There are all kinds of reasons marketers should be upbeat this holiday season. Online spending is up nicely. Foot traffic and purchasing in malls is in line with moderately optimistic forecasts. And falling gas prices could easily translate into extra eggnog.
But it would be a mistake to expect shoppers to go all 2004 this holiday, says James Russo, Nielsen’s SVP global consumer insight. He gives Marketing Daily a peek into what consumers are really thinking about household budgets right now, and why retailers won’t get any “irrational exuberance” for Christmas:
Q. What's your take on the season, so far?
A. We continue to feel good about our forecast of a 1.8% increase. It’s a good amount of growth — not gangbusters, but still positive. And when we look at week-by-week spending, we can definitely see where shoppers have shifted their dollars back and forth between essential and discretionary spending. So we’re heading into this important week — from Super Saturday until Christmas with optimism. It’s the biggest spending week of the year. But it’s still very balanced between essential spending and holiday spending. To me, that’s key.
Q. How so?
A. What no one had forecast earlier this fall was this big drop in gas prices, and that is the real X factor. How much of that will consumers spend on holiday gifts? We just surveyed 500 consumers online, and 40% say they have additional money to spend because of falling gas prices. And with gas prices at their lowest levels in close to five years, there is a real benefit in their wallets. What’s interesting is that of those people, 50% say they are going to pay bills and 40% are using it for holiday spending and gift giving.
Q. How much might that help?
A. About 24% say lower gas prices are creating an additional $25 to $50 for them this season, and another 22% say they are getting an extra $50 to $75. And with people starting the season with a budget of anywhere from $200 to $500, that might add another 20% to some family budgets.
there’s still considerable restraint?
A. Yes, and that is a little surprising, that people are looking to pay bills and be more fiscally responsible. It’s also a positive.
Q. How does that set us up for 2015?
A. Well, we still have 65% of consumers believing we are in a recession. That’s pretty significant. And when we asked about their current level of optimism, on a scale of 1 to 5, 40% are right in the middle. There is this trepidation and uncertainty that has permeated the consumer mindset for the last five years. And it continues.
Q. Could it be permanent nervousness?
A. To an extent, the recovery has been uneven, and will be until wage growth takes hold. Housing, fuel, jobs, stocks — those are all good trend markers. But we are still knocking on the door of wage growth, and until that happens, people will worry: “If I lose my job, could I get another one that pays as much, or more?” Until that happens, there will still be a level of uncertainty.