It Looks Like a A Ho-Hum Holiday Season

As the holiday shopping season draws to a close, consumers are keeping a tight grip on their purse strings, according to a new survey by the Consumer Business Practice of Deloitte & Touche LLP with BIGresearch LLC. More than 7000 consumers responded to the survey conducted between Dec. 7 and 13, 2001. It is the fourth survey in a series initiated in September, which confirms that during the past three months, consumers have not changed their holiday spending plans.

Despite heavy promotions by retailers in recent days, a majority of consumers surveyed are sticking to their budgets: 80% report that they plan to spend the same or less than last year, down a negligible 3% from the survey conducted during Thanksgiving weekend. These findings are consistent with the survey conducted between Oct. 30 and Nov. 4, which reported that 83% said they expected to spend the same or less.

“It’s been a very promotional retail environment this year,” said Tara Weiner, managing director of Deloitte & Touche’s Consumer Business Practice. “But in the twilight of the shopping season, consumers are sticking to their guns with regard to their gift budgets.”

In preparation for the New Year, consumers appear to be tightening their purse strings: 37% report they intend to pay down debt in the next three months, up 6% from the November survey, and 27% say they plan to increase savings, up from 23%. In addition, 62% report paying for their holiday purchases with cash or check instead of credit, with 32% saying they plan to decrease overall spending in the next 90 days.

“The employment situation is the real driver behind consumers’ cautious spending and their inclination to save,” said Carl Steidtmann, Deloitte Research chief economist. “Given the fact that 35% of respondents say they know someone who has been laid off, and 13% have a family member who has been laid off, it makes sense that Americans are spending more conservatively this year.”

Despite this cautiousness, Americans haven’t completely lost sight of the holiday spirit: 12% report they will give more to charities this year.

Yet, even as consumers watch their spending, the trend hasn’t put a major crimp in internet purchasing trends, according to the study.

“Although consumers are spending less online than in stores, the internet is still a stable and significant channel for retailers,” said Ms. Weiner. While only 2% of shoppers report doing all of their shopping online, 58% say they will do some portion of their holiday shopping on the web.

Respondents who shop online cited a number of factors for Internet purchases:

• 86% shop online to save time;

• 81% shop online because of the good selection of products;

• 77% shop online because they don’t want to fight traffic in stores;

• 70% shop online because of good prices; and

• 42% shop online to avoid sales tax.

For the 42% of respondents who don’t shop online, the top three reasons cited were:

• Desire to handle a product before buying (40%);

• Fear of credit card fraud or other security issues (40%); and

• Use the internet only to browse for gift ideas and product information (39 percent).

More men (28%) than women (19%) indicated they are concerned about delivery time for online purchases, perhaps influenced by the fact that they have completed less shopping thus far, noted Ms. Weiner.

As of December 13, 45% of shoppers reported they had completed three-quarters or more of their holiday shopping. Half of the female respondents said they had completed 75% or more of their shopping, compared to 40% of men who had at least three-quarters of their shopping done.

“As the shopping season winds down, retailers’ best bet could be to target the male shoppers who have a larger percentage of shopping left to do,” said Ms. Weiner. “With fewer than 10 days left however, strategies must focus on price reductions based on the remaining inventory.”

Inventory levels relative to sales are very low this season, so it won’t take much demand to stimulate production again, according to Mr. Steidtmann. “Because business cycles are driven by inventory levels, this is good news for the economy. As manufacturers begin to ramp up production to restock, the stage could be set for a recovery.”

According to Ms. Weiner, for the next six months, retailers should stick to the basics, keeping inventories in line with reduced sales expectations. “And of course, they should continue to focus on consumers’ orientation toward home and family,” she added.