Technology

Economic Woe May Rain on Dad's Big Day


Many deals—especially for electronics—are being offered to encourage consumer spending for a June 15 Father's Day clouded by a down economy

Don't get your hopes up, dads. If you're jonesing for a big Father's Day gift this year you might need to reset your expectations. Rising unemployment, sky-high gas prices, and plunging consumer confidence are likely to take a whack out of some families' spending plans for dad's big day.

The drumbeat of dour economic news kept up June 6, when oil reached another record and government figures showed the largest surge in the unemployment rate in 22 years in May (BusinessWeek.com, 6/6/08). That followed a report earlier in the week showing consumer confidence tumbled to a 16-year low in May.

Gas price spikes aren't helping either. The average price for a gallon of gas in the U.S. rose to $3.989 on June 5, according to AAA. The price of a barrel of oil surged to a new high above $139 on June 6.

The worsening economic outlook gives context to figures released at the end of May showing families will spend less on Father's Day, which this year lands on June 15. U.S. consumers expect to spend $9.58 billion on dads this year, down 4.2% from $10 billion last year, according to a survey by BIGresearch disseminated May 29 by the National Retail Federation. That's the first expected decline since the trade group began releasing the figure in 2004. On average, people expect to spend $94.54 on the man of the house, from $98.34 in 2007.

It's Better to Give

Consumers' lack of confidence isn't taking a bigger toll on Father's Day, since people tend to keep buying presents for others even as they curtail spending on themselves. "Gift spending is always less affected by the economy," says Stephen Hoch, marketing professor at the Wharton School of the University of Pennsylvania. "Because it's the thought that counts, people are more price-sensitive when they're buying the same thing for themselves than for someone else."

Dads may also benefit from the economic stimulus checks making their way into consumers' bank accounts. Recent reports showed a gain in May sales at stores open at least a year. Analysts attributed the increase in part to the payments being sent by the federal government as part of an effort to jump-start growth.

A Discounted Day for Dad

In an effort to attract those consumers who do intend to spend, stores and consumer-electronics makers are cutting prices, touting low-cost financing, and experimenting with online coupons. Circuit City (CC) commissioned a study that found 52% of dads want electronics for Father's Day and urged consumers to buy navigation devices that will help dad find cheaper gas. The retailer says it's cutting as much as $150 on devices based on GPS technology.

Best Buy (BBY) is providing two years of zero-interest financing for any purchase of $999 or more. Best Buy and other companies also are offering discounts through online coupons on DealLocker.com. For JCPenney (JCP), it's free shipping; Dell (DELL) says you can save almost $500 on one of its mobile workstations; and Hewlett-Packard (HPQ) posted discounts on printers, desktop PCs, and notebooks.

Will the discounts work? That depends in part on how large a purchase households want to make, says John Barrett, director of research at market research firm Parks Associates. Consumers are holding off on certain big-ticket items such as computers and flat-screen televisions, but may be more inclined to buy Dad lower-priced items, he says. "There are certain kinds of products that are gift products," Barrett says. "GPS devices are one, because price points are low enough that you could easily go get one."

And if budgets get really tight, families can always make up in thoughtfulness where they skimp on price. The National Retail Federation's study found that in 2008, 68% of those surveyed plan to at least get Dad a card.

Check out our slide show for gadget gift ideas for dads and grads.

Sun is an intern in BusinessWeek.com's San Mateo bureau.

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