Fewer consumers than ever are spending on the holidays, period

We’ve covered the amount of holiday spending that is happening, but what about the spend that’s not taking place?

The news: Nearly 12% of US consumers said they do not plan to spend on experiences, gifts, or other items this holiday season, according to a September study by Deloitte. That’s a record high since Deloitte began tracking this metric.

• This somber fact is covered up by affluent consumers, who plan to boost their spending. On average, higher-income households (bringing in $100,000 or more per year) will spend nearly five times as much as their lower-income counterparts, according to the study.
• Higher-income households will spend about 15% more than they did last holiday season; meanwhile, households making less than $50,000 a year will spend about 22% less than they did in 2020.

How we got here: Consumer confidence dropped to its lowest level in a decade during November, per the University of Michigan Consumer Sentiment Index, as inflation rose to its highest level in nearly three decades.

A tale of two economies: Marketers aimed at the high end are continuing to aim high: Neiman Marcus’ holiday catalog, for example, features a $6.1 million diamond and a $38,000 champagne vending machine.

• At the other end of the spectrum, inflation has hit consumers on a budget, with even Dollar Tree raising its lowest prices to $1.25 to offset increased supply chain costs.

Buy now, pay later (BNPL) ascendant: Another reason some shoppers might be sitting out this year: Of the US adults who had bought holiday gifts on credit last year, 29% said they haven’t paid off those purchases yet, per a NerdWallet study from September.

• That could be why more shoppers are turning to services like Klarna, Affirm, and Afterpay. Total BNPL spending this year (through November 27) jumped 422% versus the same period in 2019, with BNPL order volume up 438%, per Adobe Analytics.
• Fifty-six percent of shoppers said they have bought something using BNPL they couldn’t pay off, per a study by neobank Oxygen cited in CNBC. The survey also found that 43% would be more likely to make a large expenditure if BNPL were offered.
• A DebtHammer study from November found that 66% of US adults expect to use BNPL services to finance their holiday spending—just 8 percentage points higher than the share of respondents who said they’ll turn to a payday loan or similar financing.

The big takeaway: It’s clear that many buyers are suffering. While price-conscious consumers have less spending power on average, meaningfully connecting with them could pay significant dividends in the long run.