Consumers remain cautious, but some ready to spend

News

Managing Editor

As the holiday shopping season lurks in the weeks after Independence Day, retailers can celebrate, at least a little, that consumers intend to loosen their wallets, at least a little.

In a follow-up study this spring by the International Council of Shopping Centers, more than a quarter of the shoppers surveyed said they were inclined to spend more. In addition, 30 percent said they had not cut back their spending in the prior six months.

“People are feeling a little bit more optimistic. I am hoping it’s good for the retailers,” said Kate Clifford, president and broker of Strategic Sites Clifford Commercial in Jacksonville Beach. Clifford is a member of ICSC in North Florida.

“I think there’s a lot of inventory out there and I honestly do think we are mentally trending upward,” said Clifford, who handles retail and office properties.

Geneva Henderson, executive vice president of commercial real estate company Lat Purser & Associates and an ICSC member, expects this year’s holiday season will be an encore of 2009.

“I think people are going to go into the holidays just like last year. People will pay in cash and buy more needs than wants. Retailers will have less merchandise, just like they did last year. I think it will be about the same as last year,” said Henderson, whose business is predominantly in retail.

The study found that the categories with the the biggest boosts were shopping trips in general, visits to specialty apparel stores, purchases of discretionary goods and spending for clothing and casual dining.

That doesn’t surprise Clifford. For example, she said a lot of the moderately priced restaurants she’s assisted tell her they are having “an exceptional first half of the year.”

“They say people might not spend money on a vacation, but they are saying, ‘you know, things aren’t so bad that I can’t take my family out for an $80 dinner.’ They have strong volumes,” said Clifford.

She said value-oriented stores also are marketing to the middle-income consumers who want to freshen up their homes and wardrobes at a lower cost.

“I think there’s some pent-up demand,” said Clifford. “We all went into preservation mode. When you are uncertain about the future, you don’t feel good about spending discretionary dollars. Most of us can live without most of what we think we want.”

Henderson said retail stores expanding the most are the discounters and dollar stores.

“They are coming in to make the best deals they can in a depressed economy,” she said.

The Phase Two study this spring followed the Phase One study launched in October. The study is designed to provide a way for the shopping center council to track consumer perceptions and behaviors.

The second phase surveyed more than 2,700 consumers, age 18 and older, who were responsible for at least some of the shopping in their households. The majority of the interviews were with U.S. consumers, although 529 interviews were completed with Canadian residents.

“The majority of consumers are still using caution in their purchase decisions, such as focusing on need or replacement purchases rather than wants, waiting for a sale or coupon before making a purchase and establishing a budget or spending limit before they go shopping,” said the report, written by The Research Shop Inc. for the council.

“It’s interesting. The grocery stores have done that forever,” said Clifford. “When that cereal is two-for-one, even though you can take one and get it for half price, you buy two because it’s such a good deal.”

It can be similar with shoes, said Clifford.

“When you see that second pair and you can get it half off, you are like wow, OK.”

Henderson said the study was done during a time when the stock market was doing better, which improved consumer perceptions.

“Between October and April, the market was doing better, so you tend to be little more optimistic,” said Henderson.

The report, called “How the recession has impacted consumer shopping habits,” said in its key findings that the largest share of consumers continue to rate their current financial situation as good, at 38 percent, or fair, at 39 percent. Another 17 percent rated their finances as poor and just 6 percent regarded their situation as excellent.

Consumers also remained optimistic, but with caution, for the next year. The report said 38 percent expected financial improvements, although that was down from 42 percent who said in the first phase that they expected improvements.

Retailers depending on school and holiday shopping should take note that the consumers said they were more willing to cut back on purchases for themselves and their homes than to cut back on purchases for their children.

Also, U.S. shoppers reported the most positive improvement in the areas of casual dining, apparel purchases and games and toys.

The survey was done online, which could skew results for online shopping questions.

Still, the majority of consumers – 85 percent – said they preferred to shop in a store rather than online. Nonetheless, the retail categories most shopped online were books, games and toys and apparel. Consumers said 30 percent of their book purchases were online, as were 17 percent of clothing purchases and 17 percent of games and toys.

Those using the Internet to buy goods cited convenience, saving time, ease of finding a specific item, lower prices and a wider selection.

Henderson said Internet shopping will continue to attract more aging and affluent consumers.

“I think that as the consumers with money get older, they go online because there’s X amount of money in the account and X amount of money for retirement,” she said, “so if they can save 10 to 15 percent (buying online), that’s 10 to 15 percent they will have.”

Those physically visiting stores reported similar patterns in both phases of the survey. More than three-fourths of consumers said they shopped at strip centers or enclosed malls, with more visits to strip centers - an average of almost 15 visits a year - than to malls, with about nine annual visits.

Shoppers said they visited outlet centers, lifestyle centers and downtown shopping areas an average of five to six times a year.

In summary, most of the consumers said they were cautious, with more than 60 percent identifying strongly or somewhat with statements that they buy only items they need or must replace rather than items they want; that they wait for a sale or a coupon before buying something; and that they establish a budget or spending limit before buying.

On the flip side, almost 30 percent are showing an inclination to spend more, including consumers ages 18 to 24.

Consumer shopping habits

• 77 percent say their financial situations are good or fair

• 38 percent are optimistic about the next 12 months

• 28 percent say they’ll spend more

• 30 percent said they haven’t cut back the prior six months

• Majority are cautious, focusing on needs, waiting for sales and coupons, setting spending limits

• They report increases in shopping trips in general, and buying clothes, games/toys and casual dining

• 85 percent prefer shopping in stores rather than online

• More than half of the adults use a social media site, mostly Facebook.

• Social media is most used by consumers age 18-44 (75 percent).

• Social media is used by 50 percent of consumers age 45-64 and 30 percent by 65 and older