What: Holiday 2025 retail spending is declining for the first time since 2020, with Gen Z cutting back sharply while older generations maintain or increase their budgets.

Why it is important: The generational divide and economic pressures reinforce the importance of flexible retail models and personalised engagement to capture shifting demand.

The 2025 holiday season signals a notable shift in retail dynamics, with overall consumer spending expected to decline by 5%—the first such drop since 2020. Gen Z is leading this contraction, planning to reduce their holiday budgets by 23% as they navigate economic uncertainty, early career challenges, and a heightened focus on value, sustainability, and wellness. In contrast, baby boomers are set to increase their spending, and millennials are holding steady, highlighting a pronounced generational divide. Despite tighter budgets, consumers remain committed to holiday traditions, with spending on travel and entertainment holding firm and food emerging as a resilient gift category. Value-driven choices are shaping the season, as shoppers seek affordable alternatives, embrace secondhand and upcycled gifts, and prioritise meaningful experiences over material goods. Flexible shopping and payment channels, including omnichannel integration and diverse payment options, are increasingly important, while technology and AI are playing a growing role in product discovery—especially among younger consumers. Retailers are challenged to move beyond one-size-fits-all strategies and respond in real time to evolving consumer needs.

IADS Notes: The generational and value-driven shifts described in the 2025 holiday outlook are echoed in recent industry findings. Gen Z’s changing definition of necessities and their rising economic influence are prompting retailers to adapt, while baby boomers’ wealth and loyalty remain underleveraged. The surge in secondhand gifting and the anti-materialist movement, highlighted in late 2024 and early 2025, reflect a broader move toward affordability and sustainability. Hybrid shopping patterns and the adoption of flexible payment options, such as BNPL, are reshaping consumer journeys, as seen in the 2024 holiday season. Economic pressures, including tariffs and inflation, are eroding consumer confidence and driving more cautious, deliberate spending. Meanwhile, the growing use of AI for product discovery among younger shoppers coexists with a persistent demand for human interaction, confirming that successful retail strategies must balance technology with personal service.

US Holiday Outlook 2025: Value, meaning and generational shifts