How Gen Z and Millennials Are Reshaping Holiday Commerce

By Jyoti Menon

Gen Z and millennials are known disrupters — and the retail landscape is their latest target. Specifically, their payment choices signify a shifting consumer spending landscape this holiday season.

While the economic projected outlook is tentatively positive — despite inflation stubbornly persisting and an increasingly volatile economic landscape — Adobe expects U.S. online holiday sales to hit $221.8 billion this holiday season, a 4.8 percent increase year-over-year (YoY). The holiday purchase landscape is evolving. Retailers hoping to capitalize on the purchasing power of Gen Z and millennials will need to understand how this important consumer sector is approaching the upcoming holiday season, how alternative payment methods and cost-cutting measures will define their approach, and how retailers can accommodate these changes in a meaningful way.

Alternative Payments Become More Popular

One driver of the shifting purchasing landscape amongst younger generations stems from their utilization of alternative payment methods. As inflation takes its toll on wallets this holiday season, diversifying payment methods offer consumers relief and variety. For example, over a third (36 percent and 35 percent) of millennials and Gen Z, respectively, are planning to use buy now, pay later (BNPL) this year. With BNPL driving a record $17 billion in online spending, retailers offering alternative payment methods will be able to capture consumers who prefer to spread out their holiday purchases in a manageable, flexible way without sacrificing their overall purchasing power and breaking the bank. Other forms of payment that are increasing in use by Gen Z include leveraging gift cards (44 percent) and installment loans (28 percent) to pay for small purchases.

Discounts Drive Purchase Decisions

Beyond alternative payments, consumers will leverage discounts and cost-cutting measures, and retailers must take note accordingly. Discounts are expected to hit record highs this season, peaking at 35 percent off the listed price for toys, 30 percent for electronics, and 25 percent for apparel. Validating those findings, our holiday lookahead data found that 76 percent of respondents plan to seek deals and shop savings events. Another discount opportunity is using points to pay for small purchases, which 36 percent of millennials and 35 percent of Gen Z plan to use. Retailers can capture the wallets and brand loyalty of younger generations by offering deals and encouraging consumers to leverage every tool in their arsenal to achieve maximum savings this holiday season.

Expect Digital-First Brands to See a Consumer Spike

Digital-first consumers shifting toward mobile experiences vs. desktop will also disrupt the traditional payments landscape this holiday season. In fact, over half (51.2 percent) of online spending is projected to take place on mobile devices this holiday season, reflecting improved small-screen shopping experiences and consumers' increased comfort with digital-first payment options. Retailers should take advantage of these shifting preferences and examine their digital-first options in-store and consider increasing them by leveraging QR codes that offer payment options such as virtual cards or BNPL.

Looking Forward

As the world of retail modernization continues to evolve, the world's most successful retail brands will continue evolving to meet Gen Z and millennial customers where they are by using the right technology to offer flexible payment options, discounts and cost-cutting measures, and plenty of digital-first payments experiences to capture the hearts and wallets of these savvy shoppers.

Jyoti Menon is vice president, digital lending and mobile at Bread Financial, a tech-forward financial services company.

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Jyoti Menon Author's page

Jyoti is a product management, strategy, and development professional with 20 years of experience in delivering next-generation financial services products. Jyoti has developed strategy and led execution for large-scale, global products through her ability to define vision, collaborate across multiple teams, and work through changing environments and priorities.

Jyoti is currently VP, Digital Product and Analytics at Bread Financial, where she owns the digital product for Bread's complex lending product suite. She is responsible for product strategy and delivery as well as platform, product, and fin-rev analytics.Prior to Bread, Jyoti was Director and Head of Digital Wallets/eCommerce, Bill Payments, and Funding at Citi. She managed relationships and led strategy for multiple digital wallet partnerships, and owned Citi's bill payments and consumer-centric funds transfer product and strategy.

Jyoti started her career in digital product management as a member of the Global Corporate Services team at American Express, where she focused on building robust mobile travel and expense solutions for corporate travelers. In prior roles, she launched global marketing tools, redesigned client reporting solutions, and has owned and developed key partnerships.

Jyoti is a Trustee on Barnard College’s Board of Trustees. She also serves on the Board of the Shanti Bhavan school in India that aims to bring children and their families out of poverty through a world-class education. Jyoti holds a Master’s in International Affairs from the Columbia University School of International and Public Affairs and a bachelor’s degree from Barnard College, Columbia University.