Will Gen Z splurge or save on holiday gifts this year?

CURATED READS FOR GEN Z—AND THEIR Z-CURIOUS COLLEAGUES

Click to get this newsletter weekly

Brought to you by Liz Hilton Segel, chief client officer and managing partner, global industry practices, & Homayoun Hatami, managing partner, global client capabilities

first up

An image linking to the web page “US holiday shopping 2023: Consumer caution and retailer resilience” on McKinsey.com.

Welcome back! This week, we’re exploring Gen Z’s holiday shopping plans.

In the US, the holiday shopping season is expected to drive about $960 billion in retail sales this year—a roughly 4 percent increase from the previous year (but down from its pandemic peak).

McKinsey’s latest ConsumerWise survey on holiday shopping asked more than 1,000 US consumers across age groups how they intend to shop for the holidays this year and how much they plan to spend. The results show that winning over Gen Z—whose expectations are high while their brand loyalty is notoriously low—requires retailers to excite shoppers, offer enticing deals, and complete deliveries at the speed of light. Let’s have a closer look.

Baby, are you down, down, down, down, down?

Even though younger consumers rank quality as the most important consideration when shopping this year (ahead of price and promotions), they also express a greater interest in “trading down,” by swapping for cheaper alternatives or forgoing purchases altogether. After all, Gen Z has lingering concerns about the economy, while also dealing with high prices and the return of student loan payments—all of which have reduced their savings cushion, a recent poll shows.

Trading down may also mean that Gen Zers double down on dupe shopping—aka finding cheaper versions of high-priced items in categories such as fashion, beauty, and home decor.

Back in April, Gen Z and millennials were ready to treat themselves: they were just as set on splurging as they were on trading down. McKinsey partner Kari Alldredge and senior partner Warren Teichner explain how these two seemingly contradictory behaviors—trading down and splurging—coexist: splurging is selective, and consumers gravitate toward splurge purchases that are experiential.

If I was a rich girl …

But times, and the grip on one’s wallet, can change. In our most recent survey, fewer Gen Z consumers say they intend to splurge on holiday gifts compared with last year. For those Gen Zers who still plan on shelling out, apparel, beauty and personal care, and electronics are the most popular categories to do so.

I still haven’t found what I’m looking for

Gen Zers plan to do their holiday shopping most frequently on retailers’ apps and websites, followed by browsing on social media and in stores. Email marketing is somewhat less relevant to Gen Z than it is to Gen X or boomers (which isn’t to say that it doesn’t matter at all, but that brands might have more luck meeting Gen Z where they are—on retailer apps and social media).

Once Gen Z shoppers decide on what to buy, they want their purchases ASAP—and are willing to pay extra to get them faster. According to this year’s survey, about half of Gen Z consumers say they expect to choose same-day or next-day delivery when they buy something online, and more than 50 percent say they will pay for same-day delivery. They’re also willing to pick up their purchases either curbside or in-store.

Gen Z: putting the instant in instant gratification since 1997!

VISUALIZE IT

K–12 schools in the US will need to spend or decide how to allocate around $5 billion per month in federal aid before the funds expire in September 2024.