Holiday Spending on Gifts to Fall 2.5%

Approximately $169.1 billion will be spent on gifts for the holidays, 2.5 percent less than last year, according to the results of recent poll.

The Harrison Group, a market research firm which conducted an online poll of a representative cross-section of 1,300 adults and 1,100 teens, said the bulk of the decline—not surprisingly—is expected to come from lower- and middle-income households (annual income less than $75,000), who expected to spend 7.6 percent less on gifts than last year, for a total $83 billion holiday tab. For these consumers, fuel prices, home heating costs, and the increasing food expenses are taking a toll on giving.

Affluent households, however, are poised to make up the difference. Holiday spending among households with more than $75,000 in income is projected to rise by 3.1 percent, to almost $82 billion. In short, the top 30 percent of households will spend nearly as much on gifts as the remaining 70 percent.

Teens are also holding up their end of the consumption bargain, according to poll results. They plan to spend 2.4 percent more on gifts this year, for a total of $4 billion. Yet even among affluents and teens, holiday gift giving is likely to have a strong dose of the practical in preference to the whimsical.

“Our sense is that this holiday season will be an interesting mix of ‘Wow!’ and ‘Thanks, Mom, I really needed that!’” said Doug Harrison, president and chief executive officer of Waterbury, Conn.-based firm.

At a seminar for clients held in October in which the firm presented findings from a number of recent surveys, Harrison Group vice chairman Dr. Jim Taylor told the audience America is in an emotional recession, if not an actual economic one. He describes it as “a withdrawal of enthusiasm and a pervasive sense of dread,” increasing the value of practical gifting. “For budget-strapped middle-income families, this will be less an ‘iPod Holiday season,’ and more an ‘iNeed’ Holiday,” he said. Consumers will be on the lookout for gifts that express affection while providing basic necessities.

“Consumers at the high end of the market, however, appear to be unaffected by economic uncertainty and will spend with gusto,” Taylor said. “A rising tide of affluence and deepening family connections are producing interest in high-impact, high- quality gifts. Look for heavy spending on extraordinary quality and sublime luxury, from fashion to designer technology and event tickets to jewelry.”

Teen shopping, meanwhile, will be driven by continued income growth (working teens have nearly $600 per month in discretionary income) and increases in the number of ‘gift-exchange’ relationships, Taylor said. Teens will be exchanging small to substantial gifts—game systems, clothing, music and toys—designed to communicate depth of feeling and connection through brands.

A complete report of Harrison Group’s consumer market findings from the firm’s fall seminar presentation will appear in an upcoming issue of JCK.