The NPD Group, Inc., a leading market research company, released the results of its annual survey of consumers’ holiday spending intentions. This year 26% of consumers surveyed told NPD they plan to spend less. In the 2007 survey results, only 18% said they planned to spend less. “This 8% decline illustrates that consumers are already focused on the idea of spending less,” said Marshal Cohen, chief industry analyst, The NPD Group, Inc.
2008 2007 Plan to Spend More 11% 11% Plan to Spend About The Same 63% 70% Plan to Spend Less 26% 18%
"For the first time I am predicting flat to declining sales for the holiday season,” stated Cohen. “With consumers already saying they plan to spend less, stores with lean inventories, those inventories on sale as soon as they hit the floor, and tightening credit both for businesses and consumers, where can growth come from?”
The recent turmoil in the financial markets and the meltdown in the credit sector seem to have had an impact on consumers as they look to pull back on their credit card spending. The number of consumers who tell NPD they will "spend on credit" this year is down 2%. “Consumers will be keeping careful watch on their credit card spending this season,” stated Cohen, “I think many will refrain from purchasing an indulgence or splurge gift, and for the first time in years, may actually cut people from their shopping lists.”
With no “must-have” gift, what will drive consumers into stores this holiday? Sixty percent of consumers surveyed say that either a “special sale price” or “overall value for the price” will influence where they shop this holiday. “Last year we saw GPS systems used by stores as ‘Door-buster’ specials. Where is this holiday’s GPS?” asks Cohen, “So far nothing has surfaced, and in short-order if nothing does, it will be too late.”
The good news is that consumers will still be buying gifts this holiday season. Again this year consumers say Apparel will be the most often gifted item, followed by Toys.
1 Apparel 49% 2 Toys 37% 3 Movies (VHS, DVD) 29% 4 Books 27% 5 Electronics
(TVs, Home Theater Systems/DVD Players/Recorders, Home Audio Products, Satellite Radio, GPS Systems, Cell Phones, Desktop/Laptop Computers, Computer Peripherals, Digital & Video Cameras, MP3 Players) 23% 6 Video Games 22% 7 Accessories
(Bags, Small Personal Accessories, Watches)20% 8 Music 20% 9 Food 17% 10 Fragrances 17%
One cautionary note Cohen sounds, "The Apparel industry is not doing enough to keep their products front and center for consumers. This is the least technically advanced industry these days, add in a lack of color and style changes, and there truly is no excitement being generated, nothing to ignite consumers’ passion. Apparel will be hard pressed to keep its number one ranking as most often given gift.”
There are two items that could emerge as this season’s bright spots. They are Televisions and Sunglasses. This was the last full year for analog TV reception, and NPD research shows consumers may be looking to purchase new digital sets. “With prices at all time lows and not all wanting to deal with signal conversion boxes, we could see some good news here,” said Cohen. The sleeper category for growth this year is Sunglasses. “The younger market is all over them and the bigger the logo the better. They are the most sought after item by young adults and will surely be their most desired gift. Sunglasses will be this year’s handbag,” predicted Cohen.
Current holiday study results indicate that gift cards are not yet “top-of-mind” with consumers. Thirty-eight percent of survey respondents state they will buy a gift card this year; 49% said they purchased one last year. “Keep in mind many consumers don't go out with the intention of getting a gift card but will likely do so when they can’t find an appropriate or affordable gift. And don’t forget those post-holiday promotions. The markdowns could almost double the value of a gift card,” stated Cohen.
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