While economists continue to scratch their heads about the current economy, consumers have continued to spend, but what will the holiday season look like in the current climate? On this week’s episode of Retail Gets Real, Kelly Pedersen, partner and U.S. retail leader for PwC, joins the show to talk about how retailers are responding to the environment and how consumer behavior is adapting.
“There’s a lot happening in retail, and it’s a dichotomy. We hear a lot about the economic stats, right? Potential recessions, slower growth inflation,” Pedersen says. “But then on the other side, we also have really great job numbers and low unemployment.”
According to PwC’s Global Consumer Insights survey, overall consumers are still spending, but what they’re spending on has changed — less discretionary spending and more spending on necessities such as food and fuel.
That trend will carry over into the holidays, Pedersen says, with slightly less spending on gifts and travel, as consumers realize that “preparing a holiday meal for friends and family is going to be more expensive this year so they know they’re going to have to spend on that and they’re going to cut back on maybe gifts and some travel. There’s some real interesting dynamics in what people are spending on.”
PwC’s latest survey reports that overall spending this holiday season will be down slightly compared with last year, but millennials are bucking that trend and are planning to spend more than any other generation this year, according to PwC’s latest holiday survey.
“There was a big difference between [generational] spending levels,” Pedersen says. “Overall holiday spending for millennials was predicted to be up 11%. It’s a very significant increase. Baby Boomers? Down 11%. Gen Xers [are] about flat to previous years. It’s really the story of millennials right now and more millennial shoppers.”
Dive deeper into the latest holiday shopping trends of consumers.
There are a couple of factors driving that trend of spending more, Pedersen says. First, many millennials changed jobs during and immediately following the pandemic. Second, many of those job changes translated into significant salary increases. “Millennials have been the highest beneficiaries of changing jobs, getting significantly higher pay at new companies — which seems to have translated into higher spending.” Meanwhile, Baby Boomers are scaling back and spending more on health care and saving for retirement.
Listen to the full podcast to hear Pedersen’s take on how retailers and suppliers are dealing with increased costs throughout the entire network, the rebound in bricks-and-mortar traffic and what makes him excited about the future of retail.
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