Gen Z Slashes Holiday Spending as Economic Pressure Hits Young Shoppers

Young American adults are cutting their holiday spending far more than any other age group. This shift is creating challenges for retailers who rely on Generation Z’s influence and future purchasing power. Survey data from major firms like Deloitte reveals the stark pullback.

Consumers overall showed resilience during Black Friday sales. However, Gen Z shoppers are making a clear and deliberate choice to spend less. Their financial pressures are unique and are reshaping holiday shopping trends.

Survey Data Reveals a Stark Generational Divide

Recent surveys highlight the dramatic spending gap. A Deloitte poll found Gen Z plans to cut holiday spending by an average of 34%. That is a much sharper reduction than older generations reported.

In fact, Gen X was the only group that planned to spend more. A separate PricewaterhouseCoopers survey confirmed the trend. It found young adults are also pulling back on travel, dining, and clothes shopping.

This matters greatly to the retail industry. Generation Z currently makes up about 8% of U.S. retail spending. Analysts at PwC expect that share to grow to 20% within five years.

Their social media influence is also outsized. Retailers must pay attention to their habits now. These young shoppers are trendsetters who explore a wide range of brands.

Economic Realities Drive a New Frugality

Several economic factors are squeezing young wallets. Housing and student-loan costs continue to rise. Prices for everyday items like groceries and restaurant meals remain high.

Recent college graduates also face a tougher job market. Entry-level hiring has slowed significantly. The unemployment rate for recent graduates has climbed to its highest level in a decade, outside the pandemic.

This financial strain is changing gift-giving traditions. Young adults are opting for homemade presents and low-cost activities. Secondhand luxury items are also becoming more acceptable as gifts.

Retail executives are taking notice. Companies are adjusting strategies to appeal to budget-conscious youth. Best Buy reported stronger sales among younger shoppers after stocking more lower-priced items.

Beauty brand e.l.f. focuses on keeping most products under $10. This price point directly appeals to Gen Z’s search for value. The strategy has proven successful even after recent price increases.

The trend of reduced Gen Z holiday spending signals a cautious new reality for retailers. Brands must adapt to this generation’s pronounced focus on value and financial pragmatism. Their influence will only grow, making their current frugality a critical market shift.

A quick knowledge drop for you

Q1: How much is Gen Z cutting holiday spending?

According to a Deloitte survey, Generation Z shoppers plan to reduce their holiday spending by an average of 34%. This is a significantly larger cut than any other age group reported in the same survey.

Q2: Why are young adults spending less this year?

They face multiple financial pressures. Key factors include rising costs for housing, student loans, and essentials, coupled with a softer entry-level job market and higher unemployment for recent graduates.

Q3: How are retailers responding to this trend?

Brands are adapting by emphasizing value. Strategies include expanding lower-priced product ranges, like at Best Buy, and keeping core items affordable, as seen with e.l.f. Beauty’s under-$10 product focus.

Q4: Is secondhand shopping part of this trend?

Yes. Giving pre-owned luxury items as gifts has become more acceptable. Platforms like The RealReal note that Gen Z and millennials now make up over half of their shoppers, including for gifts.

Q5: Did overall holiday shopping decline?

No. Overall U.S. consumer spending remained resilient early in the season. Black Friday sales actually rose 3% year-over-year. The spending pullback is particularly concentrated among younger shoppers.