depending on household income, with more than a third of respondents with an annual income over $65,000 saying they’ll spend more, compared to just a fifth of those who earn less than that.
Gift cards are one way of dealing with inflation, allowing gift-givers to give the same amount as previous years without the appearance of giving less, Pedersen said. While about half of 2015 holiday shoppers gave out gift cards, this year 65% plan to leverage them as gifts, PwC found.
As in other years, there are generational differences, with Gen Z especially keen on shopping in stores, taking sustainability into account when making purchases and 40% of them considering celebrity and influence endorsements important (versus 28% for consumers overall). That cohort’s average holiday spend has gone up 37% year over year to $1,752, a nearly 60% increase over two years.
Millennials’ budgets are also bigger at $2,222 average spend per shopper, up 16% year over year and 22% over two years. Their elders are trimming theirs, though, with Gen X consumers cutting their holiday budgets by 9%, which translates to average spend of $1,454. Baby Boomers are cutting theirs 6%, for an average spend of $1,126.
With many consumers holding record levels of credit card debt, PwC found a shift in preferred payment methods, with 65% saying they’ll use a debit card, 58% using cash and 55% using credit cards. In 2015, 80% used cash, 69% used credit cards and 63% used debit cards, per PwC.
There may be a quirky pattern to holiday promotions and marketing this year because, while retailers want to get a jump on the season, the presidential election is overshadowing much of the advertising space, Pedersen said.
“We expect some retailers to go heavy early on, probably dissipate a little bit mid-holiday season, and then back at it again in late November,” he said. “So it could be a really good time for consumers to shop right now.”
