Consumers say they plan to spend less for the holidays

The eighth annual survey by The NPD Group found American shoppers planning to pinch pennies this year when it comes to gift buying. 30% said they plan to spend less for the holidays this year, while only 11% said they plan to spend more than a year ago.

The “spend less” percentage was up four points from the 2008 survey, while the “spend more” percentage was flat.

“That 4% increase is certainly a sign of the times. On the other hand, that 4% is not as dramatic as it could have been.” said Marshal Cohen, chief industry analyst at The NPD Group. “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,” he said.



For Holiday 2009, the researchers found the kinds of gifts being bought will go back to more traditional holiday gift items, rather than extravagances. “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,” he added.



While there is no change in the top five categories, there is some movement in the bottom five categories. The survey results show some upward movement in consumer purchasing intentions for accessories, music, and fragrances. The number of consumers saying they will purchase those as gifts for holiday has shifted. Accessories moved up one spot from seventh to sixth this year, music was up one spot from eighth to seventh and fragrances moved up one spot to ninth this year.

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% of consumers told NPD they intended to buy apparel as a gift; this year that number is holding at 49%. “That is good news for apparel. multi-year slip has stabilized this year,” said Cohen.
 
What will motivate consumers to purchase this holiday? The survey results point to “value” as a primary motivator this year. 62% of survey respondents stated value plays a big role in determining what and where they buy. That is followed by “special sale” at 61% percent and “convenient location” with 50%.
 
However, Cohen says this holiday holds a number of variables that could contribute to the outcome of the 2009 holiday retail season. Or as he calls it: the “X-mas X-Factor.”
 
X-factor for Timing: When will consumers begin their shopping? This year there was a 3% 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% 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 US consumers’ psyche. Will they be feeling frugal or will they have a case of frugal fatigue and unleash some pent-up demand?” said Cohen.

Source: The NPD Holiday Survey of Consumer Purchase Intentions was fielded September 8th to September 15th, 2009. The findings presented here are based on information from 1,995 completed interviews of NPD's online consumer panel.

RBR-TVBR observation: We note that even the Neiman Marcus Christmas Fantasy Catalog was more down to earth this year. The traditional over-the-top #1 gift was scaled back from the multi-million-dollar price tag of recent years. This year, it was merely a sports aircraft and pilot training for two for $250,000. Now that’s really cutting back!