Young consumers may be putting their spending on ice for the incoming holiday season.
Data from consulting firm PwC found that Gen Zers plan to spend 23 percent less on holiday this year than they did in 2024. As a point of comparison, in 2024, the same demographic said they planned to spend 37 percent more than they did in 2023.
Gen Z’s hesitancy around holiday is influencing at-large consumer spend expectations for holiday. PwC projects a 5 percent decline in overall average consumer spend, led largely by Gen Z; millennials said they planned to decrease spending by 1 percent, and Baby Boomers plan to spend 5 percent more than they did in 2024. The firm believes the average consumer spend for holiday will fall at about $1,552 per person.
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Ali Furman, partner and U.S. consumer markets industry leader at PwC, and Kelly Pedersen, partner, global retail leader at PwC, said part of Gen Z’s plan to back away from spending this year comes from the fact that retailers don’t do a strong enough job of showing Gen Zers that they understand their interests and shopping habits.
For instance, Furman said, retailers often don’t react quickly enough to emerging trends that would capture market share among younger generations. PwC’s holiday survey showed that Gen Z respondents use social media for gift discovery equally as often as they use search engines for the same purpose.
Furman called that the “social to shelf” effect, but noted that many retailers don’t have the systems in place to respond rapidly when a trend or product captures young shoppers’ attention.
“Retailers need to understand not just what consumers do, but what they aspire to,” Furman said. “I don’t think retailers are moving fast enough, particularly for Gen Zers and Gen Alphas that are looking for social to shelf. They should focus on creating categories around unmet needs. It’s just this moment where retailers need to fundamentally reimagine how their company connects with consumers…Agility beats perfection,” Furman said.
What’s more, Pedersen said, Gen Z lacks some of the brand loyalty that other generations bring to the table. In his mind, it has repeatedly proven more difficult to retain the Gen Z consumer, in part because they focus heavily on price and trend.
The increased use of artificial intelligence systems—in particular, AI agents—for shopping could cause further deviation from brand loyalty among Gen Z shoppers, Pedersen posited. That’s because agents do exactly as they are instructed. If a shopper tells an agent they’re seeking a particular price or attribute, the agent works to find that, rather than focusing on a specific brand, in many cases.
Gen Z consumers indicated they plan to use shopping agents at a higher rate than their peers in different generations.
Furman said she expects the adoption curve for AI systems like that to continue to accelerate in the future, but noted that consumers continue to use the technology for discovery and research rather than for direct purchasing today. That perspective tracks with Salesforce data that shows consumers still primarily use agents for discovery.
“The gap between what’s possible from a technological standpoint and user adoption is quite a chasm at this stage of the game,” she said. “But with AI, we’ve seen adoption accelerate exponentially in other forms. It’s not to say that we won’t get there fast. It is just a big question mark as to when.”
Even though consumer adoption hasn’t hit its peak yet, Furman said brands and retailers need to be preparing to make themselves seeable by AI systems; the way some websites are set up today isn’t conducive to how agentic AI and large language models (LLMs) crawl the internet for responses to consumer queries.
“If retailers aren’t investing in these capabilities to optimize your product or your brand to be found by an AI agent, they risk becoming invisible,” Furman said.
But beyond technology strategy, brands and retailers need to keep a continued focus on retaining their consumers. That’s particularly true at a time of economic volatility and wavering consumer sentiment.
Pedersen said that drawing younger consumers in is done best by ensuring that they feel they’re getting strong value for the increasingly limited dollars they anticipate spending.
“Exclusivity and limited editions and limited drops are very smart strategies to use for Gen Z. They’re very responsive to those things. If you can do things with a layer of perceived value for quality, you’re really in the zone,” Furman said.
The point about perceived value seems to hit home for many consumers. Nearly eight in 10 consumers PwC surveyed said they are actively looking for less-expensive versions of products, either for themselves or for gifting, this holiday season. Value continues to be a defining factor for holiday purchases, particularly in some categories; 36 percent of consumers said they plan to cut back on apparel purchases in general in the coming six months. Meanwhile, 84 percent of consumers said they plan to cut down in general in the next six months.
But value isn’t necessarily only, or even primarily, predicated on the lowest possible price for some consumers. Pedersen and Furman said consumers increasingly consider the quality of the product when making a decision about what to buy.
That’s important when considering prior holiday trends; last year, Salesforce projected that low-cost e-commerce marketplaces like Shein and Temu would control a large portion of holiday spending. This year, the appetite for such goods may have shifted. That’s, in part, because of consumers’ perception of value, but also because of the closure of the de minimis provision, which now leaves low-value parcels susceptible to duties that are driving up prices on fast-fashion items.
Pedersen said the closure of that loophole and talk about tariffs could impact consumers’ holistic view of such marketplaces and change their behavior. But, like most consumer trends, he expects sentiment around fast fashion to remain far from universal.
“It actually could push consumers to think about local brands again; it could have the intended result that the administration wants it to have, which is looking at local companies instead of importing,” Pedersen said. “We have to still remember that, even though things like de minimis are going away, the base cost of some of those [marketplace] products is so low anyway, that an extra 20 percent on $4.99…is not going to make that big of a difference.”
Furman and Pedersen said that gift cards increasingly seem to provide consumer satisfaction around value. The PwC survey shows that more than half of overall respondents plan to give gift cards to friends, while 47 percent of respondents plan to give them to family. The experts said consumers see gift cards as a way to show their generosity without having to spend extra on physical gifts that have increased in price because of inflation, tariffs or other economic factors.
“There’s almost been a direct correlation between inflation and gift card increases,” Pedersen said. “It’s a strategy—as a gift giver, I’m passing on the burden of inflation onto the gift receiver,” Pedersen said, with Furman quipping that, because the value of the gift card remains the same, “You look equally generous every year.”
Pedersen and Furman expect the continued rise of gift cards to impact retail from multiple angles.
On one hand, Furman said, gift cards’ increasing popularity could see consumer spend exceeding the value of the gift card that brought them to a brand or retailer and could extend the holiday season, helping retailers optimize their inventory effectively.
And, on the other hand, Pedersen said, it’s likely that gift cards could postpone some of the revenue retailers are expecting to see from holiday, especially in highly personal categories like apparel.
“The more gift cards, the softer [retailers’] holiday results could be, and the stronger their Q1 results are going to be,” Pedersen said. “If consumers don’t go and spend those [gift cards] in January, then they’re not recognizing the revenue until February or beyond.”
