Gen Z Cuts Holiday Spending While Retail Bets Billions on an Analog Comeback

NEW YORK — Gen Z consumers are planning to spend less on gifts and travel this holiday season, even as major retailers and commercial real estate developers commit billions of dollars to physical storefronts and retro-themed marketing.

According to PwC’s 2026 Holiday Outlook report, the group’s average gift spending is projected to fall 9%, from $586 last year to $533. Projected holiday travel budgets are declining by 29%.

The same consumers are placing unusual value on offline holiday rituals. In a PwC survey of 1,006 Gen Z respondents, 61% said festive physical decorations and holiday atmospheres in stores make the season “feel real.” Over eight in 10 Gen Zers surveyed, or 81%, said they are prioritizing in-person activities during the holidays.

Gen Z is defined by the Pew Research Center as the generation born between 1997 and 2012. Although its near-term holiday budgets are tightening, the demographic’s global spending power is projected to reach $12 trillion by 2030.

That long-term potential is helping drive a recovery in physical retail spaces, which were hard-hit during the pandemic. Commercial real estate data shows that mall values have climbed 13% over the past year, outperforming other sectors of commercial property.

Indianapolis-based Simon Property Group, the largest shopping mall operator in the United States, launched the retro marketing campaign “Meet me @ The Mall.” The campaign ran across YouTube, TikTok, and Netflix, using an aesthetic drawn from the 1980s and 1990s with teenagers roller skating, dancing, and playing arcade games.

Target Corp., the Minneapolis-based retail giant, is directing $5 billion this year toward building new stores and remodeling existing locations. The investment in brick-and-mortar locations corresponds with Gen Z’s preference for experiencing the holidays in physical spaces, even as many shoppers plan to reduce spending.

The preference extends to gifts. The PwC report found that 78% of Gen Z consumers are interested in receiving screen-free, physical gifts, including puzzles, board games, art supplies, and gift cards. That compares with 64% of the broader consumer public. Meanwhile, 63% said sharing a holiday meal is more important to them than receiving a physical gift.

“The more digital everyday life becomes, the more value they seem to place on things technology can’t fully replicate: something tactile, personal, social, and enduring,” Ali Furman, PwC’s U.S. consumer markets industry leader, told Fortune.

Gen Z’s interest in physical goods is also visible beyond the holiday season. Over the past several years, younger consumers have embraced analog hobbies such as knitting, gardening, bird-watching, and painting. The shift has boosted sales of physical goods including film cameras and vinyl records.

According to data from the Recording Industry Association of America (RIAA), U.S. vinyl record sales have grown steadily in recent years and surpassed CD sales volume for the first time since 1987 as younger buyers sought tactile music formats.

“They have grown up in a world where almost everything is digital, instant, and endlessly editable,” Arianna Lebed, creative director at the advertising agency MAS, told Fortune. “That makes physical objects, shared meals, and in-person experiences feel more meaningful because they are finite, tactile, friction-full, and actually lived.”

The same nostalgia for pre-digital experiences appeared in the viral “Ralph Lauren Christmas” social media trend. Its aesthetic uses traditional tartan plaids, heavy velvet fabrics, classic candlesticks, and nutcrackers. Many Gen Z shoppers searched for lower-cost replicas and vintage items rather than purchasing high-end luxury goods.

According to Mark Beal, a Rutgers University professor and author of multiple books on Gen Z behavior, the design aesthetic reflects a deeper cultural yearning among younger consumers.

“Gen Zers have a passion for traveling back in time to a world that existed before they were born,” Beal told Fortune, noting that the trend reflects a desire for the perceived economic stability and family-centric social connections of the 1990s.