Holiday spenders hitting the mute button

Prognosticators have been having a difficult time trying to get a handle on consumer sentiment of late, and that seems to be making it even trickier to get a handle on holiday shopping plans with just a little over a month to go before the annual year-end spending spree is over.

Spending plans take a hit month to month
The most recent Gallup Poll analysis of holiday spending plans showed a significant drop-off. Its survey for October found that citizens were planning to spend about $740 this season. But in its most recent poll, conducted 11/5-8, Gallup found that consumers had pulled a little over $100 of that back off the table – dropping their spending plans to $638.

At least it hasn’t pulled all the way back to last year’s level. According to Gallup, at this time in 2008, consumers were planning to spend $616.

There is good news that goes with this decidedly unpleasant bit of information. At least, it is still ahead of last year’s consumer spending plans, which were sullied by the fact that the entire global economy suddenly seemed on the verge of collapse.

"Americans' current spending prediction is roughly the same as it was last year at this time, and, indeed, the majority (57%) now say they will spend the same amount on gifts as they did last Christmas,” wrote Gallup.

Gallup noted that more consumers are planning to spend less – 34%, against a scant 8% that are planning to increase spending. However, even this statistic had a hint of a silver lining – last year at this point almost half – 46% -- had plans to scale back spending.

This year, there is uncertainty, but not nearly the same level of gloom and doom that last year had consumers hanging on to their cash.

The fact that holiday spending isn’t going to retreat even further, and will stay in the same range as the 2008 level is a positive. But if in fact 2009 spending will only be able to match par with one of the worst holiday spending seasons in recent memory, it would constitute a negative.

Another silver lining this time around is that merchants have not exactly been caught by surprise, as they were last year. Most are carefully managing inventory and making sure in particular that they are not overstocked. This in turn will prevent massive markdowns that were great for those consumers who did open their wallets last year, but which demolished margins and made it difficult for any retailers to turn a profit.

Speaking to the retail situation, Gallup wrote, “Although the still-inflated percentage saying they will ‘spend less’ suggests retailers are not yet out of the woods, when considered with the other findings, it appears the 2009 holiday retail season will not be as depressed as last year's. Same-store sales reports released earlier this month offered some encouraging signs about a possible uptick in spending in September and October; however, given the fragility in the economy and consumer psychology, there is no guarantee these trends will hold through December. Thus, even the flat holiday sales suggested by Gallup's latest Christmas spending intentions data may be a welcome relief to retailers at the end of a year when monthly department store-type spending through August fell roughly 4% behind 2008 levels.”

A silver lining
The Gallup study came out during the same week that Deloitte produced its own Consumer Spending Index, and its results were far more optimistic – in fact, if Deloitte is correct, the “real wages” of consumers are significantly improved, although it may be difficult for the consumers themselves to see it immediately.

That is because it hinges not on actual wages, which have not been growing, but on household expenses, which have actually been decreasing as retailers have been cutting prices to keep inventory moving.

According to Deloitte, the result is a 4.8% increase in real wages per household, and Deloitte believes the holidays may provide the perfect incentive for moving some of this wealth back into the economy.

"Consumers may be encouraged by improving economic conditions, but they may also need an incentive to increase their spending," said Deloitte’s Stacy Janiak. "The intersection of the holiday season with these signs of recovery may provide that motivation. Retailers should consider improving the service offerings that appeal to consumers' modified and judicious spending habits. These may include layaway plans, mobile commerce capabilities, exclusive limited-time offers and customer interaction via social media. Promotions that tie charitable contributions to purchases may also appeal to customers looking to bring a more meaningful element into their holiday activities."

A practical guide to gift-giving
Another recently-released poll informs us that 70% of those anticipating receiving a gift are putting practical items on their wish lists, rather then luxury or entertainment items.

We do not doubt the results of this poll, conducted by Zogby International, but we couldn’t help noticing how favorable its results are to the company that commissioned it: Black and Decker. B&D used the occasion of releasing the poll to remind us that it has several items which may be of interest to the practical people on one’s shopping list.

But the poll makes sense, and such items may be worth a little extra marketing push this holiday season.

RBR-TVBR observation: We’ve been watching these polls for a couple of months now, and they really have been fluctuating. In general, consumer confidence has been in somewhat of a slide, but it is nowhere near as bad as it was a year ago.

Our gut reaction is that people have had a solid year of gloom and are ready for just about any excuse to blow off some steam and just enjoy themselves. If our gut is correct, it means the Deloitte prediction will carry the day and the business community will be pleasantly surprised by December’s results.

If our gut if off target, at least the gloomier prediction coming from Gallup has a solid floor – a firm prediction that at the very least, this December will be no worse than last. And if that’s true, the saving grace will be that this time, most are prepared for it.

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