Looks like retailers may be tangling with more ghosts from Christmas past than they expected this holiday season. New consumer research from Retail Forward shows that despite some recent gains in the economy, consumers are in some ways more nervous about their finances than they were a year ago, making them less likely to splurge on seasonal spending. And they are increasingly leery about debt.
Its survey found that only 9% of shoppers have any plans to increase their near-term spending. And the number of consumers who feel better off than last year about their household income levels actually recorded the sharpest decline this year -- only 24% fell into that category in October, compared to 28% in October 2008.
Fewer people also feel their job security has improved over the last year, or that the value of their home has increased.
The good news is that while many are still planning to cut back, more shoppers seem to feel they have set their holiday budgets accurately: While some 45% of shoppers still say they are going to curb holiday gift spending, this percentage is significantly less than the 50% who planned cutbacks in October 2008. And among households with investments, 20% say their holdings are better off than a year ago, while last October -- amid the market's crash -- only 10% believed that was true.
"Our analysts and economists are beginning to see signs of optimism on the luxury end of the market," Mandy Putnam, VP of the Columbus, Ohio-based consulting company, and director of its ongoing ShopperScape survey, tells Marketing Daily. "But it's too early to tell if it's an aberration or a trend."
Perhaps the biggest change, however, seems to be in the way consumers are managing their debt. More shoppers say they are better off in terms of their credit card debt levels and monthly mortgage and car payments than are worse off. And the trend toward using cash or debit cards rather than credit is even stronger. Just 35% say they plan to use credit cards to pay for most of their purchases, and 49% of shoppers either strongly or mildly agree that they are using cash, checks or debit cards to pay for more than they did a year ago.
Shoppers are especially determined to shun store-issued credit cards: Just 1% say this is the way they will pay for most holiday purchases, and only 9% are using such cards more now than they were a year ago at this time.
"Shoppers are having a logical reaction to getting hit with very high revolving credit rates right now, so they are moving to cash and cash equivalent payments," says Putnam. "Layaway and 0% credit options become more appealing under this scenario for consumers who don't have cash on hand."
For retailers, all this lingering consumer anxiety presents a little bit of incongruity -- business is actually picking up. Macy's, for example, just reported third-quarter results that exceeded expectations in both sales and profits. "Given the difficult economic climate, we had an excellent quarter," CEO Terry Lundgren says in its release. "Our business improved progressively each month during the period." As a result, the Cincinnati-based company now expects its same-store sales to be down between just 1% and 2% for the fourth quarter, better than previously forecast.