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Economy to Affect Two-Thirds of Families This Holiday

NRF advises shopping early to compensate for lower inventory

By James Limbach
ConsumerAffairs.com

October 21, 2009

According to the National Retail Federation's (NRF) 2009 Holiday Consumer Intentions and Actions Survey, conducted by BIGresearch, U.S. consumers plan to spend an average of $682.74 on holiday-related shopping, a 3.2 percent drop from last year's $705.01.

It comes as no surprise that the economy was an overriding theme throughout this year's survey. Two-thirds of consumers (65.3 percent) say the economy will affect their holiday plans this year, with the majority of them saying they're adjusting by simply spending less (84.2 percent).

People will also be shopping for sales more often (55.0 percent), using more coupons (41.7 percent) and putting up last year's decorations (34.0 percent). Many will also make changes in gift-giving, planning to buy more practical gifts (36.0 percent), buying a joint gift for kids or parents (17.3 percent), and making more gifts (16.7 percent). Additionally, more than one-fourth of consumers (28.6 percent) say the economy is forcing them to travel less or not at all for the holidays.

"While last holiday season was filled with chaotic confusion, adjusting to uncertainty has now become routine for many Americans," said NRF President and CEO Tracy Mullin. "This holiday season will be a bit of a dance between retailers and shoppers, with each group feeling the other out to understand how things have changed and how they must adapt."

Americans' eagle-eye on bargain hunting is adjusting the priorities of many shoppers. According to the survey, more than half of holiday shoppers say that sales and price discounts (43.3 percent) or everyday low prices (12.7 percent) will be the most important factor when deciding where to shop. Factors like selection (21.0 percent), quality (11.8 percent), convenience (4.9 percent) and customer service (4.4 percent) declined from last year.

Not surprisingly, the majority of holiday shoppers (70.1 percent) will purchase from discounters this year, though more than half (55.8 percent) will also shop at department stores. Grocery stores (45.0 percent), the Internet (42.4 percent), clothing stores (33.8 percent) and electronics stores (31.8 percent) will also be popular destinations. In addition, one in ten holiday shoppers (11.4 percent) will buy gifts or other holiday-related merchandise at thrift stores or resale shops.

Retailers are compensating for soft sales this holiday season by cutting back on inventory. According to NRF's Port Tracker report, released in September, traffic to the nation's ports has scaled back to levels not seen since 2003.

"In anticipation of weak demand, many retailers scaled back on inventory levels to prevent unplanned markdowns at the end of the season," said NRF President and CEO Tracy Mullin. "Once the most popular items are gone, retailers won't have anywhere to get them, so if there was ever a holiday season to buy early, this is it."

Whether they're shopping to get the best selection or trying to stretch out spending over a longer period of time, many holiday shoppers are starting early. According to the survey, 39 percent of consumers will begin their holiday shopping before Halloween, which is comparable to previous years.

As in previous years, three-fourths of Americans' holiday budget will be spent on gifts. While spending on family members will decline by a slight two percent ($387.06 in '09 vs. $395.15 in '08), gifts for friends ($66.77 vs. $80.13) and co-workers ($19.26 vs. $22.63) will see double-digit drops. Americans also plan to spend about five percent less ($34.81 vs. $36.88) on "other" gifts for people like babysitters, teachers and clergy.

Candy and food spending may be one bright spot this year, with the average person planning to spend $10 more in that category than last year ($90.26 in 2009 vs. $80.28 in 2008). Spending on other non-gift categories like decorations ($40.75 in '09 vs. $43.45 in '08), greeting cards and postage ($26.77 vs. $27.39), and flowers ($17.05 vs. $19.10) is expected to drop.

"While the economic climate has shown some improvement from last holiday season, retailers are not out of the woods yet," said Phil Rist, Executive Vice President, Strategic Initiatives, BIGresearch. "With a variety of factors still up in the air, including uncertainty over job security, many Americans just aren't buying into the talk of recovery."

Though Americans were less inclined to purchase gift cards last season, the popular gifts retain their spot at the top of the list among gift recipients. According to the survey, 55.2 percent of adults would like to receive a gift card this holiday season, with clothing (48.8 percent), books and DVDs (48.6 percent) and electronics (33.2 percent) among other popular choices.

NRF continues to expect holiday sales to decline 1.0 percent to $437.6 billion.

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