The holiday season is upon us. As prices remain high, the luxury downturn persists and the country grapples with the outcome of the presidential election, what can retailers expect from US shoppers?
The latest round of earnings shows how strained the US consumer still is. Brands from Ferragamo to Nike saw drops in US revenues in their most recent reports. Kering recorded a 15 per cent dive in North America, though this is relative to the company’s overall struggle (Asia, by comparison, dropped 30 per cent). LVMH’s fashion sales remained flat in the region. On Thursday, US-based Tapestry and Ralph Lauren’s earnings boded better. Tapestry’s North America revenues were down just 1 per cent, and this was partly due to a planned reduction in wholesale. And, at Ralph Lauren, North America revenues were up 3 per cent, after dipping the quarter prior.
Squeezed or not, consumers are gearing up to shop for the holidays. This season, Americans plan to spend an average of $2,100 outside of typical obligations and necessities, a 7 per cent increase from 2023, according to Bank of America’s holiday shopping season survey. Plus, consumers with higher discretionary income (the $100,000 to $199,000 income group) are planning to spend more this season, up 17 per cent year-on-year, per Deloitte’s 2024 holiday retail survey.
Brands are planning accordingly. Forty-three per cent say they are allocating over 25 per cent of their marketing budgets to holiday campaigns, according to a recent Launchmetrics holiday marketing survey. And almost 20 per cent of companies are set to spend between $100,000 and $500,000 on these initiatives.
But it’s not just about capturing spend at this specific moment. Building loyalty is an especially big opportunity this year, as 62 per cent of consumers plan to shift their brands of choice if their go-tos become too expensive, per Deloitte.
Below, Vogue Business breaks down how consumers are thinking about spending this holiday season — and how brands can plan accordingly.
The election is on the mind, but impact is limited
Experts predict that, post-election, holiday spending will commence as usual. Neil Saunders, managing director of retail at Globaldata, says, based on past election years, most consumers revert to normal levels of spend in time for holiday shopping. “There is certainly an impact on sentiment with the losing side feeling gloomier about future prospects, but this really doesn’t have a massive impact on spending,” he adds.
That said, Trump’s proposed tariffs also mean that prices may well hike in the new year — providing even more reason for consumers to shell out and stock up this season. This will only have a limited impact on spending levels, though, because the average consumer isn’t solely basing their shopping off of this.
“The risk of higher prices due to tariffs may bring some spend forwards, especially for big ticket items, but I think this risk is currently too opaque in the minds of consumers to have a major impact over the holidays,” Saunders says.
Eyes on younger shoppers and men
Gen Z is projected to spend $3,300 this holiday season, and millennials are expected to top the spending at an average of $4,000, per Bank of America. Gen Z is keen on buying (and receiving) fashion and beauty gifts this year, according to student discount platform Pion. Forty-five per cent are also planning on self-gifting — another brand opportunity.
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In terms of brands, 82.4 per cent are targeting millennials this year, while 43.4 per cent are targeting Gen Z, according to Launchmetrics. Gen X and boomers comprise 30.7 and 8.6 per cent of holiday marketing strategies, respectively. When it comes to Gen Z, there’s still room for growth in budget allocations; they plan to spend, on average, just $700 less than millennials, but their budget allocation is half of that of millennials.
By gender, men plan to spend an average of $2,750, whereas women plan to spend $1,400, according to Bank of America’s report. (In 2023, on average, men planned to spend $2,491, versus $1,419 for women.) The holiday season is as big a business as it is because of gifts, after all. So female-focused brands ought to target not just their usual female customer, but should look to insert themselves in the consumer journeys of male partners and friends, too.
Promotions are a priority
Consumers may be keen to spend, but they’re also cost conscious. Sixty-two per cent of Americans anticipate feeling financial strain around holiday expenses, per Bank of America. Notably, this is down from 67 per cent in 2023. This year, almost half of Americans (49 per cent) are stressed about affording the holidays, according to Credit Karma, and 61 per cent say inflation and higher costs have significantly impacted their holiday spending budgets.
Given the strain, discounts are key. As a result of rising prices, 59 per cent of Bank of America survey respondents are trading down and plan to do more shopping at discount stores. And, according to Credit Karma, 40 per cent of consumers say that holiday sales encourage them to spend money they don’t have on things they don’t need.
This year, 84.2 per cent of fashion, lifestyle and beauty brands surveyed are participating in Black Friday, while 70.1 per cent will take part in Cyber Monday, highlighting their significance, per Launchmetrics (which surveyed hundreds of employees in these sectors). Extra incentives, like free shipping or a discount for spending a certain amount can also help brands stand out during the holidays.
Consumers are down to “spave” this year, per Credit Karma — meaning they’ll spend more to save more, like add an extra item to their cart if it will get them a savings perk. Forty per cent of Americans are keen to do so (49 per cent of Gen Z and 51 per cent of millennials), according to the report.
Online and IRL
The holiday shopping season may bring big foot traffic, but online shopping is just as important a destination. Forty-eight per cent of shoppers say they are planning to do more online shopping during the holidays versus non-holiday months, up from last year’s 35 per cent, according to Bank of America. And 48 per cent of consumers also plan to shop on their phones this holiday season, per Deloitte.
When people do shop in person, they’re looking for something special. Focus on experiences is up 16 per cent year-on-year, according to Deloitte. Mimi Allen, a 21-year-old Newcastle University graduate from London told Vogue Business: “A lot of my friends are now very much focused on doing stuff instead of getting items.”
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