Twin Cities retailers might want to consider stocking up on eggnog.
It probably won’t sell, but at least it’ll come in handy for drowning the sorrows of what’s predicted to be the region’s bleakest holiday shopping season in decades.
A survey released Wednesday by the University of St. Thomas’ Institute for Retailing Excellence says local retailers should expect some not-so-excellent sales results this holiday season.
More than half of the survey’s 659 respondents said they plan to spend less money this holiday season. The average Twin Cities household will spend about $660 on gifts, down 12 percent from a year ago.
Multiply that over the number of households in the region, and it adds up to a $102 million loss for retailers.
Making matters worse for local stores, the survey found a significant shift in the percentage of people who say they’ll shop for gifts online or in catalogs more than at traditional stores.
“This is going to be the bleakest holiday spending season that we’ve seen since we started conducting this survey,” said David Brennan, the institute’s co-director. The survey is in its seventh year. Brennan said you’d probably have to go back to the mid-1980s to find a comparable climate.
The numbers are more negative than this year’s similar national surveys, which range from indicating slight spending increases to smaller decreases. Brennan said Midwest residents tend to be more conservative and respond more negatively in surveys like this one.
Here are some of the key takeaways from the report:
More are saying ‘less’: Last year, 28 percent of respondents said they planned to spend less money than the year before. This year, 54 percent said they planned to cut back, and very few said they planned to spend more. The numbers of people planning to spend less cut across income brackets and even includes six-figure earners, whose spending plans helped drive down the average household spending outlook for the region.
Less of everything: The survey asked people how much they planned to spend in 12 categories. Books, clothing and gift certificates remained popular, but the totals for every category declined, Brennan said. (A national Nielsen report on holiday shopping found necessities, such as food and gas cards and practical clothing like winter gear, will be popular.)
More plan to shop by catalog or computer: Stores are losing ground to the Internet and catalogs, the survey found. Last year, respondents planned to spend 80 percent of their holiday budgets at stores. This year, it’s down to 64 percent. Stores have been losing ground to the Internet and catalogs in a trend for several years, but this year’s jump is significant, the report says.
Mall of America back on top: Malls are losing ground as a whole, but within the category, the Mall of America appears to be a winner. It’s reclaimed its position as the most popular mall destination in the survey after trailing Rosedale in recent years. The MOA has done a good job of adding destination stores, Brennan said. “What they’re doing is reinventing the Mall of America, giving it a facelift … and creating some excitement.” It’s also popular with one-stop shoppers.
Outstate may outperform: The farm economy has stayed relatively strong, even through this fall’s financial crisis, Brennan said. As a result, Greater Minnesota retailers will probably enjoy somewhat better holiday spending than their counterparts in the metro area, he said.
Big boxes, big sales: Large retailers are already slashing prices, 30 percent to 50 percent on many items, in an attempt to keep customers spending. As a result, they’ll probably be able to move inventory, at lower profits. Smaller stores that don’t have as much ability to absorb those profit losses will probably be hit the hardest, Brennan said.
The timing of the survey may have been a factor in the results, Brennan warned. It was conducted in October, fresh off the financial market’s collapse at a time when retailers were reporting dismal results and the price of gasoline hadn’t yet fallen to its current level.
Still, the report concludes that lower gas prices aren’t enough to offset consumers’ concerns about the economy: “Nervous holiday spenders are not big holiday spenders.”