As the holiday season approaches, US consumers are poised to increase their spending despite ongoing economic challenges, including high prices, the luxury downturn, and the lingering effects of the presidential election. Retailers are preparing for a mixed season, with some brands experiencing a decline in revenues while others are seeing more optimistic results.
Recent earnings reports show that US-based retailers are feeling the squeeze. Luxury brands like Ferragamo and Nike have experienced drops in their US sales, and Kering reported a 15 percent decline in North America. However, brands like Tapestry and Ralph Lauren saw more positive results, with Tapestry’s North American revenues down just 1 percent due to a planned reduction in wholesale, and Ralph Lauren seeing a 3 percent increase.
Despite these strains, US consumers are planning to spend significantly this holiday season. According to Bank of America’s survey, Americans are set to spend an average of $2,100 on discretionary items, a 7 percent increase from 2023. Consumers in higher income brackets (those earning between $100,000 and $199,000) are expected to increase their spending by 17 percent, as noted in Deloitte’s 2024 holiday retail survey.
Retailers are responding to these shifts, with 43 percent of brands allocating more than 25 percent of their marketing budgets to holiday campaigns. Some are also planning substantial investments, with nearly 20 percent of companies set to spend between $100,000 and $500,000 on their initiatives. Along with immediate sales, loyalty-building has become a priority for many brands, as 62 percent of consumers are willing to switch to cheaper alternatives if their preferred brands raise prices.
Though the presidential election has influenced consumer sentiment, experts predict little long-term impact on holiday spending. Neil Saunders, managing director of retail at GlobalData, believes that while some consumers may feel gloomier post-election, the effect on spending is generally limited. Additionally, potential tariff-driven price hikes next year may lead to earlier spending, but they are unlikely to significantly affect the current holiday season.
Generational and gender-based spending patterns also show distinct trends. Gen Z is expected to spend an average of $3,300, while millennials are projected to spend $4,000. Gen Z is particularly interested in fashion and beauty gifts, with nearly half planning to indulge in self-gifting. Brands are targeting these younger demographics, with 82 percent focusing on millennials and 43 percent on Gen Z. Interestingly, men are planning to spend more on average than women, with an expected spend of $2,750 compared to women’s $1,400. This shift presents an opportunity for brands that traditionally target women to appeal to male shoppers as well.
Promotions will be key this season, as 62 percent of consumers expect financial strain from holiday shopping, though this is a slight improvement from last year. In response to rising prices, many shoppers are opting to shop at discount stores, and a growing trend of “spaving”—spending more to save more—has emerged, especially among Gen Z and millennials. Discounting strategies such as Black Friday and Cyber Monday sales, along with incentives like free shipping, are expected to be crucial for brands.
Online shopping continues to be a dominant force this holiday season, with nearly half of consumers planning to make more online purchases compared to non-holiday months. In-store shopping is still important, with an increasing focus on experiential gifts and activities. According to Deloitte, interest in experiences is up 16 percent from the previous year.
As retailers prepare for a busy season, understanding these consumer behaviors and targeting the right demographics with tailored offers will be crucial for success this holiday season.
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