The Great Retail Reset: How Gen Z Is Redefining Holiday Spending

After several years of strong holiday growth, 2025 is shaping up to be a year of recalibration. According to PwC’s latest consumer survey, overall holiday spending is expected to decline by 5%, marking the first drop since 2020. The biggest driver of this shift: Gen Z, whose planned spending is down nearly 25% year over year.

But what’s happening here goes beyond inflation or cost-of-living pressures. The data signals a broader transformation in how every generation — from Gen Z to Boomers — defines value, makes purchase decisions, and interacts with brands.

The Macro Picture: A Cooling Retail Engine

Retailers heading into the 2025 holiday season are confronting a rare convergence of factors: economic fatigue, cautious optimism, and changing consumer priorities that span every generation.

While inflation is stabilizing, shoppers are feeling its residual impact on daily expenses like housing and groceries. Eighty-four percent of U.S. consumers say they plan to spend less in the next six months, reflecting a national mood of financial self-preservation.

This doesn’t necessarily mean consumers aren’t spending. It means they’re spending more deliberately. Across sectors, we’re seeing:

• A decline in impulse purchases, as consumers delay or research non-essential buys.
• The rise of “dupe culture,” where shoppers seek alternatives to premium brands that deliver similar quality at a lower price.
• A surge in resale and recommerce, reinforcing that ownership and newness are no longer synonymous with value.
• An expanding middle market, as brands once positioned as “affordable luxuries” now cater to price-sensitive consumers trading down from high-end retailers.

This shift represents more than a temporary slowdown. It’s a correction. A return to intentional consumption after years of pandemic-era splurging and stimulus-fueled demand.

The Cultural Lens: Gen Z’s Redefinition of Value

Gen Z’s spending pullback isn’t about pessimism; it’s about principle. This generation, now a major force in the economy, is reshaping consumer culture through a mix of pragmatism and personal expression.

For Gen Z, “value” is multidimensional. It’s not just about price tags, but about alignment with identity and purpose. Their shopping behaviors show that they:

• Seek novelty and authenticity, favoring brands that reflect individuality over mass appeal.
• Prioritize affordability as empowerment, using smart shopping to maintain autonomy in an expensive world.
• Trust peer influence more than corporate marketing, making social validation a form of currency.
• Treat sustainability as a baseline, not a differentiator.

This generation’s cautious spending may feel like a pullback, but it’s more accurately a reshuffling of priorities. They’re still participating in retail; just on their own terms. The “splurge” moments will still come, but they’ll be tied to experiences, social moments, and brands that earn their loyalty through transparency and creativity.

For brands navigating this new consumer mindset, personalization is key. Optimizing segmentation strategies can help tailor messaging and retention efforts for these more deliberate shoppers. 

A Generational Balancing Act

While Gen Z headlines the conversation, other generations are also adjusting their approach to holiday spending:

• Millennials, who face rising childcare and mortgage costs, are tightening budgets but remain focused on gifting experiences and supporting small or mission-driven brands.
• Gen X remains pragmatic, balancing saving and splurging, often prioritizing quality and convenience over brand loyalty.
• Boomers, though less financially constrained, are still trading down selectively, embracing digital deals and value-oriented brands they once ignored.

The common thread? Every generation is redefining what “worth it” means.

Where past holidays were driven by novelty and abundance, 2025 may be remembered as the year consumers collectively paused to realign spending with meaning.

What This Means for Retail and Beyond

The 2025 holiday season won’t reward the loudest brands; it will reward the most perceptive ones. Success this year depends less on who discounts deepest, and more on who truly understands the shifting psychology of value.

Several themes are coming into focus:

• Value redefined. Price still matters, but proof matters more — proof of quality, purpose, and staying power. Shoppers are moving away from abundance toward alignment.
• Experience over excess. Across generations, the joy of buying is being replaced by the satisfaction of buying well. Consumers want purchases that affirm their discernment, not their indulgence.
• A shared language of value. For the first time in decades, Gen Z, Millennials, Gen X, and Boomers are motivated by the same question: Is it worth it? What differs is how each defines the answer.

The Big Picture

Holiday 2025 isn’t a downturn, rather it’s a moment of maturity. A collective recalibration where consumers are choosing meaning over motion. For retailers, this is both a challenge and an invitation: to listen more closely, to connect more thoughtfully, and to see value not as a price point, but as a mirror of what people truly care about.

As the noise of endless promotion fades, a quieter kind of growth is taking shape, one fueled by awareness, intentionality, and trust. The brands that understand why people spend won’t just keep them coming back; they’ll become part of how those consumers define value itself.