Holiday Retail: Winners and Losers

Parents will still shop for kids' presents, but even the affluent will cut back on buying for themselves this holiday

By Rebecca Reisner

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For retailers, holiday season 2009 looks no better, and possible slightly worse, than 2008 and will be marked by extra-careful consumer decision-making, an emphasis on quality over quantity, and a strong market for such essentials as apparel and books.

Like last year's shopping season, 2009's falls squarely within a recession. More Americans, 30% vs. 26%, say they plan to spend less money than they did the previous year, according to the Holiday Retail Outlook survey conducted by the consumer research firm the NPD Group. "The 4% increase makes sense, since the unemployment rate rose by about the same amount this year over last," says Marshal Cohen, chief retail analyst at NPD in Port Washington, N.Y.

NPD's data show few changes in where consumers expect to drop their dollars this year. Mass merchants top the list (58%), followed by online retailers (37%), national chains (32%), electronics stores (26%), department stores (25%), and warehouse clubs (21%). Although some of the percentages have changed slightly—by one or two points—this year over last, the rank of the sectors remains unchanged.

Sticking to Basics

"Regardless of where people shop, price is the No. 1 reason people will buy," says Kathy Grannis, a spokeswoman for the National Retail Federation (NRF), a Washington trade association for more than 2,000 physical and online retailers. "People have cut back and are keeping it to essentials. Heading into the fourth quarter, we're seeing that they're still hesitant to spend money."

Jennifer Russell, a recently unemployed administrative assistant living in New York, says she has decided to forget about gifts for most of her extended family members this year: "I'll get something for my mom and my sister and the little kids in my family, but that's about it."

Even consumers unscathed by the economic downturn feel disinclined to splurge. For part-time stay-at-home mom Claire Buie, gift purchases will come only after serious study and consideration. "I practice bankruptcy law, so I have no shortage of work," says Buie, a lawyer who lives in Charlotte with her husband, Craig, also an attorney, and their two children. "But I'll make many reconnaissance missions and do a lot of research online to compare prices before buying. My son asked for a Mind Flex and an iPod Touch. I don't think he'll get the iPod. I might get myself an iMac, but that's only because my PC just gave me the blue screen of death."

Search engine Google (GOOG) reports that searches for printable coupons as well as coupon codes to use online have risen this year, by 30% and 15% respectively, more evidence that consumers are working harder to snag savings.

The Fire Under Kindle

As for the most sought-after gift item this year, Cohen says he can't point to any specific products that will drive consumers into a feeding frenzy. The folks at Amazon.com, not surprisingly, say they've identified the hottest catch. "The Kindle is the most wished for, most gifted, and best-selling item across Amazon.com (AMZN)," says Grace Chung, spokeswoman for the online retailing giant, which markets the Kindle, a device that allows users to download and read books electronically.

Amazon's other anticipated big sellers include the Asus UL30A-X5 Thin and Light 13.3-Inch Black Laptop, Panasonic Viera G10 Series TC-P50G10 50-inch 1080p Plasma HDTV, Kitchenaid Mixer 90th Anniversary Limited Edition five-quart Stand Mixer, and Black & Decker Ready Wrench.

In the toy sector, many retailers point to Zhu Zhu Hamsters ($10) and Elmo's Tickle Hands ($30) as 2009's "it" products.

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