Shop Talk

Retailers, consumers and prices

Why retailers can expect modest holiday spending growth

By Thom Blischok
November 21, 2012

As the 2012 race to the holidays kicks off, shoppers in America are experiencing economic sobriety.  With 23 million people still looking for work, home prices still down, and those with jobs holding little hope for salary increases, the season is shaping up as a time of controlled spending. Without question, consumer purchases will be made through a lens of affordability.

Still, in the past few weeks I have visited with small groups of shoppers in California, Phoenix, Dallas, New Orleans, northern Pennsylvania, and finally New York City; I found a consensus of hope as the holiday season approaches, and a feeling of thanks at having survived another tough year.

American consumers have grown tired of continuing signs of economic uncertainty. My conversations with American shoppers, as well as earlier consumer research by Booz & Company, indicated several changes that will set the stage for a holiday season that’s focused on affordability:

1. In almost all of our conversations we asked the following question “What will be different about this holiday season over past seasons?”  The overwhelming response was bringing together family and friends to celebrate.

Expect holiday gift giving to be less impulsive and more personal and meaningful.  Almost all of the people we talked with plan to spend about the same as last year ($675 – $725 per family), but this season the gifts will be much more based on “needs versus wants.”  Several families I talked with have decided to purchase family gifts, from home entertainment (3D movies) and movie tickets to cooking tools, including waffle makers, coffee makers and popcorn machines. Others spoke of the new seasonal wardrobe and special luxury gifts for mom and dad. Retailers would do well to capture the emphasis on family and togetherness as they adjust their market strategies.

2. Nearly 65 percent of people are struggling to find the finances to enjoy the holiday season as they would like to, and my conversations with consumers reflected a growing thoughtfulness and concern for those who do not have as much as they would like for the holidays. This spirit of caring indicates a 2012 season that will be far more focused on the emotions of the holidays as opposed to materiality and luxe gift-giving. One sign of this “move away from more”: This year 32 percent of shoppers said they were considering giving an as-yet unused gift to someone else this season.

Retailers must be cognizant of consumers’ financial struggles and attitude shift toward the holidays this year. There are many consumers for whom small items are luxuries, and retailers need to be as attentive to these shoppers as they are to those with more to spend. Those stores that clearly position themselves as offering value and a range of lower-cost products should find more shoppers making purchases.

3. The search for great deals will drive consumer purchase behavior. Seventy-three percent of all shoppers expect to find them this holiday season—an 18 percent increase over 2011. Consumers are also looking earlier and buying later, and going online more to browse and buy. As a result, retailers are discounting even earlier, seeking to convert these early shoppers. As always, some will leave making purchases until the last minute; we estimate that some 25 million shoppers will hit the stores on Christmas Eve, a 9 percent increase over last year, anticipating even better last-minute deals.

This deal hunt is driving an increase in “showrooming”: checking things out in-store before purchasing from an online competitor.  Forty percent of consumers now describe showrooming as their shopping strategy.  Retailers hoping to capture more in-store sales should feature signage and product descriptions (especially for electronics) that highlight the unique features that make their models different from what consumers could buy online. Bundling complementary items together is also a smart strategy; for example, an electronics retailer can combine sale of a DVD player with an offer for consumers to free movies of their choice.

Even though nearly everyone has gone through difficult economic times, spending is in the air, to a degree. The 2012 holiday season is predicted to see a spending increase of three to four percent over last year’s sales of $471.5 billion.  The emphasis from shoppers, and an opportunity for retailers, is to attain a little extra joy this holiday shopping season.

PHOTO: Shoppers browse at the Union Square Holiday Market as the busy holiday shopping season begins in New York, November 18, 2012. REUTERS/Carlo Allegri

Comments

Retailers are dying because online buying is so much easier and cheaper. It’s not rocket science. Mall stores are going the way of brick-and-mortar travel agents. Or stock brokers. Who needs them?

I hope the whole mall system dies within 20 years. I always hated malls anyway. They smell like vanilla bathrooms.

Posted by AlkalineState | Report as abusive
 

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