What's Happening?
A recent survey conducted by PwC indicates that US holiday spending is expected to experience its steepest decline since the pandemic. The survey, which polled approximately 4,000 US consumers between June and July, reveals that shoppers plan to spend an average of $1,552 per person, marking a 5.3% decrease from the previous year. This decline is comparable to the 7.6% drop in 2020. The survey highlights that spending on gifts will be particularly affected, with an anticipated 11% reduction from last year's average of $814 to $721. Gen Z consumers are expected to reduce their budgets by 23%, contrasting with a 37% increase in 2024. Despite increased store traffic among Gen Z, actual in-store transactions remain low. Major retailers like Target, Best Buy, and Home Depot have maintained their forecasts, while Walmart and Abercrombie & Fitch have raised theirs. Mattel, however, has lowered its forecast.
Why It's Important?
The anticipated decline in holiday spending reflects broader economic challenges, including inflation and the impact of trade policies from the Trump administration. This cautious consumer behavior could significantly affect major US retailers during the crucial holiday season. As consumers prioritize essential purchases and scale back on discretionary spending, retailers may face reduced demand, impacting their revenue and profitability. The shift in spending habits, particularly among Gen Z, suggests a change in consumer priorities and purchasing behavior, which could influence retail strategies and marketing efforts. Retailers may need to adapt by offering more value-driven promotions and experiences to attract cautious consumers.
What's Next?
Retailers are likely to adjust their strategies to accommodate the changing consumer landscape. This may include enhancing online shopping experiences, offering competitive pricing, and focusing on essential products. As consumers become more deliberate in their spending, retailers might also explore new ways to engage Gen Z shoppers, who are increasingly seeking experiences over transactions. The economic uncertainty may prompt further adjustments in forecasts and strategies by major retailers as they navigate the holiday season.
