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Parents will still shop for kids' presents, but even the affluent will cut back on buying for themselves this holiday
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. Although toy stores may see a decline in business—the NPD survey shows a three-percentage-point drop in the number of consumers who say they'll shop at toy stores this Christmas compared with last—it doesn't mean parents will spend less on their children. The drop is accounted for by the fact that parents are buying more electronics for their kids. "Every year the traditional age at which a child gets his or her first iPod or cell phone goes down," says Cohen. Kids Come First
"People never cut back on their kids," says Mitch Burg, president of the Syndicated Network Television Assn., a New York organization that makes holiday shopping predictions based on the number and type of retailers that purchase air time for commercials on syndicated TV series. "We're seeing a significant rise in retail activity. Target (TGT), Wal-Mart (WMT), J. C. Penney, Sears (SHLD), and Best Buy (BBY) are buying more advertising on syndicated TV." He believes that means healthy sales for value-priced gifts for children. Google reports that with the approach of Black Friday—the day after Thanksgiving, which traditionally marks the beginning of the holiday shopping season—it's seeing a spike in online searches for products on Wal-Mart, Best Buy, and Sears Web sites. Thanks to this year's emphasis on basics, the apparel market looks strong for children and adults, although it's not all about utility with respect to women's clothing. Carol Davidson says that while "black is the new black this year," clothing retailers will also see high demand for embellished articles. "It's sequins for day, sequins for night," says Davidson, an image consultant and personal shopper who owns the firm StyleWorks of Union Square in New York. "Capes and leggings are big this year, too. Teal is the newest big color." For men, two classics are coming to the forefront, according to Davidson. "The vest and the cardigan are strong," she says. "A lot of cardigans are cut so they have a better fit now, so they're more popular." Sending Fewer Cards
In keeping with the trend toward substantive gifts, the book market looks healthy, possibly bolstered by an escalation in price wars between Wal-Mart and Amazon.com this holiday season. Gift cards, on the other hand, look like one of the season's losers. NRF's 2009 Holiday Consumer Intentions and Actions Survey suggests that holiday shoppers plan to spend $139.91 on gift cards in 2009, a drop from $147.33 in 2008, probably because of negative publicity about expiration dates and fees, as well as the public's fears that retailers will fail before recipients have a chance to use the cards. Consumer conscientiousness notwithstanding, retailers both online and offline can expect the usual, if not more-frenzied, last-minute Christmas shopping rush. According to NPD, this year 19% more consumers indicated they would put off shopping until December. "It seems that every year on Dec. 23 or 24, I realize that I forgot someone," says Buie, "and I shop in a panic."
Click to see BusinessWeek's 2009 Executive Holiday Gift Guide.