A Frugal Holiday: How Young Shoppers are Changing Retail

As the holiday shopping season kicks off, retailers are bracing for a significant shift in consumer behavior, driven largely by the spending habits of younger Americans. Millennials and Gen Z are approaching the holidays with tighter budgets, shorter gift lists, and a more resourceful mindset than ever before. This change signals a potential reshaping of the traditional retail calendar and challenges businesses to adapt to a new economic reality.

This holiday season is not just about finding the best deals; it’s about intentional spending. According to a recent Small Business Saturday Survey, younger generations are leading the charge in adopting more disciplined financial habits. They are navigating economic pressures with creativity and pragmatism, forcing retailers to rethink how they engage with this crucial demographic.

In this post, we’ll explore the key trends shaping the 2025 holiday season. We will look at why younger shoppers are cutting back, the creative ways they’re saving money, and what this means for both large retailers and small businesses. Understanding these shifts is crucial for any business hoping to connect with the next generation of consumers.

The New Holiday Budget: Spending Less, Gifting Smarter

The most significant trend this holiday season is the deliberate reduction in spending among Gen Z and millennials. These generations are using budgeting tools at a higher rate than any other group. The survey found that 24% of Gen Z and millennials rely on these tools, compared to just 12% of Gen X and 10% of Boomers. This disciplined approach is a direct response to financial pressures, including the impact of tariffs, which 39% of younger consumers cited as a reason for spending less.

This financial caution is leading to more resourceful gift-giving strategies. Gen Z shoppers, in particular, are embracing a do-it-yourself spirit. About 24% of them plan to give handmade gifts to save money, a stark contrast to the 13% of both Gen Xers and Boomers who plan to do the same. This trend reflects both a practical need to save money and a desire for more personal, meaningful gifts.

Despite these cutbacks, the desire to celebrate and give gifts remains strong. A vast majority of Americans (82%), including younger shoppers, still plan to participate in holiday shopping. The difference lies in how and when they shop.

The Decline of Thanksgiving Weekend Shopping

The traditional tentpole shopping events of Thanksgiving weekend, Black Friday, Small Business Saturday, and Cyber Monday, are losing their grip, especially on younger consumers. A significant majority of shoppers now say they will complete most of their holiday shopping outside of this once-critical weekend.

This shift indicates that the holiday shopping season is becoming a more prolonged, spread-out affair rather than a frantic rush centered on a few key dates. Retailers can no longer rely on a massive influx of shoppers during Thanksgiving weekend. Instead, they must engage with consumers throughout the entire season, offering consistent value and convenience.

For younger shoppers, the decision to shop outside the traditional window is driven by a desire to avoid impulse purchases and stick to their carefully planned budgets. They are more likely to research products, compare prices, and wait for the right deal rather than get caught up in the frenzy of doorbuster sales.

The Small Business Dilemma: A Lack of Awareness

Small Business Saturday has long been a vital boost for local retailers, but participation among younger generations is wavering, and the reason is surprising. It’s not about price or a lack of desire to support local businesses; it’s about visibility.

The CNBC|SurveyMonkey survey revealed a significant awareness gap. Nearly half of Gen Z shoppers (47%) and 38% of millennials said they would skip Small Business Saturday simply because they don’t know where to find local small businesses. While price does play a secondary role (cited by 17% of Gen Z and 18% of millennials), the primary barrier is a lack of digital discoverability.

Younger generations rely heavily on online search and social media to discover new brands and products. When they search for gift ideas, national retailers with massive marketing budgets often dominate the results. For small businesses to capture the attention of Gen Z and millennials, a strong digital presence is no longer optional, it’s essential. Without it, they remain invisible to a large and growing segment of the market.

What This Means for Retailers

The evolving habits of younger shoppers present both challenges and opportunities for businesses of all sizes.

For Large Retailers:

The key is to offer value beyond just discounts. While deals are still important, large retailers must also provide a seamless, convenient shopping experience across all channels. They need to engage with younger consumers authentically on social media and demonstrate an understanding of their values, including sustainability and ethical sourcing. The extended shopping season means marketing efforts must be sustained over a longer period, with messaging that resonates with budget-conscious and intentional shoppers.

For Small Businesses:

The mandate is clear: get online and get noticed. Small businesses must invest in their digital footprint to reach younger consumers where they are. This includes having a professional, mobile-friendly website, being active on relevant social media platforms, and utilizing local SEO strategies to appear in search results. Highlighting what makes them unique, whether it’s handmade products, personalized service, or a connection to the local community, can help them stand out from larger competitors. Collaborating with local influencers and running targeted digital ad campaigns can also be effective ways to bridge the awareness gap.

A Season of Intentionality

This holiday season marks a turning point in retail. The careful, creative, and digitally-native approach of Gen Z and millennial shoppers is forcing the industry to adapt. They are proving that it’s possible to celebrate the holidays thoughtfully without overspending, and their influence is likely to grow in the years to come. For businesses that are willing to listen and evolve, this new era of intentional consumerism offers a chance to build deeper, more meaningful relationships with the next generation of shoppers.