Holiday Retail Outlook: Consumers Intend To Spend Less

NPD, a leading market research company has posted its Holiday Retail Outlook: NPD's Eighth Annual Retail Survey Looks Back-to-the-Future.

The NPD Group, Inc., a leading market research company, released the results of its annual survey of consumers� holiday spending intentions. Thirty percent of consumers surveyed told NPD they �plan to spend less� this holiday, which is a four point increase over last year�s results.



�That 4 percent increase is certainly a sign of the times. On the other hand, that 4 percent is not as dramatic as it could have been.� said Marshal Cohen, chief industry analyst, The NPD Group, Inc. �I think consumers will be looking for the right gift, rather than the most extravagant or expensive one. That combined with the soft numbers we are up against from holiday last year, and I think we will see growth, albeit a modest 0.5 to 1.5 percent.�

It is the 0.5 to 1.5 percent growth that takes us �back to the future� and to holidays past when growth rates of 5 percent or more were unheard of and unexpected. For Holiday 2009, not only will actual spending levels go �back to the future� but the kinds of gifts being bought will �go back� to more traditional holiday gift items.

�The survey results point to a return of more gifts being made of sweaters, fragrances, music, books, movies, and wallets, again,� said Cohen, �We are also seeing make-up and TV�s showing signs of growth. Other standouts are notebooks/netbooks. They have been growing and will continue to grow through the holiday.�

For the electronics categories overall, the NPD Holiday Survey shows a 20% rise in the 18 to 24 year old demographic saying electronics are the �gift to purchase.� �This age group is clearly demonstrating that they feel electronics are no longer a luxury but are in fact a necessity,� said Cohen.

Apparel is also a bright spot. Last year 49 percent of consumers told NPD they intended to buy apparel as a gift; this year that number is holding at 49 percent. �That is good news for apparel,� Cohen said, �Its multi-year slip has stabilized this year.�

What will motivate consumers to purchase this holiday? The survey results point to �value� as a primary motivator this year. Sixty-two percent of survey respondents stated value plays a big role in determining what and where they buy.

�X-factor for Timing�
When will consumers begin their shopping? This year there was a 3 percent change in the number of consumers saying they will begin their holiday shopping during the Thanksgiving weekend or later. The number of consumers that said they would begin their shopping in early December or at the last minute posted an eight percent change. �The X-factor here points to a later start for this season�s shopping,� said Cohen.

�X-factor� for the impact of state of the economy on consumer spending.
Almost 50 percent of consumers told NPD that the �state of the economy� will have a significant effect on their holiday spending. �Will the economy force the consumer to dip into savings or just cut down those on the list? Perhaps if you are an in-law, you might just find yourself getting a card rather than the gift this year,� says Cohen.

�Perhaps the biggest X-mas X-factor is the overall state of U.S. consumers� psyche. Will they be feeling frugal or will they have a case of frugal fatigue and unleash some pent-up demand?� said Cohen.

There is more in the article including a table of the top 10 spending categories.

While 11% plan to spend more, and 30% plan to spend less, the real questions are "how much more and how much less?"

Year-over-year only 4% plan on spending less than last year (30% vs. 26%), but it is important to remember that last year was one of the worst holiday shopping seasons ever.

The third critical question is "How much competition over customers will there be?"

Already we have seen Price Wars Between Wal-Mart and Amazon over books. Websites like Saintly Savers are sprouting up, with goals of telling consumers how to get more for their money.

So even if sales are flat, there are strong indications that profit margins will contract. Lower profit margins puts pressure on an already stressed commercial real estate sector.

Stress continues to build in many places, yet the market continues to ignore it. How much longer this can continue is anyone's guess.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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