As the 2023 holiday season quickly approaches, PwC’s annual holiday outlook report finds a generally more optimistic view. The company is predicting holiday spending to surge to its highest level recorded ($1,530) with a 7 percent increase in spending compared to 2022 (which notably took a dip).
PwC’s holiday survey shows that spending is up across all holiday categories, with travel expected to experience the highest increase at 12 percent year-over-year for an expected $510 spend per consumer. Both the gift and entertainment categories are expected to see a 4 percent increase, reaching an estimated $786 and $234 respectively. Almost 40 percent of consumers reported plans to spend more overall compared to last year with those with household incomes of $120,000 or more expected to exceed an average of $3,000.
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The overall increase in spending for the 2023 holiday season, Kelly Pedersen, retail leader at PwC U.S., told WWD, is indicative of some broader economic trends.
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Shifts in spending are shown across generational demographics, and while Millennials will still represent the highest spend with an average of $1,918, Gen Z is for the first time expected to outspend both Gen X ($1,782) and Baby Boomers ($1,148) at $1,782 — a 15 percent increase from 2022. Pedersen said that while new and important, the finding is somewhat unsurprising given that the Gen Z consumer is now up to age 25 with many having graduated school and starting to earn more money.
“It’s also that same group of people who are getting into a lot of consumer debt and so there’s a willingness right now to spend in the economy,” Pedersen said. “That sort of shifted demographics and who is spending what has been a pretty interesting change as well. A lot of Baby Boomers are in retirement age now so they’re cutting back.”
Putting travel’s notable increase into context, Pedersen said the company’s survey findings indicate that whereas increased travel spend was recently due to revenge spending, a more significant shift in consumer priorities is also now at play. The Gen Z consumer, for example, is choosing to put more of their budget in the travel category as spending increases. Another important factor is the consumers’ drive to get more value from their dollar amid inflation, which Pedersen says might be giving travel a leg up.
“We have broader consumer surveys that people value experience more than things,” Pedersen said. “[But] also general perception is that the inflation has manifested itself into inflation on physical things rather than travel in the last couple of years so people likely also have the sentiment that ‘Hey, my money doesn’t go on as far anymore, I might as well go do something to enrich my experiences with travel.’”
Similarly, Pedersen said, that as consumers report increased prices on food and fuel, the trend for entertaining at home, which was popular during the 2021 holiday season, has shifted with people allocating a higher percentage of their holiday budget to restaurants and other entertainment in 2023.
As in similar 2023 holiday reports, PwC’s survey found a hyper-focused consumer when it came to finding deals this season. “People are very cost conscious out there and they’re really trying to you know, hunt for those extra deals, hunt for saving or any sort of money they can so they can potentially shift that spending into spending for experiences,” Pedersen said. “And that will come out throughout the season.”
According to PwC’s holiday consumer survey, 77 percent of consumers are on the hunt for deals this holiday season, citing efforts to counteract rising prices, compared to 74 percent in 2022. Eighty-six percent of consumers also said they plan to cut back on discretionary spending in at least one area including eating out, shopping for clothes and going out to movies or concerts. Some consumers said they would switch to non-branded products.
Continuing from previous years, PwC’s data found that deals and shopping will occur much sooner than Black Friday, with Prime Day in October leading the way. Pedersen told WWD that this timing is something he speaks to retailers about a lot, noting the importance of figuring out promotional timing and inventory availability much earlier on in the season.
The company’s report found that just 19 percent of consumers plan to shop on Black Friday this year, down from 20 percent in 2022 and down from 60 percent in 2015. Most consumers (26 percent) said they expect deals to begin before the holiday season and in early November (37 percent).
Notably this holiday season represents the first after a summer of female empowerment coming from the Barbie movie and both Beyoncé’s and Taylor Swift’s tours and as such, PwC’s report found that women are planning to spend 11 percent more than they did in 2022. While women are still expected to spend significantly less than men ($1,292 versus $1,711), Pedersen told WWD the finding is interesting as it shows how the summer’s events have “created this really interesting dynamic in the economy. We’re seeing that confidence come through in the holiday outlook report.”
“On average men make more than women in the economy but I think the story is that women are catching up. Men and women are about the same in terms of increase and this year there was that tilt,” Pedersen said. Also considering the impact on retail and local businesses where Swift concerts popped up this summer, he said it will be a challenge to comp next year. “What’s going to happen next year when she’s in Europe? Some of these stores might be having to promote more and they’re going to have to think about that because everything you do in retail is always about comping last year. Especially for the major markets where a lot of the revenue was for many retailers that are going to have a material impact next year.”
To win this consumer, Pedersen further explained that as retailers look to what matters to female consumers should consider that women rank priorities as price (65 percent for women versus 55 percent for men), speed (51 percent compared to 43 percent), convenience (51 percent to 43 percent) and free returns (52 percent to 41 percent). What matters less? Health and wellness (31 percent for women versus 38 percent for men) and shipping costs (47 percent to 56 percent). Women are not as brand loyal as men (59 percent and 67 percent, respectively) and are willing to switch loyalties based on the values they deem as important.
Looking to the next several months, competition for wallet share will be tough even with an expected increase in spending this holiday season, Pedersen said. Younger consumers are showing interest in getting out in person for shopping, allowing retailers to engage, with a majority of consumers staying focused on online options including search engines, online marketplaces, brand websites and social media. It’s a short period and those who will win are offering experiences and the right promotions.