As Thanksgiving approaches, major brands have launched holiday marketing campaigns to boost sales. However, even as pressures in other areas ease, the year-end retail rush remains full of uncertainty.

This is the first holiday season since 2020 not constrained by pandemic restrictions, and many shopping behaviors reflect consumers entering a new phase some brands call "revenge living." Many are willing to shop but may buy fewer gifts. Some consumers spend enthusiastically, while others put shopping plans on hold due to economic concerns. The return to physical stores is making headlines, but social commerce could reach new highs. Ultimately, this season's success will depend on the strength of emotional appeals.

One theme this season is the damage persistent inflation and economic hardship have done to consumer psychology, a mindset shaping how brands market. According to Deloitte's 2022 holiday retail survey, 37% of U.S. households said their financial situation worsened compared to last year, and 73% believe product prices will rise.

"As a friend and colleague of mine said, getting on your favorite aunt's shopping list this year is much harder than in the past," said Rod Sides, Deloitte's global insights leader.

This is not without bright spots. Surveys show average consumer spending this year is expected to be $1,455, down slightly from $1,463 last year. Overall retail spending is expected to grow 4% to 6%, totaling $1.45 trillion to $1.47 trillion between November and January. In the same period last year, the U.S. Census Bureau reported sales growth of 15.1%, totaling $1.39 trillion, the largest annual increase in a decade.

"We're finding that lower-income groups will make a strong comeback this year. I think they've adapted to this new normal."

— Rod Sides, Deloitte Global Insights Leader

Although money is still available, consumer spending patterns are shifting, reflecting an experience-driven mindset many have adopted to make up for lost time during the pandemic. The average number of gifts per consumer is expected to drop from 16 in 2021 to 9 this year, while total spending on experiences like concert tickets or restaurants is expected to grow 7%.

The consumer base is also changing, with spending by high-income shoppers (annual income over $100,000) expected to drop 7%, while lower-income earners (under $50,000) are expected to increase 25%, Deloitte data shows.

"We're finding that lower-income groups will make a strong comeback this year," Sides said. "I think they've adapted to this new normal. They want to celebrate the holidays and spend time with family."

The Value of Giving

Reflecting consumer concerns about the economy, 53% of marketers believe they won't reach 2021 profit levels, according to a holiday benchmark survey by Commerce Next and The Commerce Experience Collective. Key concerns include reduced consumer spending (63%), marketing ROI issues (47%), and pressure to match discounts (45%).

"Although it's the holiday season, marketers realize many people are struggling to make ends meet and fight the effects of inflation."

— Matthew Champigny, CEO of Industrial Color

Marketers hoping to profit in the crucial fourth quarter need insight into consumer mindsets to succeed, said Matthew Champigny, CEO of Industrial Color. Brands may choose more understated marketing strategies rather than flashy holiday displays to create a sense of understanding that is more likely to drive purchases.

"Although it's the holiday season, marketers realize many people are struggling to make ends meet and fight the effects of inflation," Champigny wrote in an email. "So the message is about enjoying real life moments, not showing off shiny outfits."

Some brands have launched strategies to address economic concerns. Kohl's earlier this month released a "More Gifts. More Deals." campaign, including TV ads focused on promotions and social media engagement centered on money-saving tips. Similarly, Walmart released a campaign inspired by "Office Space" promoting ongoing holiday deals, which moves the big-box retailer away from Black Friday and toward Monday promotions, following a trend away from post-Thanksgiving annual sales events.

To reach price-sensitive consumers earlier, 45% of marketers plan to encourage early shopping—reflected in platforms like Amazon holding a second Prime Day in early October for the first time. The shift in the holiday shopping season comes as 23% of shoppers expect to finish their holiday budgets by the end of October, up from 18% last year, with the average shopping window expected to be 5.8 weeks, compared to 6.4 weeks in 2021, Deloitte's holiday report shows.

Calling All Santas

To reach consumers at the right time, 32% of marketers plan to increase promotional efforts, up from 13% in 2021, CommerceNext reports. Promotional channels will also shift.

While paid search remains dominant, affiliates and partners are expected to become the second most used strategy, surpassing paid social, which usually holds that position. According to Shopify data cited in the report, affiliate marketing has grown 50% over the past five years.

"I dare say we're seeing emerging digital, CTV, and digital audio growing at rocket speed."

— Damian Benders, General Manager of B Code Media

Moving away from paid social is especially beneficial for brands this holiday season, particularly among younger consumers, said Daniel Cobb, CEO of Daniel Brian Advertising.

"The influencer community and affiliate community will be where the new opportunities are, rather than paid ads, because this generation is very skeptical of paid ads and is even starting to become skeptical of influencers," Cobb said.

Linear TV is also being abandoned as marketers continue to face measurement challenges and declining viewership. Emphasis on streaming platforms will follow, said Damian Benders, General Manager of B Code Media, adding that interest in channels like digital, connected TV, and audio is "at rocket speed levels."

However, paid social may still play a role, as 34% of consumers and 60% of Gen Z plan to use social media for holiday shopping, Deloitte data shows. American Eagle's holiday strategy largely revolves around the medium, including a focus on Snapchat's augmented reality tools, TikTok hashtag challenges, and a presence on BeReal.

Some brands, including American Eagle, are also entering the metaverse, though it brings its own challenges. Pacsun's holiday campaign revolves around connecting virtual and real worlds, with a one-minute ad showing a VR headset transporting users to a fictional "PacVerse" featuring futuristic experiences with real people. Alongside the campaign, Pacsun expanded its Roblox PacWorld with a holiday store.

Connecting the real and digital worlds could become the foundation of holiday metaverse strategies as marketers continue to explore monetization, Champigny said.

"Physical-digital marketing in the metaverse is still in its infancy, but this holiday season we're seeing more campaigns and experiences blending the physical and digital worlds, with each providing engagement opportunities for the other," he said.

Messages with Intent

Consumers are also being purposeful when making holiday lists this year. Amid strong sustainability interest, 39% of consumers say they will buy sustainable gifts whenever possible, Deloitte data shows, and 41% say they prefer shopping at stores that promote sustainable practices.

From a retailer perspective, 35% say at least half of their holiday inventory is responsibly sourced or eco-friendly. Additionally, 48% say they will sell refurbished or secondhand items this season to support the 32% of consumers planning to buy resale goods, with saving money and ethics being two main drivers of such behavior.

Similar to common themes in last year's holiday campaigns, brands are also catering to experience-driven consumers with marketing centered on multicultural traditions. These efforts come as three-quarters of multicultural shoppers say they want more retail ads tailored to them, and over half say it's important that holiday ads include their cultural elements, according to a holiday analysis by My Code conducted in October.

"The holidays are actually a unique period with an overall positive outlook and warm atmosphere," said Damian of B Code, an extension of multicultural digital marketing agency My Code focused on reaching Black consumers. "If you want to try to say, 'Hey, let me show you I care about your culture, understand your culture, and can demonstrate it,' this is one of the best opportunities. It's a great time to do that."

Diversity-focused campaigns have already emerged this season. In mid-October, Ritz launched its "Our Holidays" campaign, partnering with Bon Appetit to create recipes and a video series exploring how different cultures celebrate. Earlier this month, JCPenney released a series of ads featuring diverse families and their celebrations.

"I expect many brands will launch, at least in part, campaigns specifically targeting their audience groups during that period," Benders said.

"If you want to try to say, 'Hey, let me show you I care about your culture,' this is one of the best opportunities."

— Damian Benders, General Manager of B Code Media

However, brands hoping to connect with multicultural consumers need to ensure the message comes from genuine interest, he continued. To successfully reach diverse communities, they must feel a connection to the brand's actions and values.

"That's ultimately the key," Benders said. "What really matters is, do you care about these communities? If these people are your audience, what do you want to do to give back and provide opportunities for them?"