2023 Holiday Shopping Trends
As the holiday shopping season gets longer, consumers grow more value-driven and pragmatic — can tech-powered experiential retail win them back?
With Thanksgiving right around the corner, let’s take a look at the retail trends emerging out of this early stage of the holiday season, in particular, how a year’s economic uncertainty and a summer of funflation has impacted shopper behavior this year.
More Price-Conscious & Value-Driven Than Ever
Rising economic pressure has been a defining feature of 2023 for many U.S. consumers. A confluence of factors, such as persistent inflation, rising interest rates, and geopolitical tensions, has created a challenging environment for households across the country. In response, many chose escapism by spending big on live entertainment events such as concerts and sports games, leading to a summer of “funflation,” a term referring to the rising cost of leisure activities and experiences.
Unsurprisingly all these factors are putting pressure on holiday shopping budgets, making it even more important for shoppers to be mindful of their spending this year. Unsurprisingly, a recent McKinsey survey found that 79% of U.S. consumers are planning to trade down this holiday season, swapping their purchases for cheaper alternatives, up 5% from 2022. McKinsey notes that while this belt-tightening is true for all income groups and generations, and although Gen Z tend to rank “pricing and promotions” as less important than other factors, they too are considering trading down.
Yet, make no mistake, this reactive price-consciousness among holiday shoppers does not mean people would forgo holiday shopping altogether. The overall holiday spending in 2023 is expected to increase between 3% and 4% over 2022, per estimates by the NRF. In particular, ecommerce sales would grow faster than overall sales, jumping between 7% to 9% year-over-year.
As a result, consumers are embracing a more value-driven mindset when it comes to holiday shopping this year. They are doing their research online and in-store, and being deliberate when making purchases. They are looking for gift inspirations all over, from the lifestyle influencers they follow to using generative AI to come up with gift recommendations.
Consequently, pandemic-era indulgence is going out of style, as the percentage of consumers who intend to splurge on either themselves or others declined from 39% in 2022 to 35% in 2023, per McKinsey survey data. This decline is mostly fueled by Gen Z, which represents a 12% decrease in consumers who intend to splurge.
In addition, many value-driven consumers are embracing resale items as a smart way to save this holiday season. Salesforce predicts that 17% of gifts this holiday season will be a resold item, saving 32 billion pounds of additional waste in landfills. In line with expanding efforts towards sustainability, numerous brands and retailers have embraced the practice of reselling merchandise returned by customers.
A notable instance is Coach’s introduction of a “recycled” bags section on their website, selling new products made from repurposing and redesigning previously owned items. Such innovative offerings not only underscore the commitment to sustainability but also provide a compelling reason for customers to revisit the website, potentially leading to more purchases. Similarly, Poshmark, a popular resale platform, is hosting live events and encouraging shoppers to embrace circular fashion during this holiday season.
The “Holiday Creep” Met With Creative Pragmatism
It’s no secret that the holiday season has been getting longer. This elongation of the holiday season, sometimes referred to as the “holiday creep,” is mostly attributed to early deals introduced by major retailers. For example, Macy’s launched Black Friday events throughout November and introduced early holiday deals, and Amazon rolled out early Black Friday deals. Some analysts would even argue that Amazon’s second Prime Day sale in mid-October kicked off the holiday sales this year.
Funny enough, Walmart’s suite of Mean Girls-themed holiday ads — which reunites the cast from the much-meme’d 2004 film and is arguably the buzziest holiday retail campaign so far this year — is all about hammering home the message that the retail giant now drops “Black Friday deals” on Wednesdays throughout November.
As a result, consumers are being strategic in managing their holiday budgets and taking advantage of early deals. According to data collected by Adobe, U.S. shoppers already spent a record number of $76.8 billion online on holiday purchases in October alone, up $4.3 billion from last year. They are also becoming more savvy when it comes to the timing of making purchases, with many now expecting to get a good deal outside of the traditional holiday shopping window.
A recent YouGov survey found that 52% of U.S. shoppers plan to skip Black Friday sales this year, blaming negative in-store experiences during previous years and a lack of trust in the deals being offered; in fact, only 17% of shoppers think they can find genuine discounts on Black Friday.
This trend, along with the aforementioned value-driven mindset, coalesces with what Accenture has dubbed as “creative pragmatism,” which includes a reversal in the ‘shopping ahead’ trend seen in previous years. Accenture’s survey found that 51% of U.S. shoppers intend to start their holiday shopping in November or December. Other manifestations of this pragmatic attitude include willingness to compromise on convenience, with 54% of those surveyed say they would opt to collect from store versus doorstep delivery if it saves them money, and making purchases that they can enjoy all year around, such as board games.
Having a more spread-out holiday shopping experience also gives consumers more time to do the research to ensure they are getting the best value for their money, thus discouraging impulsive purchases. In response to such a value-driven and pragmatic mindset, retailers will need to do more than just frequent discounts to win over holiday shoppers. For example, loyalty programs are becoming increasingly crucial, and retailers can leverage them to gain a nuanced, data-driven understanding of each consumer, and offer timely rewards to those who already made purchases, thus leveraging a prolonged holiday season into an opportunity for repeat purchases.
Moreover, the prolonged holiday season can also mean more time for retailers that are integrating unique in-store experiences to attract customers. These can range from holiday-themed events to interactive product demonstrations, making shopping a more engaging and memorable experience. Shein, the viral Chinese ecommerce app, is taking over Forever 21’s Times Square store to host a “Home for the Holidays” pop-up experience, featuring an interactive game room where customers can play to earn gift cards. As shoppers grapple with the pressure to be pragmatic and save, retailers have an opportunity to inspire their customers through storytelling and immersion.
Tech-Powered Shopping Experiences Add Value
Speaking of experiential retail, a big part of what drives attention and engagement in retail experiences these days are novel, innovative experiences powered by emerging technologies such as augmented reality, the metaverse, and generative AI. Retailers are increasingly leveraging these technologies to create immersive and interactive experiences that go beyond traditional shopping, and this holiday season is no exception.
For example, Lego leveraged AR to create a transatlantic snowball-throwing contest This digital snowball competition, a part of Lego’s larger “Play is Your Superpower” campaign, exemplifies how AR can transform a conventional marketing campaign into an interactive and globally accessible experience. By creating this AR experience, Lego goes beyond selling products and offers a playful and immersive experience that blurs the lines between digital and physical play.
Similarly, J. Crew has unveiled a holiday-themed virtual store, taking the concept of experiential retail to a new level. The virtual store appears as a snow lodge for women’s apparel and a ski chalet for men’s clothing. This immersive virtual store, in line with how other brands have been exploring early-stage metaverse platforms, offers customers an engaging shopping environment far removed from the typical ecommerce website. The experience is enhanced with a scavenger hunt and an AI holiday card generator, making the shopping journey more interactive and personalized. This not only enhances brand engagement but also creates a memorable shopping experience that customers are likely to share and talk about.
Speaking of AI, the hottest innovation concept of the year is certainly making an impact on the holiday shopping experience as well. Google’s AI-powered “Search Generative Experience,” which aims to provide more comprehensive and informative search results in a chat format, is adding an option that allows shoppers to use AI to generate gift ideas and items to help with online shopping.
The upcoming feature, which Google is set to release in December, will allow users to create true-to-life images by simply describing the clothing item they’re interested in, for example, a “colorful, patterned puffer jacket.” Following this, it enables them to locate and buy real products online that resemble their envisioned item. Users will have the capability to fine-tune their input to make sure the images generated accurately meet their specifications. They can then explore a range of purchasable products, closely mirroring the style they desire, selected from the vast array of 35 billion options available in Google’s Shopping database.
In addition, Google is also adding new AI features aimed at helping small businesses appear more prominently in search and on Google Maps during the holiday season. U.S. businesses on Merchant Center can now add a “small business” attribute, displayed as an icon and label on their listings, making it easier for shoppers to find them. Additionally, Google is partnering with Etsy and introducing an AI-powered Product Studio for creating product images with text-to-image AI for experimental scenes, similar to the ones that Amazon just announced.
Overall, this holiday season marks a significant evolution in retail, with AR, AI, and immersive experiences leading the charge. They offer consumers a blend of entertainment, personalization, and convenience, transforming the traditional experience of shopping into an engaging, memorable journey.
Want to Learn More?
In conclusion, the 2023 holiday shopping season reflects a landscape where economic challenges have led to more price-conscious and value-driven consumer behavior. In response, retailers are innovating with technology, creative marketing, and strategic promotions to attract and retain customers in this evolving retail environment.
If you want to learn more about the latest retail trends and tech-enabled shopping experiences, please reach out to Chelsea Freitas (Chelsea@ipglab.com) to start a conversation.
