SAGE Advice: Our First 2006 Holiday Spending Preview

By: Leo J. Shapiro, Steve Yahn, and Erik Shapiro It's beginning to look a lot like Christmas spending might be down this year for many. But a fortunate few -- buffered from macroeconomic turmoil by microeconomic prosperity -- will spend unabated.

Just when retailers are beginning to stock up for the holidays, August data indicate that many consumers plan to cut back on Christmas spending.

Our Leo J. Shapiro and Associates consumer surveys show a five-point year-to-year decline in the percent of consumers planning to increase spending -- to 17 percent this August from 22 percent last August -- and a three-point year-to-year increase in the percent planning to reduce Christmas spending (to 41 percent this August from 38 percent last August).

The sharp drop in Christmas spending plans is a partial function of the 14-point rise in the percent of consumers worried about inflation (up to 37 percent this August from 23 percent last August).

When it comes to stagflation -- with inflation rising and the economy worsening -- what retailers mostly have to worry about is worry itself. A family perceiving and concerned about rising prices and falling or stagnant income will reduce spending no matter what the economic pundits declare.

Among those worried about stagflation, only 11 percent say they will spend more for Christmas this year compared to last, and more half (55 percent) say they will spend less for Christmas this year than last.

Last year's August poll was completed before Katrina struck and smashed consumer willingness to spend. If the September 2006 reading for Christmas spending falls short of matching post-Katrina spending plans, retailers will be eager for help from their newspaper advertising partners in planning strategies for dealing with reluctant consumers.

But Christmas spending for 2006 is not necessarily down for everyone. Our August 2006 survey also shows that there has been a year-to-year increase in the percent reporting increased household income and feelings of job security.

Retailers and their newspaper advertising partners will have a challenging opportunity this year: coaxing Christmas dollars out of the reluctant majority, while welcoming Christmas dollars from the enthusiastic minority.

Join us here in monitoring changing reality, month-to-month, and hope for the best while preparing for the worst.


BOTTOM LINE

Since retailers cannot wait to order holiday merchandise, they need help doing contingency planning, developing options to take advantage of last minute surges in consumer spending and avoiding overstocks should consumers? gloomy projections of stagflation prove correct and they follow through on their planned cuts in Christmas spending.

Here is a thought starter for a promotion that might help in planning.

Let the newspaper take the initiative in setting up a Christmas gift register where anyone can register their hearts desires. Salt the register with coupons that shoppers can redeem with cooperating retailers for tickets that give them a chance to get a full refund for the dollars they spent.