Retail Viewpoint: Consumers are trimming their holiday lists—what that means for retailers

Ahead of the peak 2024 retail season, consumers of all income levels have expressed intent to reduce their holiday spending—not just lower-income households. ​Retailers will have a shorter window of time and stricter prerequisites to satisfy if they are to capture their share of a shrinking wallet. 

A similar dynamic played out in 2023. A year ago, consumers signaled their intentions to cut back, but logged higher inflation-adjusted spending anyway (+1%). This time around, economic sentiment is even weaker. Forty-three percent of middle-income consumers ($45,000-$100,000 a year) say the economy is worse or much worse than the year prior, as do 35% of those making over $100,000. And according to consumer intentions, the holiday season is going to start later than it has in the past six years. 

On September 17, we released our annual AlixPartners Holiday Outlook Survey of more than 1,000 American consumers. We projected that holiday sales will grow by just 2% to 5% year-over-year—below the growth seen in 2023. According to the survey, 22% of wealthy consumers plan to spend less this holiday season than last year, and 32% of middle-income earners—a figure that rises to 43% for households earning under $45,000 annually. 

We see this translating to more pressure on retailers to manage in-stock, finesse the messaging of their holiday deals, and reach target customers as households trim their budgets. 

On net, consumers plan to spend less this year than the 2023 holiday season.  

While our historical data shows that the consumer tends to exaggerate estimated spend increases or decreases, the actual trend generally aligns with our forecast. In 2024, consumers appear to be going into the holiday season with much more trepidation than usual. They are conscious of uncertainty around the U.S. election and wary of stubborn inflation, which continues to be the number one driver (for 38% of respondents) of changes to financial health, with an outsized impact on lower-income households​.

In practice, this means that consumers will be strict in planning their budgets this year. They are planning on purchasing the same number of gifts as last year (if fewer self-gifts) but holding firm to their budget. To save money, they will be looking for lower-cost brands, including private label, and deals.

We see a planned decline in spend in almost all categories except food & beverage at home—so the party will be around the dinner table rather than in the living room. The biggest reduction is in self-gifting, across all ages except those 25-34​. Older consumers (55+) are most likely to reduce spend on gifting this year​ (net -5%). 

Consumers are waiting until after the election to start their holiday shopping. 

From 2019 through 2022, about half of all consumers started their shopping before Halloween. In the past two years, consumers have pushed their shopping closer to the holiday season. In 2024, only 35% plan to start holiday shopping before Halloween, continuing a four-year trend of people delaying later and later.  

Amid economic uncertainty, consumers are doing more homework than ever to discover new lower-cost brands or products, conduct price comparisons across retailers, and wait to capture the best deal. 

Retailers should not panic if there is a slower build to holiday sales, but a shorter window means that it’s more important that product descriptions are clear and robust, that final pricing is clear (including discounts and shipping fees), and that product is in-stock. This will allow consumers to easily compare and select products when they’re on a mission to complete their lists.  

Even more consumers are looking for a deal, with a higher share of respondents buying more than half of their holiday haul on sale. 

In 2023, 38% of respondents intended to purchase the majority of gifts on sale. In 2024, that number rose even higher to 42% of respondents. An expanding Black Friday and Cyber Monday window has trained them to expect significant promotional activity throughout the holiday season—and to have access to major discounting earlier each year, as pre-Black Friday deals have proliferated. 

That means that the competition to win wallet-share through these shopping events is extremely high and your average sale won’t cut it anymore.​ Having a clear and robust promotional plan is vital throughout the holiday season, with contingent plans to pull on in case of emergency. ​Retailers can also help consumers ramp up to the holiday checkout by allowing them to pre-build carts for big promotions like Black Friday, and allowing loyalty customers the chance to “reserve” inventory ahead of the official launch. 

Regardless of how early consumers start shopping, the Christmas Eve rush is real, and retailers should drive urgency through clarity over inventory levels. That hot toy is going to sell out, and consumers need help planning their shopping to avoid disappointment. 

Inventory allocation and in-stock rates are very important this holiday season—out-of-stocks will lose you a customer in two-thirds of cases. 

During COVID, consumers were very forgiving with in-stock rates, knowing that global supply chain issues were impacting everyone. They have now lost patience. The consumer expects product to be available in-store and when they encounter an out-of-stock they are more likely to go to a competitor’s site or store than see if there is online inventory—only one-third of customers will bother going to the retailer’s website . 

This means that inventory allocation will be an even more powerful lever this holiday season. As 67% of customers intend on making at least 30% of purchases online, spending by the shrinking-but-significant sliver of in-store customers will depend greatly on in-stock rates. 

Attracting a consumer into your store is only half the battle. In-store staff need to be focused on driving conversion, whether through making inventory available in-person or shipping the product directly to the consumer. Implementing staff training programs and SPIFFS to build and reenforce these capabilities can help reduce consumer frustration.

This holiday season may be more of a sprint than a marathon, and will still be influenced by factors that have yet to play out, including the election. The U.S. Holiday Outlook also signals a shift toward online shopping for reasons of stock availability, range, and convenience.  

Notes: Administered August 6-7, 2024, online survey of 1,000+ U.S. adults. 

For complete access to AlixPartners’ 2024 Holiday Outlook Survey results and methodology, please contact Meghan Hayward here.