Nearly 90% of surveyed shoppers said they expect to spend more because of rising prices. The second-most-cited reason for spending more is cooking more food for the holidays."

The holidays represent a time for cheer and celebration, with reflection on the year that has passed and excitement for what’s to come. This holiday season, consumers are excited to return to traditional celebrations with their friends and loved ones, with gatherings expected to increase in frequency and size, likely the largest in-person celebrations seen within the last couple of years.

However, with inflation high and wallets tightened, shoppers are thinking about how they can make the most of their holiday spending as they plan festivities, meals and gifts. Retailers should be thinking about what impact consumers’ economic circumstances will have at the shelf this holiday and how they can best position themselves to win by focusing on holiday budgeting intentions, key consumer gifting categories and younger consumers’ holiday purchasing.

Consumers Are Shifting Their Holiday Spend Amidst Inflation

As they navigate inflation and other economic challenges, consumers are expecting to spend more on holiday groceries and gifting, according to Daymon’s 2022 Holiday Consumer Study. But they’re doing what they can to stick to their budgets — including being willing to switch brands and categories. Nearly 90% of surveyed shoppers said they expect to spend more because of rising prices. The second-most-cited reason for spending more is cooking more food for the holidays. With the combination of rising prices and larger gatherings, half of shoppers still plan to do their holiday grocery shopping at a conventional grocery store, but they’re also considering value-oriented retailers such as club stores.

Within food categories, many consumers are looking to switch among brands that best meet their needs and adjust their category purchases to maximize value. Some of the most anticipated value-seeking swaps include purchasing more affordable meat and opting for frozen items rather than fresh or canned. These shoppers are looking to extend the value of their purchases, opting for items with a longer shelf life that can be purchased at the right time to maximize budgets. This makes for a competitive environment that puts overall value at the forefront, requiring retailers to be strategic in how they promote the value of their holiday grocery offerings through marketing that details savings and in-store displays that promote cross-merchandising of their value meal components.

Some shoppers will be making different types of switches, such as prioritizing more healthy and fresh items. While these trends may seem contradictory, they indicate a variety of shopper subgroups with differing needs and priorities this holiday season. For example, the propensity to switch to a frozen turkey increases by generation, with the oldest generation being the most likely to buy frozen birds this year. Meanwhile, the youngest generation is the most likely to report preparing more healthy holiday meals this year compared to last year.

Holiday Gifting Expected to Be Strong

The return to large in-person holiday celebrations has consumers excited about gifting, with retailers poised to win with the right strategy. This year, 85% of shoppers are planning to purchase holiday gifts and spend about the same or more than last year across two-thirds of the gifting categories surveyed. While inflation and tightened budgets remain shopping influencers, shoppers are excited to enjoy the holidays and participate in gift-giving festivities.

When shopping for gifts, consumers plan to spend as much as last year or more on key categories such as apparel, gift cards, toys and games, and food gifts such as wine, chocolates and gourmet cheese. With 73% of shoppers expressing they seek out product information online to guide their shopping trips, retailers that play within these categories should ensure they have an integrated marketing strategy focused on omnichannel tactics — inclusive of social channels, apps and SMS marketing — in addition to engaging in-store displays. Simultaneously, they should be offering competitive promotions that drive value and price.

Gen Z and Millennials Putting Their Own Spin on the Holidays

Younger shoppers are ready to celebrate and host their own holiday gatherings this year and there are key behavioral differences across grocery shopping and gifting that set them apart from older shoppers. They also have complexities in their lifestyle desires that, at times, seem contradictory, such as being the most likely to purchase premium brands, but also the most likely to stick to a budget.

Compared to older generations, Gen Z and Millennial survey respondents were more lifestyle-focused and more likely to opt for healthy and convenient options. For example, Gen Z is almost 2.5 times as likely as other shoppers to prioritize sustainability in their holiday brand selection. These shoppers are also the most compelled by flavors and the least likely to factor in brand familiarity in brand selection. Also, Gen Z intends to purchase more premade foods for the holidays than other generations, even as these items come at a higher price point; nearly 1 in 4 of these shoppers shared that buying more premade foods is the reason they expect to spend more this holiday season. While there is still an appetite among these younger shoppers to make items from scratch, retailers can best target Gen Z by incorporating prepared options that center on fresh attributes to drive convenient and health-based purchasing.

When it comes to holiday gifting, Gen Z and Millennials are planning to increase their spending across categories and products that reflect personal style and aesthetics, with the top category being apparel. Home goods and decor and personal care and makeup represent two additional categories that have a higher expected holiday spend compared to older generations’ spending. Retailers need to be thinking about how they can target younger shoppers across in-store and online strategies, increasing marketing to accentuate these top spending categories while promoting holiday deals to motivate purchasing.

This year, shoppers are eager to celebrate the holidays, but how much they spend — and where they spend it — depends on retailers’ abilities to offer the right value in the right categories to the right customers.

Michael Taylor
President, Global Customer Solutions
Advantage Solutions

Michael Taylor leads Advantage Solutions’ global retailer-focused businesses and teams, including Daymon, SAS Retail Services and retailer experiential marketing services, plus shopper marketing agency Promopoint and The Data Council, a content creation and syndication agency. He also leads Advantage’s Customer Collaboration Center of Excellence.