The 2025 Holiday Reality Check

[00:00:05.84] Phillip: Hello, and welcome to Future Commerce, the podcast at the intersection of culture and commerce. I'm Phillip.

[00:01:56.59] Alicia: And I'm Alicia.

[00:01:57.47] Phillip: And today we are unpacking how data culture and commerce collide to shape the future of retail. And joining me today, she is the Retail Research Leader at Deloitte and a seasoned analyst whose work identifies the inflection points driving how people shop and how brands grow. Her insights have been featured for years now in The New York Times, Wall Street Journal, Women's Wear Daily, and many more, where she's known for turning complex data into stories that reveal where retail is heading next. Lupine Skelly, welcome to Future Commerce.

[00:02:25.48] Lupine: Hi, thanks for having me.

[00:02:26.92] Phillip: Yeah, thanks. And today we are unpacking a brand new piece of research for 2025 that Deloitte is in its fortieth year of reporting on. Give us a little bit of background on this year's research and the history of the report.

[00:02:41.25] Lupine: Yeah, so like you mentioned, this is our fortieth year doing holiday study. Things have changed a lot in forty years, as you can imagine. But this year, we're seeing consumers kind of take a cautious approach. They're planning to spend $1595 dollars. That is down 10% versus last year. And basically what we're seeing is just a lot of concern about the economy and people's own financial situations. And then just this ability to understand if prices are gonna be higher on this holiday season.

[00:03:12.89] Phillip: There's a little bit of I think a cautious outlook, I think, you would say 10% of a bit of a drawback. What do you think are the contributing factors that are going into this year versus, say years prior that's causing some of that? Is that demographic across the board? Is that psychographic? What do you think are some of those reasons that causes that 10% pullback?

[00:03:41.15] Lupine: Well, we're definitely seeing a pullback across demographics. It's pretty interesting, but there's kind of three main reasons. One, over three quarters are expecting higher prices this year on holiday goods. So they're kind of trying to figure out what does that mean for their budgets. The second point we have is that over half are saying they're expecting a recession next year. So again, just kind of uncertain about things and protecting their budgets. And then probably the most remarkable stat I've seen since working on this report for seven holidays is that 57% of people are saying they expect the economy to weaken in the year ahead. And that's the highest we've seen since we started tracking that question in 1997. To put that in a little bit of context, 2008 was probably the next highest 54% were saying that they expected the economy to weaken. So that was around The Great Recession. So a lot of uncertainty out there. We certainly have seen the consumer kind of hold up spending in the past several months, but I think this is kind of signs of some cracks in the foundation.

[00:04:43.94] Phillip: Something to really keep in mind here as we're going into the spending for holiday season. We're tracking that throughout here in the weeks to come here on Future Commerce.

[00:04:53.43] Alicia: Yeah. Absolutely. And what I find most interesting about this research is how that cautiousness of the economy, their individual financial standing is how that translates into the actual behaviors. How they're engaging with brands and retailers. There's data that indicates a lot more participation and engagement Thanksgiving week. And there's been this long held narrative around the elongation of the season means Black Friday is dead. But your data points to the contrary, right? And I think that shows how with the price consciousness comes participation and these cultural rituals that really drive the holiday season. So I would love your perspectives on how you're seeing that juxtaposition really come to life. And we're recording this leading up to Black Friday and how that translates to actual actions and things that brands can do leading up to this period where apparently consumers are gonna be hyper engaged?

[00:06:05.37] Lupine: Yeah. I mean, I'm kind of cracking up because I feel like people have been trying to kill off Black Friday for twenty years.

[00:06:11.37] Alicia: I know, and I love it.

[00:06:14.09] Lupine: {laughter} Black Friday is not dead. There's certainly some things that have occurred that like you mentioned, are elongating the season. Couple things, Amazon has done a remarkable job of creating these Prime Day events. And we have all these other kind of subsequent promotions that go on around that time now, Target, Walmart doing them, but also like small retailers kind of jumping in because it's the moment when consumers are out there and they're willing to spend. Retailers need to kind of take note. So what we've seen is that pulled sales forward into October, we've seen people saying, 24% of my budget will be spent by the end of October now, which is pretty remarkable.

[00:06:57.15] Alicia: Wow.

[00:06:57.23] Lupine: And that was only 20% last year. So again, the impact of these promotions and the fact that people are so just focused on deal seeking, right? Like they're going out for these promotions. The other interesting thing, I do the back to school study. And in July when Prime Day happened, we had four in 10 people say that they bought holiday gifts at that time. So, you know, we're really the Christmas in July is back, and people are really kind of stretching out their budgets.

[00:07:29.77] Phillip: Wow. Couldn't be me. {laughter} Although I think every year my holiday creep is that I am buying a little bit earlier, but the 24% in October is not happening yet.

[00:07:45.57] Lupine: Not happening.

[00:07:46.29] Phillip: Not happening yet. That would be a paradox if that happened for sure.

[00:07:50.69] Lupine: Yeah. But the other interesting thing about Black Friday is we're really seeing it be the younger generations are embracing this, right? So during the pandemic, Black Friday really did kind of fall off. We were stuck at home. But we've just seen it raise, it's gone up over 20 percentage points of people planning to participate in the last five years. And a lot of that's been driven by the younger generation. So kind of cool that these young folks are like, "Yeah, I want to get out there and do experience this."

[00:08:20.23] Alicia: Yeah, that is really interesting. And Gen Z, if I recall was the demographic that was expecting the most pullback in their spending. It was like 30 something percent.

[00:08:32.21] Lupine: Yeah, they're planning to spend 34% less than last year. So it's kind of interesting when you unpack the data, there's definitely some areas that are concerning. And I think the other aspect for Gen Z is that the job situation is much different for them than someone like me in Gen X, where we're pretty established in our careers and this isn't as big of a concern. So they're very much approaching the holidays cautiously. I love that a lot of them are planning to do like DIY gifts. So I like the idea of like, we still want this to be meaningful, but they're just finding ways to kind of create a smaller budget.

[00:09:08.15] Phillip: In this time of AI and you hear a lot of people, especially even on our TikTok feeds, we see a lot of people who are talking about slop in the comments. I think it seems like there's this push towards authenticity too. I think that that sort of tracks. So it definitely feels like a very much a cultural reaction, if you will. So that feels very much in line. So I think that those two things, I think, can go together. And I think that that feels very much like a cultural participation at the same time. Are Gen Z shopping more in those social native channels? Are they shopping more there? Are they still going to the mass retailers? Are they still shopping in traditional online retail?

[00:10:01.63] Lupine: Well, I think your authenticity point is really great. And I'm kind of doing a tangent here, but in the data, we're seeing people really kind of uphold their spending and experiences, right? So I think this idea of authenticity, meaningfulness, being together is really, that's where we're seeing the growth.

[00:10:21.85] Phillip: On the total other end of the spectrum, you're talking to executives and the data shows that six out of 10 executives in the study expect prices to trump loyalty. And I think that sort of signals the value based expectation here in this coming year. Is there a crisis of loyalty in this coming holiday season or maybe in this coming 2026 shopping cycle? Or are consumers spoiled for choice? What would you say is there something driving this reaction out of the executive crowd in the report?

[00:11:08.16] Lupine: Well, I think they've seen some behavior going on since the pandemic that is concerning. And I do think it is kind of a crisis because what happened was during the pandemic, we had empty shelves. And so consumers were forced to try other brands and other retailers. We had three and four consumers say that they tried a different brand just because their preferred brand was out of stock. So you have this environment where people tried new things, maybe they liked it, maybe it was a better value. And so you kind of had that starting this crisis. And then you get into inflation and, you know, we've created this consumer that's hyper aware of prices and costs. They're dealing with a higher cost of living. And so they're just being very value conscious. So I think may it's interesting like when you think about it for holiday, it might be a little bit different than just like your regular day to day. Because there's that emotional component. You wanna get your child that one brand or item that they really want. So maybe you're not, trading down or looking for a different brand. But when you think about the essentials and the day to day spending and what that looks like for 2026, I think that's a concern. People are very much willing to trade brands and retailers right now.

[00:12:26.99] Phillip: Well, so much for us finding spiritual and emotional connection with our soap. {laughter} Although I still very much believe in that. Tell us more about the value-seeking consumer. Can brands better approach them during holiday and beyond in '26? Is that something that we can still work hard toward, or is this something that you we're a bit of a maybe a race to the bottom is a crude way to say it, but is is this something that we're gonna have to keep in mind for this upcoming season?

[00:12:59.45] Lupine: Well, I think this is kind of actually perhaps an opportunity for retailers. What we found in our research is that value isn't all price, right? Up to 40% of it can actually be these other drivers. So what we're looking at is quality, value being more than just that price. So I think that's an opportunity for retailers, right? Maybe you don't have the lowest price, but you can offer a better experience or more convenience. And so those are the levers that I think that really give retailers an opportunity to kind of find that incremental dollar this year and appeal to a value-seeking consumer.

[00:13:40.18] Phillip: Something to keep in mind as we're going beyond. I think a lot of folks that we were talking to, Alicia, are in the midst of the next holiday bump planning. They're thinking the Valentine's, Mother's Day, Father's Day. That's all in their retail planning schedule right now. And I think that's something to be really mindful of. And I think that kind of brings me to the next question, Lupine, is we've heard a lot about this K shaped economy over the last five years, and I have to wonder how that's factoring into holiday this year and into next year. This 57% figure that you talked about earlier makes me really concerned and how drastically it's jumped year over year. Is this negative outlook something that drives more that is it sentiment based? Or is this the lived reality? Like what drives the sentiment and this feeling of a K shaped economy that's emerging?

[00:14:42.38] Lupine: Well, I think there's a couple things going on, especially for holiday. A couple of years after the pandemic, we saw people really being able to spend in all income groups because of stimulus checks. And so it was really kind of this joyful time where there was a lot of people replenishing their decorations and things like that. Coming out of that, and then with just the continuation of inflation, we're just seeing a big bifurcation in the ability of low income to spend versus the high income. We've seen the retail sales hold up for the last nine to ten months. And a large part of that is because the high income folks were able to stock up and buy things ahead of time when they were expecting prices to increase. I think this is concerning going forward though, in our holiday report, we had the low income group saying they're planning to spend 24% less than last year. So really this is about kind of keeping the gifts intact and keeping that kind of fun for the kids, but a lot of the extras, the experiences, the decorations and the holiday attire are really having to get cut. So, I think this is definitely on retailers' radars, they know this is going on. How do you provide value to that low income folk that are suffering? And then as well as like that high income group that's still interested in finding value as well. So just kind of an interesting time for retailers to kind of sort through these demographics.

[00:16:15.32] Phillip: I wish I could have found a way to make some sort of a bet on the 11 foot skeleton outdoor decoration market. That's the market I wanna make some sort of futurist bet on because that's the one I feel like is the place to... That and self storage. Those two things feel like that's the economic place that doesn't seem to be slowing down at all.

[00:18:24.14] Lupine: Slowing down.

[00:18:24.93] Phillip: Yeah.

[00:18:25.10] Lupine: That's a good... I should have asked that question. Are you pulling back on your budget because, you know, you spent so much on Halloween decor or the giant skeleton? I mean, it's remarkable how well...

[00:18:35.56] Alicia: It sells out. Year after year, it's fast to sell out.

[00:18:39.16] Phillip: According to my TikTok, it's never been more popular. That could be the bubble of my algorithm.

[00:18:46.98] Alicia: I wanna dig a little bit deeper into that income point a little. I mean, obviously all brackets are trying to make smarter decisions. They're focused on that value to price ratio so to speak that you were referring to. And I'm curious how you're seeing AI come into the equation. I'm sorry I had be the one to bring it up, but for myself personally, I mean, it's always a tool that helps me narrow that massive, you know, pool of options that we all have access to. Right? So I'm curious how you're seeing that play into the decision making journey. If it's a source of new insight or just a way to pair options back and really narrow like the best price option. And I guess more tactically what brands and retailers can be doing to ensure they're showing up in that mix. Right? Because I think that seems to be the key, like optimizing your experience. So it is a good destination for agents to make that connecting point for the consumer.

[00:20:00.00] Lupine: Yeah. So it was interesting in our holiday report, 33% saying they're planning to use Gen AI in their shopping journey. That more than doubled from last year. No surprise, but it's sort of interesting the way people are using Gen AI for holiday shopping. So it's more than just like search and it's more than just finding the best price. It's, "Hey, help me set a budget. I've got all these random people, and it's difficult to figure out what I buy my in laws," or whatnot. So it's very fascinating to me. It's like hitting every single part of the shopping journey, right? "Help me refine the reviews, so I just get the one thing I wanna know about." And then it's, you can imagine next year, we're gonna have a very different conversation where things are just being purchased. So definitely it's being used for finding great deals, but I think the bigger story is it's kind of taking over the entire shopping journey. I think it's sort of interesting because it makes me think about what does this mean for retailers? How do they stay involved in this? When we talk about experiences and this sort of like need for authenticity and I recently was trying to buy this, I needed to buy gifts for my best friend's twin daughters turning 14. Obviously I wanna be the cool auntie, tough age. So I put it into ChatGPT, and it actually came up with some great ideas. And I didn't really pull the trigger on them, I was like, "That's a good backup." Randomly, had to go to a store and make a return. And when I walked in the door, there were all these like holiday gifts set up and the salesperson came up said, "Oh, are you looking for a gift?" And I said, "No, I just need to return this." But then it made me think, actually I do need to buy these gifts. And it was so fun. I spent like fifteen minutes with this gal, we brainstormed and she had all these ideas and we put this together and I really got like swept up in the moment of it, and then I ended up buying three other holiday gifts because I was so excited.

[00:22:07.39] Phillip: Oh wow.

[00:22:07.79] Lupine: And then I just I got home and I went, "Oh, this is where AI misses. I'm not getting swept up in this." Even online, right? You don't get kinda swept up in that moment. So I feel like for retailers, there's yeah, you gotta you gotta play in that that game, but also lead into what you do really well. And that to me says a lot, like that personal connection and the experience of holiday shopping.

[00:22:38.12] Alicia: Yeah. I think you really nailed it, Lupine, because in my personal usage and things that I've been seeing through other, you know, use cases, it is very utility based. But I think that aspect of storytelling, like you mentioned, lean into what you're doing well as a brand and own it. That's the opportunity especially because to go back to Gen Z, sure, they are using these AI tools and platforms, but they're also turning to influencers and social media. They're going to malls now, right? They're going to physical stores because even they are hungry for that more community based cultural experience, and the holiday season, that's the opportune time to kind of bring that magic to life so to speak.

[00:23:56.17] Lupine: Yeah. And I do think there'll be a place for Gen AI to maybe do that whole, you know, like I was thinking about, oh, like, I wanna get people in the office some gifts. That makes sense to just kind of throw that into Gen AI and have it like do the whole thing, right? Send it to my office. But to your point, the storytelling, there's a whole aspect of like nostalgia, tradition, just like that the desire to give a meaningful gift and make someone happy. I think that's where the storytelling comes in, right? How can you lean into those really human elements that we really are huge drivers during holiday?

[00:24:38.92] Phillip: Something that you tease out in this report is retailers may win loyalty by easing stress with curated gifts, ideas, wish lists, and tools. And I think you sort of go into a bit of a strategic and tactical insight here about shareable wish lists. You know, basically like journeys or gift registries, things that allow people to sort of make decisions or help them curate gift giving decision making. And you sort of break it down by cohorts of folks like Gen Zs or Millennials or even folks who it's stressful to shop for. You found that people find it most stressful to shop for someone who has everything. That's 67% of respondents. And I'm like, I fall into that category. I'm sure everybody hates shopping for me. I think it's interesting on the other side, though, is that how AI solves some of these issues where it's actually really difficult for some people to even find what they want to tell other people for as a gift. And I think we're at the very beginning of retailers finding solutions to have people to populate registries or gift guides because they don't know themselves what they want. It's beyond just like how I'm trying to communicate what I'm trying to shop for someone else. I need an idea to shop for. I'm trying to communicate what I want to someone else for myself, because I don't know. And I think that this is a really interesting time for us to utilize these types of solutions where I think AI could come and fill in that gap to help people for their own personal discovery. So it's something interesting I think we could fill in the gap with there.

[00:28:45.17] Lupine: Yeah. That's fascinating to think about. I mean, it also says a lot about us that, you know, we have so many things that we can't even think of.

[00:28:52.86] Phillip: Well, that's problematic.

[00:28:54.38] Alicia: We need the robot to tell us what we need. {laughter}

[00:28:56.70] Phillip: No. No. No. No. Lupine, I have reached such enlightenment and contentedness. I couldn't possibly think of a single thing I need. {laughter}

[00:29:04.30] Lupine: I love that. No. But I mean, I think what I'm excited about is I've been doing this seven years, and we are in a really interesting time where we're gonna have some great stories and data. And the behavior is gonna shift, the younger generations are reshaping the way we're gonna be doing this. So I am very excited for the next couple years.

[00:29:25.13] Phillip: Yeah, same. I think we're looking also at the possibility of digital experiences that are competing dollar for dollar with physical goods for wallet share, the streaming services, gaming. These are all on the rise. They're attracting more attention and dollars than ever before. Have these shifts fundamentally changed what shopping looks like? And should retailers think of themselves as an attention merchant rather than product distributors? I have a lot of examples of this. Walmart is a great example of creating branded media in the holidays. But what do you think is a clearest example as entertainment as competing for retail in the season?

[00:30:15.85] Lupine: Well, I mean, I think this is a great point. I mean, retail is always battling for share of wallet, but I think we're in a very different time period. You mentioned gaming, but also gambling. There's some big juggernauts that are taking what might've been like the money used to go to the mall years ago. So I think it's important for retailers to understand this trend for sure. In our holiday data, we saw experiential guests, 47% are saying that's what they're gonna be giving. And I think that was up nine percentage points from last year. So how do retailers get in on that? This is sort of a concern. So I think there's opportunities obviously like are there co branding events? Are there ways to be part of the experience? But I mean, I think this is a great point. Yeah, you need to be gaining attention where your consumer is. And these are platforms that retailers aren't really knowledgeable about, right? This isn't their power alley by any means.

[00:31:22.66] Alicia: I really do think there's a big opportunity for brands like if they don't have, for instance, a physical store presence, there is shop-in-shops. There's a way to kind of bring collaborations to the forefront so they can be present in those moments. But I'm curious to see what kind of brands pop up so to speak, and what types of experiences become, I guess, the focal point for consumers. But one other area that's kind of an opportunity probably largely for big box retailers in particular is private label. And that's an area that I find really interesting because we're not just seeing price consciousness. We're also seeing a willingness to trade down or switch brands in order to kind of strike that value to price ratio that we've been talking about off and on over the course of this conversation. And I'm curious how you think this particular trend or I guess piece of a much larger trend opens up new opportunity to retailers, especially as we think about holiday entertaining and using private label as an entry point or an opportunity for a retailer to build that relationship because that brand was there, it was the right price and it was comparable quality.

[00:32:54.29] Lupine: To your point, people were kind of trying these private labels and the quality is there. Lots has been said about Kirkland, Trader Joe's as well, with some innovative products. This also occurred at a time when people were really willing to try things direct from Asia, like things I saw on TikTok. And so there's been like this brand erosion that's been going on for a while. And I think, both of those avenues are kind of colliding right now. That doesn't mean brands are done. I mean, there's definitely opportunities for brands to also learn from these private label offerings, right? There's been a lot of innovation like at Trader Joe's, like some really products have come out. But yeah, to your point, there is definitely a loyalty thing going on where people have tried new things. The new things are good. The quality is there, the value is there. And so it's really opened people's eyes to some things that were never on the radar.

[00:33:54.79] Alicia: And is there a chance that this willingness to switch or try new things will possibly bleed into other categories like luxury, for instance? I know that whole sector is kind of seeing a bit of a shakeup on its own.

[00:34:09.36] Lupine: Yeah, potentially, I think, anytime you try something new and it works, you're like, "Okay, this is great. Why wouldn't I try in this category or this industry as well?"

[00:34:20.00] Alicia: Why not?

[00:34:20.32] Lupine: Yeah, so I think you're right. I mean, I think luxury has its own issues that are going on, but certainly part of that is the value, right? Prices have gone up and consumers didn't necessarily see the value go up with the price points. And this isn't just luxury, it's across goods. So I think that's the bigger thing, right? It's like consumers have lost trust in brands when they were just raising prices and the consumer wasn't getting anything in return.

[00:34:50.95] Phillip: I think this is a great bookend for where we started, which is we really need, looking back on the research that you've done for this year, is value is sort of at the forefront for this year's consumer. There's a lot of agita, it sounds like lots of concern for the consumer. They're really looking closely at every dollar that's being spent. They're looking to extract that value. It looks like a lot of leaders are looking to see how they can meet that customer where they are. And both leaders and consumers are looking to see how they can play AI to find how they can meet in the middle. And I think across the board, that tenor is gonna carry through to 2026. And I think we should all be prepared for that because the world is changing rapidly. And as we are preparing for those changes, we'll continue to look to our friends and partners at Deloitte to help keep us abreast of those changes.

[00:35:55.25] Lupine: Love it. Yeah, that's a great summary. I think it'll be an interesting year ahead, much different than we saw this year. But yeah, this holiday report kind of gives you a little taste of what's to come.

[00:36:04.55] Phillip: Thank you so much. Lupine Skelly, I appreciate it. Thank you. First time here at Future Commerce, but hopefully not the last. And thank you for listening to Future Commerce. You find more episodes of this podcast at futurecommerce.com, and be sure to visit our print shop. You know, we have these beautiful books and print like Lore, which is our newest over at Future Commerce. You can get this beautiful piece of print at shop.futurecommerce.com, and we will see you at NRF for our Big how, big party. Can You find more about that at our events page, and we'll see you at the Big Show. Thank you so much for listening.