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Millennials dominate spending amid uncertain economic outlook
Holiday Outlook 2022
Despite citing fears of inflation and the rising costs of transportation and utilities as deterrents to holiday spending, most consumers — 74% — told us they plan to spend the same or more this holiday season as they did last year.
Aware that they might have to stretch their holiday budgets, some have already started to cut back in the months leading up to the holiday season — on dining out, apparel and streaming services.
To find out more about their expectations and intentions for the season, we asked 4,000 consumers where and when they will shop and travel — as well as what drives their purchasing decisions.
2022 holiday spending key themes
Holiday spending levels similar to last year
This holiday season, 35% of shoppers plan to spend more than they did last year. High-earning young shoppers, these big spenders skew male and live in metropolitan areas. In addition to spending on their families, they will also spend more on themselves than the average holiday shopper.
Overall, consumers plan to spend an average of $1,430 on gifts, travel and entertainment this year — very similar to the $1,447 they spent last year. That’s up 20% over pandemic-ravaged 2020 and more than 10% over 2019.
Consumers will spend $1,430 on average:
$754 on gifts
$452 on travel
$224 on entertainment
Why it matters
Levels of confidence in holiday spending vary by geography, as well as by age and income level, requiring brands and retailers to match their messaging with their customers’ specific preferences.
Growth in personal income primes high-income consumers for a jolly holiday
Higher income households — whose purchasing power has increased in recent months as their personal incomes have grown — will spend considerably more this holiday than they did last year. Unlike middle- and lower-income households, their spending patterns over the last several months have remained unchanged, despite inflation.
In fact, while holiday budgets for consumers at large remain essentially the same as last year, those with household incomes of $120,000 and above will increase holiday spending by 15%. They will spend $2,759 on gifts, entertainment and travel — close to double the $1,430 average.
Millennials are the only age group spending more this holiday season than they did last year: 11% more.
Why it matters
High-income households are most likely to have used virtual reality to buy physical products and luxury goods. And 50% of consumers told us they are excited about what the metaverse has to offer. If you’re not among the two-thirds of business leaders actively engaged in planning or implementing metaverse-related activities, the time to start is now.
Brand-loyal millennials bring the shine
As in previous years, millennials (ages 26-40) are primed to spend, with an average budget of $1,823 — 27% higher than consumers overall. In fact, almost half (48%) expect to spend more this holiday season than they did in 2021, compared to 35% for all age groups.
They are also more likely to travel this holiday (63% v 47% for all consumers). Often residing in large metropolitan areas, they are less likely to have to deal with the price of gas, given much shorter commutes, often via public transportation. And in the wake of the pandemic job reshuffling, many have traded up for higher paying roles in a job-seeker’s market.
Six in 10 millennials belong to a customer loyalty program and 66% have a brand or retailer credit card, which influences online browsing (77%) and in-store shopping (79%) — higher than any other age group.
53% of millennials will include resale or upcycled items on their holiday shopping lists (v 37% of all age groups).
Why it matters
Help keep those brand-loyal millennials coming back by providing the customer experience they seek: the pitch-perfect combination of speed and convenience at the right price from a relatable brand that lines up with their values.
How will they shop this holiday season? How will they pay?
While online shopping has continued to gain ground over the years, in-store shopping is holding its own, as consumers seek that in-person holiday sparkle. This year, consumers told us they will do 57% of their shopping online; 43% in stores.
When we first started asking consumers about holiday shopping in 2015, cash was the most preferred payment method, with 80% of consumers ranking it among their top three choices.
Today — as a variety of contactless payment options continue to proliferate — that top spot goes to debit cards, with 60% of consumers ranking it highest among their top three choices. Credit cards and cash round out the list.
While still nascent, buy now, pay later platforms for online shopping are gaining ground — from 5% of consumers using them in 2021 to 13% this year.
Why it matters
Consumers want to combine physical and digital shopping in whatever way works best for them. In the wake of the pandemic, they are quick to move on if they can’t find what they’re looking for. Sync up online and in-store options to provide a seamless experience for them that keeps them coming back.
Waiting for the right holiday deal
Inflation-weary consumers are understandably price-sensitive this holiday season, but not as much as they were last year. This year, 65% said price ranks highest among the top three factors influencing their holiday spending, compared with 75% last year.
As they navigate an economic environment in flux, 74% of consumers are waiting for the best deals before they begin shopping, which they don’t expect to see until November. Some (25%) will start shopping in early November; however, most (41%) will wait for the Thursday through Monday of Thanksgiving weekend to do the majority of their holiday shopping.
While Black Friday itself may not hold the appeal it once did — in 2015, 60% of consumers told us they would shop on Black Friday; this year, 20% said they would — the end of November does signal holiday shopping in the minds of consumers. Meanwhile, a scant 17% will wait until after the Thanksgiving weekend.
Almost 75% of consumers — including 87% of boomers — are braced for higher prices this holiday season; they are actively bargain-hunting.
Source: PwC Holiday Outlook 2022
Q: When are you planning to do the majority of your holiday shopping?
Base: 4,000
Why it matters
Digitized supply chains can help retailers keep up with the urgency of holiday shoppers in late November by building resilience, increasing efficiency and cutting costs — all while delivering inventory when consumers want it.
Show me proof of delivery
With pandemic-related restrictions easing and population immunity on the rise, consumers are more comfortable spending time in stores for their holiday shopping this year. Many are likely to go back to browsing in stores as part of the holiday shopping ritual.
Retailers, meanwhile, have continued to beef up the infrastructure required for pickup options in the wake of a pandemic that forced their hand; many have been gratified that customers often end up buying more once they arrive to pick up an order.
Home delivery, the most popular option for online shopping, continues to get more sophisticated as consumers become more accustomed to it — and demand more options. When deciding between various online shopping options, they prefer those that offer proof of delivery, real-time tracking and flexibility on timing.
29% of young millennials (ages 26-30) will shop via smartphone this holiday season, versus 22% for all age groups.
Why it matters
Retailers are at risk of losing up to 40% of customers if they don’t deliver their purchases on time. Meanwhile, 33% of customers will peel away if they receive the wrong or damaged item. Shorten and diversify your supply chains to deliver the right products on time and help keep customers coming back.
Consumers trust brands that reflect their values
Since 2020, when trust became synonymous with health and safety, brand trust has figured prominently for consumers. This year, a remarkable 93% of them told us it is top of mind during holiday shopping, similar to last year’s 92% and a striking increase over the 70% we’ve recorded in the years prior to the pandemic.
Almost 60% of consumers, meanwhile, told us brand trust is a very important factor in their holiday purchasing decisions, again confirming what we’ve heard from them in the past: They seek relatable brands that reflect their own values of sustainability and purpose.
Health-conscious millennials, for example, are more likely to support wellness brands than all age groups (51% v 35%). Local brands are popular with all consumers, or in the case of national retailers, those who source locally. Consumers also want to know more about a company’s environmental, social and governance (ESG) efforts. To find out, more than 60% of millennials and Gen Z rely on social media.
Trust earned is trust multiplied: 88% of consumers said when a company earns their trust, it also earns a recommendation to friends and family.
Why it matters
Consumers have told us over the years that they want to know your ESG story. Develop a robust strategy that treats ESG not just as a challenge to be met but rather as an opportunity to showcase your brand.
Holiday travel rides again
Pre-pandemic, roughly a third of consumers took holiday trips, most to gather with family and friends and some for a holiday getaway. After months of sheltering in place for much of 2020 and into 2021, however, more than half of consumers were up for traveling during the holidays last year, the vast majority by car.
Similar patterns emerged again this year, with almost half of all consumers — 47% — planning to travel this holiday. Of that 47%, more than two-thirds (69%) will travel by car..
This year, however, air travel has picked up again, with almost half of travelers — 46% — planning to fly, up from 40% in 2021 and 33% in 2020. Of course, many will end up using a combination of air and road travel to reach their final destinations.
Those who plan to travel also are big spenders overall: At an average of $2,441 this holiday season, they will spend upwards of $1,000 more than the average consumer. Here again, millennials lead the way, with 63% planning to travel.
Online booking sites are the most popular way to book travel, with 45% of travelers — and almost 60% of traveling millennials — using them for holiday travel.
Why it matters
PwC analysis finds that travelers are particularly prone to changing brands after a bad experience. Demand intelligence tools can help assess shifts in travel trends, shore up loyalty and prepare for the crush of holiday travelers.
Through the lens of the economy
This holiday shopping season is especially fraught after months of economic, geopolitical and health concerns that have affected consumers’ purchasing ability as well as retailers’ inventory and supply chains.
Slightly more than half of consumers (53%) are concerned about inflation, up from 45% in 2019. Meanwhile, as the factors causing inflation show signs of cooling, consumer sentiment has started to tick up gradually.
While lower gas prices are likely to continue fueling the recent rebound in consumer sentiment, purchasing power remains skewed toward high-income households. If the labor market remains strong and inflation continues to ease, holiday spending could experience an uptick.
For now, lower- and middle-income households are reporting diminished ability to spend on discretionary goods and services, sometimes choosing to skip purchases altogether rather than buying less-expensive alternatives. Bargain-hunting is likely to be widespread this holiday season as is shopping at value retailers.
Households with annual incomes of $100K and above — accounting for roughly 47% of spending — are masking the degree to which purchasing power has deteriorated across income levels.
Why it matters
Being able to pivot in response to fluctuations in consumer demand will be essential in an uncertain economic environment. So will the ability to respond to consumer expectations for bargains in time for the holidays.
Know your customers so you can anticipate their needs
The mandate for brands and retailers this holiday season: Respond with agility to changes in the economy and accompanying shifts in shopper sentiment. To do so, combine your own intimate knowledge of your customers — based on the data they’ve shared — with advanced analytics.
The resulting insight can help meet the expectations of those shoppers who are ready to spread holiday cheer. Meeting their expectations will require maintaining a ready supply of desirable products moving swiftly through the ordering and delivery processes — while adjusting for sales volumes that could vary significantly across geographic regions and customer segments.
Consumers are looking for the right deals this year before they commit to holiday shopping, travel and entertainment. They want to reconnect with family and friends for the holidays. And they want to support brands and retailers they can identify with — and trust.
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