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Budgeting to Play Big Role in Holiday Shopping

Price is the chief factor in deciding where to spend

October 21, 2008

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If retailers need yet another reminder that this Christmas shopping season will be challenging, consumers are happy to oblige.

According to the National Retail Federation's 2008 Holiday Consumer Intentions and Actions Survey, conducted by BIGresearch, U.S. consumers plan to spend an average of $832.36 on holiday-related shopping – an increase of less than 2 percent from year's $816.69. This represents the lowest increase in planned consumer spending since the survey began in 2002.

Though shoppers choose to visit stores for different reasons, consumers say one factor will play the biggest role in buying decisions this year: price. According to the survey, 40.0 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 and merchandise quality as the primary factor. Only a handful of consumers said they are making buying decisions based on a convenient location or helpful customer service 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 NRF President and CEO Tracy Mullin. "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."

As in previous years, gift giving is the largest component of shoppers' budgets. 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.

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. "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."

According to the survey, 40.2 percent of consumers will start their 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.

With sales and promotions the theme of the 2008 holiday season, it's no surprise that most consumers plan to do some shopping at discount stores. Additionally, more than half of American adults plan to shop at department stores, while more than one-third of shoppers plan to shop at clothing and electronics stores.

As the Internet becomes more of a mainstay in the retail landscape, 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, 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.

Though most consumers plan to stick to a budget this season, many are padding it with a little something extra. Knowing that the holidays often abound with good deals, more than half 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.

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