How Gen Z is reshaping holiday marketing — and what brands can do about it

Retailers face a cautious holiday backdrop as Deloitte finds 57% of consumers expect the economy to weaken and overall seasonal spending is forecast to fall 10% year-over-year, with Gen Z cutting spending an estimated 34%. Brands are pivoting marketing mixes toward value, connection and experiential/creator-led campaigns while increasing investments in retail media and AI-driven tools (ad buyers plan ~12% more retail-media spend year-over-year; global retail media expected to top $300bn by 2030). Notable company-level signals include Best Buy expanding influencer storefronts and partnerships (~200 influencers for 2025), True Religion reporting roughly $500M in sales and targeting younger cohorts, and rising Gen Z adoption of AI (43% using AI for product discovery) which could reshape digital ad effectiveness and shopper acquisition costs.

Analysis

Market structure: Value-oriented omnichannel retailers (WMT, TGT, Sam’s Club via WMT) and retailers with robust retail‑media stacks (BBY, WMT, GOOGL ad flow) are the primary beneficiaries as consumers trim discretionary spend (Deloitte: overall -10% vs 2024; Gen Z -34%). High‑margin, fashion‑forward names whose shopper cohorts skew Gen Z and premium discretionary categories face weaker demand and pricing pressure; expect share gains for low‑price, convenience and experience‑driven formats over the next 3–12 months.

Risk assessment: Tail risks include a sharper consumer pullback (scenario: Nationwide holiday comps -15% vs expected -10% causing guidance cuts), privacy/regulatory action on targeting/AI ads (CPRA/EU updates) and brand reputational hits from AI creative backlash (KO case). Near term (days–weeks) monitor Black Friday early data and weekly same‑store comps; medium term (1–3 quarters) ad spend reallocation and retail earnings; long term (2–5 years) Gen Z preference shifts to experience and retail media monetization reshape cash flow and margin mixes.

Trade implications: Favored trades are long WMT/TGT for defensive retail media + in‑store capture and long‑dated GOOGL exposure to capture accelerating retail media dollars (Bain: +12% ad spend). Tactical: buy BBY directional/vertical tech gift exposure into Jan sales with defined risk call spreads; trim apparel/fast‑fashion exposures that rely on full‑price seasonal lift. Use short dated options around Black Friday for volatility plays and lengthen bond duration modestly (2–5yr) as a macro hedge.

Contrarian angles: Consensus underestimates in‑store Gen Z demand (Adyen: ~75% shop in‑person weekly) — stores that convert experience to baskets can outgrow comps despite cohort pullback. Market may be underpricing retail‑media monetization: if retail media growth sustains toward Forrester’s $300bn by 2030, ad platforms + retailers will see structural margin upside; AI backlash risks produce transient volatility rather than lasting sales declines.

Key Decisions for Investors

• Establish a 2–3% long position in WMT (ticker WMT) sized for portfolio beta, hold 3–6 months to capture Black Friday/holiday comps and retail‑media ad upside; place a 6% stop‑loss from entry to limit drawdown if weekly comps miss by >5% vs consensus.
• Buy 1–2% notional of 12‑month GOOGL (or GOOG) LEAP calls (Jan 2026 expiries, 30–40% OTM if cost‑sensitive or 15–25% OTM for higher conviction) to play structural retail media & AI ad upside; reassess at quarterly earnings and upon U.S. ad demand prints.
• Deploy a tactical BBY call‑spread into Jan 2026 (bull call spread, debit, size 0.75–1% notional) targeting a 15–30% move on stronger-than-expected tech holiday sales; cap downside to premium paid and exit on 50–70% realized profit or post‑earnings revision.
• Reduce apparel/discretionary exposure: trim 3–5% aggregate from GAP and mall‑exposed peers (or reallocate to WMT/TGT); if weekly Black Friday traffic data shows SSS declines >7% vs last year, increase trimming to 7–10%.
• Hedge macro downside with a 2–3% allocation to 5‑year U.S. Treasuries (notes/futures) to protect portfolio against risk‑off moves triggered by worse‑than‑expected holiday consumption or CPI surprises within the next 1–3 months.