Sure, stock prices and factory orders are up, the housing market is stabilizing, and job losses aren’t as bad as they were, but that isn’t changing the minds of the millions of US consumers who continue to save their money rather than spend it. And for those of us with grandparents or great grandparents who lived through the Great Depression, we know these changed attitudes may be here for the long run.
So what are retailers to do? It appears it’s no longer a case of proving your products have value. American Express asked 2,032 people in late August what they would do if they found $500, offering suggestions such as splurging at a restaurant, going on a shopping spree, and taking a trip. Only 10% of those surveyed responded positively to these suggestions; most said they would pay bills, reduce their credit card debt, or save the money.
“What we see consumers doing is exhibiting a level of discipline that we didn’t know,” said Gail Wasserman, a spokeswoman for American Express, which like other card companies has reinforced the reduced- spending trend by issuing fewer cards and slashing credit lines to lower their own risks. “It’s very clear consumers have hit the reset button. They’ve re-evaluated their priorities and separated their wants from their needs.”
It should be no shock, therefore, that Deloitte’s 2009 Holiday Forecast, which was issued today, indicates a zero percentage change in holiday sales this year over last year. In a press release, Carl Steidtmann, chief economist with Deloitte Research, a subsidiary of Deloitte Services LP, said, “Although there are signs that suggest the economy is nearing the end of its darkest days, many consumers remain burdened by restricted credit availability, high unemployment and foreclosures. Americans continue to save at historically high rates while also paying down debt, and these factors combined suggest another chilly holiday season for retailers.”
Zero change is better than November 2008’s 2.4% decrease in sales, the first decrease of its kind since 1967 according to Deloitte’s analysis of Commerce Department data, it’s still enough to alert retailers to enter the 2009 holiday season with caution.
“While the level of economic uncertainty may be lower than a year ago, consumers will likely proceed cautiously into the holiday season,” said Stacy Janiak, vice chairman and US Retail leader, Deloitte LLP, in a press release.
“Retailers appear to have prepared themselves for a challenging season by adjusting inventory and closely managing their expenses. Going forward, scenario planning that accounts for different market conditions may help merchants navigate these uncertain times. Retailers should also consider placing customer insights at the forefront of their decisions around merchandising, pricing and promotions.”
