Holiday Spending 101: How to Prepare for the Shopping Season

It is important that retailers and lenders pay attention to the state of US consumer finances, especially as the holiday season approaches. Keeping up-to-date about spending patterns is vital if businesses want to have a successful holiday season.

The Equifax Market Pulse Index is a useful tool in determining financial challenges, and considers various data points such as credit, debt, capacity, assets, and income. This year, the index is 61.4, reflecting several challenges. For instance, increasing delinquency, especially for younger generations, impacts the Market Pulse Index. Wealth and income volatility, student loan impacts, and high savings rates also play a part. 

Gen Z is currently struggling the most when it comes to finances. Holiday shopping is down 23% for Gen Z consumers, and Gen Z has seen a 5% decrease in Market Pulse Value–more than any other generation. 

With this in mind, consumers are approaching holiday spending with more caution, but continue to prioritize gift-giving. Current spending trends include early shopping, increased domestic travel and Buy Now, Pay Later. 

This data provides insight into how lenders and retailers can effectively prepare for the holiday season. Lenders should anticipate a continuation in the demand for card originations and higher card balances. Additionally, it will be important to prepare for increased credit and loan requests as the holidays grow closer. 

For retailers, it is important to remember that less money in savings means less discretionary spending money for consumers. However, most consumers are still willing to spend on their loved ones; 82% of consumers say they will try to save on essentials to cover their holiday purchases. 

Another important focus for retailers is personalization and data-driven marketing. 71% of consumers expect companies to offer personalized interactions, according to McKinsey. By creating impactful and thoughtful marketing language, companies can connect with consumers, leading to increased revenue. 

By staying informed about consumer behavior, retailers and lenders can make the most of the holiday season.