The past eight years haven’t brought much cheer to consumer wallets during the holidays, given stagnant wages and a slow post-recession recovery. But the Grinch may at last be gone this season.
Americans will boost their spending by 10 percent this holiday season, reaching the highest level since the economy fell into a recession in 2009, according to a new survey from PricwaterhouseCoopers (PwC). Separately, the National Retail Federation forecast solid holiday sales, projecting an increase of 3.6 percent to $655.8 billion.
Shoppers are planning on spending more after seeing their first annual pay raise since 2007, the year before the economy took a nosedive into recession. Bolstered by a 5.2 percent jump in median household income last year, consumers said they plan to spend an average of $1,121 each this holiday season, PwC found. Two groups that have been strapped since the downturn -- millennials and households with less than $50,000 in annual income -- said they’d boost their spending even more than the overall American.
“We’re finally to a point where there are full employment levels and we’re starting to show wage growth,” said Steven Barr, U.S. retail and consumer leader at PwC. “I don’t want to suggest that things are extremely wonderful, but you can only hold the consumer down for so long.”
Big spenders this season will also include women and hipsters, who are defined as college-educated millennials living in cities such as Austin, Brooklyn, and Portland, Oregon, the survey found. Hipsters will spend $500 more than other shoppers -- and many will be spending a big chunk of that change on themselves.
Americans aren’t only spending more, but they’re changing how they spend. While online spending continues to gain market share, consumers are increasingly turning to another type of gift giving: providing “experiential” gifts, such as travel or entertainment. In other words, giving someone a handbag may not be as appreciated as tickets to hear Adele in concert.
The reason? Social media, said Allison Stone, a researcher at PwC.
“Because millennials and Generation Z are on social media so much, they are sharing what they are doing,” she said. “You want to be doing the coolest things with your friends and sharing it with your other friends.”
Generation Z, by the way, is the next big group for retailers, surpassing even the millennial generation. This group, born after 1996, include 86 million Americans, making it bigger than the millennial or baby boomer generations. While they don’t have the same purchasing power as either group, they’re also changing the way Americans shop: they enjoy social shopping, but also want to purchase items that reflect their individuality, rather than looking like everyone else.
So-called “influencers,” such as popular YouTubers or entertainers and public figures, can sway their buying decisions, with more than half of Gen Zers telling PwC that they have bought a product promoted by one of their influencers.
Across the board, Americans said they are not only shopping differently by relying more on online or mobile purchases, but are also moving away from physical gifts. About half of respondents said they still planned to give physical gifts this holiday season, but one-third said they’d rely on gift cards while another 16 percent said they’d buy experiential gifts.
Interestingly, there may be a gap between what Americans are buying and what they want to receive: only 27 percent said they want to open physical gifts on Christmas morning. More prefer to receive gift cards (42 percent) or experiential gifts (31 percent.)
That’s pushing retailers to up their game, Barr said. “They need something that will draw the consumer in, whether that’s a beauty bar in the store, or a personalization station,” he said. “They need to do something that will compete with concert tickets and dinners.”
While the two forecasts vary considerably in predicting how far consumers will open their wallets, PwC includes some segments of spending that’s not tracked by the National Retail Federation, such as travel.