Necessities Are In; Consumers Have a Laser-Like Focus on Value this Holiday Season - SNEWS

Necessities Are In; Consumers Have a Laser-Like Focus on Value this Holiday Season

With the economy weighing heavily on their minds, many Americans plan to spend less and shop differently and more carefully during this year’s holiday season, according to Deloitte’s 23rd Annual Holiday Survey of retail spending and trends.
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NEW YORK – With the economy weighing heavily on their minds, many Americans plan to spend less and shop differently and more carefully during this year's holiday season, according to Deloitte's 23rd Annual Holiday Survey of retail spending and trends.

A record number of consumers say they are pessimistic about the economy. Over half (53 percent) say they expect the economy to weaken next year – the highest in more than 10 years of asking this question – compared with 43 percent last year. Almost one in five consumers (19 percent) said they feel that their jobs are not very secure or not secure at all. This percentage also is a record high for the 1997 – 2008 period.

Almost six in 10 consumers (59 percent) expect to reduce their spending this holiday season. Higher food prices (73 percent) and higher energy prices (69 percent) were the top two reasons for spending less, outpacing the economy (61 percent) and job uncertainty (18 percent). Some consumers have another good reason to cut back on spending: 11 percent said that they are still paying off holiday debt from last year. On a more positive note for retailers, consumers who received a federal government stimulus check this summer said that, on average, 20 percent of their check was still not spent – meaning those funds are available for holiday purchases, if needed.

Spending on Home to Be Down
Categories in which spending is likely to be down the most from last year are home improvements and home/holiday furnishings. Non-gift clothing and socializing away from home also showed marked cutbacks on the survey, while charitable donations and entertaining at home showed smaller declines. Spending on gifts showed the smallest decrease (-6.5 percent), with consumers saying they will spend an average of $532 on gifts this holiday season. Consumers also said they would buy fewer gifts this year – 21.5 gifts on average compared with 23.1 gifts last year.

“Retailers face a challenging holiday season,” said Stacy Janiak, Deloitte's U.S. Retail Leader. “In these difficult times, consumers appear to be reining in their non-essential holiday spending, while trying to preserve the tradition of gift-giving and the spirit of the holidays.”

Consumers Will Shop Differently
With economic concerns high, value-oriented stores are expected to be the top shopping destinations. More consumers say they will shop at venues such as discount/value department stores, warehouse clubs, dollar stores, outlet stores, and off-prices stores. Drug stores and supermarkets also showed big increases from last year. In addition, flea markets (7 percent) and re-sale/used merchandise stores (6 percent) were cited as destinations by consumers. Consumers are looking for value: 73 percent of consumers said the best value for the money will cause them to shop a particular retailer this season, and 72 percent said low prices. Convenient location, quality and selection of merchandise, and customer service/experience all ranked lower.

Almost seven in 10 consumers (68 percent) also plan to change the way they shop due to economic concerns. Their strategies will include buying more products on sale (81 percent), buying more lower priced items (63 percent), limiting/consolidating shopping trips to save on gas (58 percent), and using more store coupons (57 percent).

“While low inventory levels may enable retailers to avoid ‘fire sales,' consumers are looking for deals and value,” said Janiak. “Retailers will likely not be penalized for their leaner staffing levels since consumers are focused on value rather than on other factors, such as customer service. As we saw in the back-to-school season, price-oriented retailers have an edge in this environment, as well as an opportunity to enhance their market share and positioning. At the same time, retailers will be focused on demonstrating the value they bring to their customers beyond price, such as expanded private label lines and enhanced loyalty program awards.”

Gift Cards Still No. 1, But Unused Cards Are Plentiful
For the fifth straight year, gift cards are expected to be the top gift purchase. Almost two-thirds (66 percent) of consumers surveyed plan to buy them, just slightly below last year's 69 percent of consumers. Holiday shoppers are also planning to buy fewer cards on average: 5.3 cards this year, compared with the 5.5 cards they planned to buy last year. Reversing last year's trend, consumers are also spending less in total on gift cards and less per card: $28.43 per card on average compared with $36.18 last year. Gift cards for stores/products are less popular: only 47 percent of consumers plan to buy them, compared with 54 percent last year. On the other hand, gift cards for gasoline increased to 17 percent from 13 percent, another sign of this year's focus on necessities.

Nearly half of consumers (47 percent) have at least one unused gift card; on average, these consumers have 5.9 unused cards, compared with 3.7 last year. Approximately one in seven (14 percent) say they have too many gift cards, and a similar number (14 percent) say it's unlikely they'll ever redeem all their cards. Almost one in four (23 percent) are concerned about the store closing before they can use a card, and a similar number (24 percent) has had at least one card expire before they could use it.

“Gift cards continue to appeal to consumers' desire for convenience,” said Janiak. “However, with the growing number of unused gift cards, and given the current economic environment, we could see a higher gift card redemption rate in January as gift card recipients make sure they use their cards while they can. At the same time, retailers have an opportunity to capitalize on this important revenue stream by implementing more creative and aggressive gift card redemption programs.”

About the Survey:
The survey was commissioned by Deloitte and conducted online by an independent research company between September 26 and October 7, 2008. The survey polled a sample of 13,276 consumers and has a margin of error for the entire sample of plus or minus one percentage point.

For more information about Deloitte's Annual Holiday Survey, including interesting statistics, historical data and useful links, please visit www.deloitte.com/us/2008HolidaySurvey.

About Deloitte
As used in this document, “Deloitte” means Deloitte LLP. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.

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