Consumers: Making a Budget, Checking it Twice

U.S. consumers plan to spend an average of $832.36 on holiday-related shopping, up 1.9 percent over last year’s $816.69, according to the National Retail Federation 2008 Holiday Consumer Intentions and Actions Survey. This represents the lowest increase in planned consumer spending since the survey began in 2002.

Consumers surveyed say a factor that will play the biggest role in buying decisions this year is price. According to the survey, 40 percent of shoppers say that sales or promotions is the largest factor when determining where to shop, while another 12.6 percent state that everyday low prices are most important. Other consumers rated selection (21.5%) and merchandise quality (13.4%) as the primary factor. Only a handful of consumers said they are making buying decisions based on a convenient location (5.6%) or helpful customer service (5.2%) this year.

“Retailers are going into this holiday season with their eyes wide open, knowing that savings and promotions will be the main incentive for shoppers,” said Tracy Mullin, NRF president and chief executive officer. “No one is canceling Christmas because money is tight, but consumers will be sticking to their budgets and looking for good deals when deciding where to spend this holiday season.”

This year, the average person will spend $466.13 on gifts for family, $94.52 on friends, $26.70 on co-workers, and $43.50 on other gifts, according to the survey. For the first time in the survey’s history, people say they plan to spend less on gifts for family members ($466.13 in 2008 vs. $469.14 last year). Spending is expected to be particularly weak among young adults, as 18-24 year-olds plan to spend $50 less on gifts than one year ago.

“It might not be easy to pull back on small gifts for a co-worker or a child’s teacher, but consumers feel like their family understands their current situation,” said Phil Rist, Vice President of Strategy for BIGresearch, which conducted the research for NRF. “Americans might eliminate an extended family gift exchange or buy one big present for all of the kids to compensate for a budget-friendly Christmas this year.”

Consumers’ holiday budgets this year also include spending on decorations ($51.43), greeting cards and postage ($32.43), candy and food ($95.04), and flowers ($22.61). Jewelry purchases were not included in the survey.

According to the survey, 40.2 percent of consumers will start their holiday shopping before Halloween. This figure is consistent with numbers from previous years and demonstrates that bargain hunters are looking for ways to spread out spending over a period of time.

Nearly 70 percent of  consumers plan to do some shopping at discount stores. About 58 percent of American adults plan to shop at department stores, while more than one-third of shoppers plan to shop at clothing (37.3%) and electronics (37.3%) stores.

Americans are heading online to compare prices, research retail locations, and look for gift ideas before heading to stores. Although the number of people buying gifts online is expected to remain flat over last year (44.2% in 2008 vs. 44.3% in 2007), shoppers will rely on the Internet more than ever to browse for holiday gifts and research products, according to the survey. The Internet will influence 33.6 percent of holiday purchases, up from 30.2 percent last year and 28.9 percent in 2006.

More than half (56.6%) of shoppers are planning to make additional non-gift purchases for themselves or their families this holiday. Some may have even been holding back on personal purchases for the last few months to take advantage of holiday pricing. Shoppers will spend an average of $119.83 on these purchases, up from $106.67 last year.

NRF continues to expect holiday sales to increase 2.2 percent to $470.4 billion.

The NRF 2008 Holiday Consumer Intentions and Actions Survey was designed to gauge consumer behavior and shopping trends related to the winter holidays. The survey polled 8,117 consumers and was conducted Sept. 30 to Oct. 7—after Congress passed the economic rescue package but before last week’s substantial stock market decline.