Even for the haves, holidays may not be bright

Gainesville, Fla. – Due to tough economic times, Florida consumers plan major cutbacks to their 2008 holiday spending, according to telephone surveys of more than 500 Florida residents conducted in September and October. The worst news for retailers: expectations fell as the season approaches. The September survey showed a 38 percent decrease from last year (from $1,324 per resident to $828) and, in October, the average dropped to $802.

Barton Weitz, executive director of UF’s David F. Miller Center for Retailing Education and Research, says, “The 2008 holiday season will be one of the worst for retailers in decades. In sharp contrast to previous years, decreased spending intentions were reported across all income brackets.”

Just over 50 percent of consumers in the lowest income bracket (less than $30,000 per household annually) intend to spend less, compared with 37 percent of middle-income households (less than $60,000) and about 19 percent of upper-middle-income households (below $100,000). For the first time, even high-income households (over $100,000), which have typically been immune to economic slowdowns in recent years, are expecting to decrease spending, with more than a third of affluent consumers reporting a dramatic reduction in spending intents.

Expectedly, the lowest income group planned to spend the least—only about $195. But, surprisingly, the surveys showed the biggest drop to be among the highest income households. According to Weitz, that dramatic drop spells trouble for luxury retailers.

“Retailers selling luxury products will suffer,” Weitz says. “They haven’t adequately planned for this tough year—in contrast to other general retailers—who have been preparing with better merchandising decisions, slimmer inventory and cautious operational spending.”

Department and specialty stores will also be vulnerable to a downfall in sales, as consumers will withhold their discretionary spending until the economy turns around. But discounters such as Walmart, Save-A-Lot, and Target may experience opportunities to lure more middle- and high-income consumers into their stores. Weitz states that with all the challenges that retailers face for the coming holiday season, they must be innovative in order to sustain their vitality. Targeting their core customers, while maintaining a slim inventory, may help retailers save on operating costs and survive this tough year.

Overall, holiday spending intentions unveiled a growing lack of consumer confidence. While 63 percent of Floridians surveyed in September believed their holiday spending would remain the same or increase, just over half of consumers expressed the same plans in October. As a result, while Florida has been a relatively healthy retail market in comparison to the national average and other states, Florida’s sales will dip below other states during this holiday season.

In other trends, gift cards continue to appeal to consumers, with nearly 60 percent indicating they will spend the same or more for them than in 2007. But shopping malls will be less crowded, with a 15 percent drop reported in September and October surveys. Instead, online shopping is predicted to fair much better this year (with just under a 1 percent decrease), as gift givers actively seek out deal- and value-driven products. Additionally, they may search for ways to pare their spending further by finding a “family gift” instead of multiple individual gifts.

The survey was conducted by the David F. Miller Center for Retailing and Bureau of Economic and Business Research at UF. The margin of error is 3 percent.