News Column

US Holiday Shoppers Are Spending, but Thrifty

Nov. 26, 2012

Adam Belz

Holiday Shopping


This year's holiday shopping season got underway this weekend with consumer confidence at a five-year high, according to a Thomson Reuters/University of Michigan survey.

One forecast, from marketing professors at the University of St. Thomas, predicts a nearly 10 percent increase in holiday gift buying this year in the Twin Cities metro area. That would mean $1 billion in spending, an all-time high.

"Consumers have made some important progress in improving their financial situation," said Scott Anderson, chief economist for Bank of the West. "We've had three and a half years of economic growth, and I think you're starting to see that reflected in consumer confidence."

Retail spending has risen roughly 7 percent in each of the past two holiday seasons -- the months of November and December -- according to figures from the U.S. Department of Commerce. Last year, consumers spent $795.9 billion during the last two months of the year, the most ever.

But that didn't get retailers much ahead of where they were before the downturn. Holiday retail spending fell 10.6 percent during the economic pain of 2008, which shifted not only the long-term trend line but also the behavior of the average shopper.

Last year's $795.9 billion in spending would have been more like $850 billion had spending stayed on the pre-2008 trend line.

"We're climbing back to normal levels after the drop, but I think there still is a change in the way people shop," said Rajiv Vaidyanathan, a marketing professor at the University of Minnesota Duluth. "It will take some dramatic changes and some time before we get back to the heady days of free spending in the holiday season."

Arthur Johnson, 45, said this year he's buying his 11-year-old son gifts that matter and will last, instead of just things he wants. For instance, instead of more electronics, Johnson is getting his son a punching bag so he can stay fit.

"I buy less, but I try to buy things that are more significant," said Johnson, who runs a shoeshine stand in the Retek Building in downtown Minneapolis.

Hunting for Deals

Vaidyanathan said big shifts are happening in the ways people shop -- using mobile devices to compare prices and hunt for deals. He uses a barcode scanner app on his phone constantly to see if he can find better prices for products online, and his children are learning to do the same thing.

Mandy Wible walked out of Target onto the skyway over the lunch hour on the day before Thanksgiving, holding shopping bags in both hands. She said her family is spending as much for Christmas as it did before the downturn, though perhaps a little differently.

During the holidays, they'll spread out their purchases. The children will get presents on Christmas, and the parents will give themselves furniture and a TV for New Year's Day.

"We're not really doing less," said the 36-year-old who lives in Plymouth. "It's more about managing our cash flow."

Jeff Inman, a marketing professor at the University of Pittsburgh and president of the Association for Consumer Research, pointed to explosive growth in couponing, services like Groupon, even TV shows about coupons as a way consumers have changed since the recession.

"The perception of coupon-users was that they were cheapskates, but that's no longer the case," Inman said. "It looks like actual spending has recovered, but there is a certain sense that consumers need to put a little more emphasis on value."

The Thomson Reuters/University of Michigan survey of consumers released this past week showed consumer sentiment stopped rising in November, and most often consumers said they were worried about higher taxes, which will automatically go into effect along with spending cuts if Congress and the White House don't come to an agreement on the so-called fiscal cliff before the end of the year.

'Numb to All These Headlines'

While the University of Michigan survey indicated consumers are worried about the fiscal cliff, it's not clear most consumers are basing their outlook on it. "Consumers have become a little bit numb to all these headlines in the paper about the eurozone crisis and the fiscal cliff," Anderson said. "The consumer's not likely to retrench here, unless we get a big shock to the economy."

Karl von Reuter, 46, a self-employed attorney who lives in south Minneapolis, tends to agree. He said he was never a big spender before the recession, and that hasn't changed.

His practice is in workers' compensation law, and he sees low-skill workers who have trouble finding a job. But the skilled tradespeople he deals with are starting to find work, and he doesn't see a correlation between the dire headlines he reads and the lives of the people around him.

"I feel disconnected from what I read," he said. "I don't see higher wage earners struggling that much, unless they're spending money unwisely."

Has the recession changed his habits? "The short answer, quite honestly, is no," he said.



Distributed by MCT Information Services



Source: (c) 2012 Star Tribune (Minneapolis)


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