Are Shoppers Ready to Shop?

Discussion
Jun 02, 2009
George Anderson

By George Anderson

There’s an old expression
about money burning a hole in your pocket. For free spending Americans,
there may be a little of that going around as those that have hunkered
down find themselves a little bored with the whole austerity thing and
there’s so much stuff, usually at discount, just waiting to be bought.

As a Time article
points out, the most recent consumer confidence numbers have been good;
economists see at end to the recession at hand, and (this one from us)
there are plenty of good deals to be had in outlets from dollar stores all
the way up to luxury retailers.

The same article points
to WSL Strategic Retail’s latest How America Shops report, which
showed that fewer consumers are cutting back on 19 of the 32 categories
it covers. Last year, nearly 60 percent of respondents said they were cutting
back on frozen food. In the latest report, that number fell to 34 percent.

"People have done
an awful lot of cutting back in the last 18 months," Wendy Liebmann, CEO of WSL Strategic Retail, told Time. "There’s
not much more they can do. They’ve figured that it’s not the end of the
world here, and there are places where you can open up your wallets."

Consumers are looking
to get out and have a little fun, said Ms. Liebmann.
"Consumers are exhausted, and they need a little break. They are starting
to come out of their little burrows, saying, ‘Please, please, can I have
a night out?’"

Discussion Questions:
Do you see evidence that consumers are getting tired of cutting back
and are looking, in varying degrees, to open up the purse strings a little
bit? Where do you see opportunities for retailers at this time?

Please practice The RetailWire Golden Rule when submitting your comments.

Join the Discussion!

23 Comments on "Are Shoppers Ready to Shop?"


Sort by:   newest | oldest | most voted
David Biernbaum
Guest
11 years 11 months ago

Retailers who have taken the sledge hammer approach with SKU reductions should have considered using a scalpel, as we initially recommended. Consumers are not only willing, but actually they are anxious, to spend in certain categories, for items that are retail based solutions that replaced non-retail solutions, be it medical, OTC, certain foods, etc. Often these items are not the commodities, not the cheapest, and not the most discounted.

As one example, I work with some premium priced solution based oral care brands that are doing terrific with consumers because the solution is still a lot more cost-effective for consumers than the professional route. Ironically, this is “new business” for retailers.

Pradip V. Mehta, P.E.
Guest
Pradip V. Mehta, P.E.
11 years 11 months ago

If the article “Americans Get Even Thriftier as Fear Persists” in today’s Wall Street Journal is any indication, I think there is no sign that consumers are tired of savings and beginning to spend!

Marc Gordon
Guest
Marc Gordon
11 years 11 months ago

Will Americans who are looking to “have a little fun” really help a stagnant economy? While it’s nice to see shoppers loosening the purse strings a little, the question remains what this means for creating economic growth. A night out at the movies, dinner at a restaurant, or a day at Six Flags will not help the economy the same way as capital purchases such as cars, houses and appliances. Regretfully these numbers are still too low to indicate we’re out of the woods yet.

On the up side, the continued growth in movie revenues has allowed the studios to continue paying immense amounts of money to actors. Kind of makes you wonder what Tom Cruise and Brad Pitt are doing to help the economy.

Doron Levy
Guest
Doron Levy
11 years 11 months ago

Shoppers are looking for the best deal right now. Fortunately for them, there are a ton of great deals. A 50 inch Plasma TV for $899? That’s a great deal here in Canada. These extreme price points for desired merchandise is what’s driving sales. I’m seeing aggressive bundling in game consoles as well. Deals in apparel are really aggressive as well.

All these discounts are going to push the customer over the edge psychologically and they will have no choice but to shop. It seems the tide is slowly turning back to our industry’s favor. I can’t imagine anyone going through a recession without an iPhone, Wii and a 52″ Sony Bravia W Series.

Anne Howe
Guest
11 years 11 months ago

Last winter, when consumer confidence was deeply tanking, Warren Buffet made a comment that it takes consumers 5 minutes to find fear, and 5 months to recover. Five months later, the May consumer confidence index took a startling jump upward. What’s better, the Expectations Index, measuring outlook for next six months, jumped over 20 points from 51.0 in April to 72.3 in May.

This bodes well for retailers, as does the $42 billion expected to shift into retail spending from the government stimulus package. A flurry of spending could take place, but it’s not the new normal just quite yet. The job losses continue to mount, and we’re not exactly out of the woods on the credit crisis either.

Nikki Baird
Guest
Nikki Baird
11 years 11 months ago

I don’t know. I realize that some 92% of Americans are still employed right now, but while the rate of decent is slowing, I’m not sure that we’ve hit bottom yet. While consumers may reward themselves for “making it this far” with something a little more than they’ve been spending lately, I doubt we’ll see any kind of recovery in consumer spending until the unemployment rate actually starts going down–vs. the rate of new claims going down, as we’re seeing right now. Remember, the latest “good news” was that consumer spending dropped by 0.1%–a smaller decline than expected. The savings rate still grew. Homes are still being foreclosed on and home values are still pretty grim. There are always bright spots in the dark, but that glow you’re seeing may not be the light at the end of the tunnel quite yet. And believe it or not, I consider myself an optimist!

Gene Detroyer
Guest
11 years 11 months ago
Let’s take great caution in our enthusiasm. The U.S. savings rate was just reported to be at an unheard of number of 6.3%. Does this mean Americans are saving more and now have cash to begin spending again? Not necessarily! The “savings rate” isn’t a measure of what people put in the bank. The “savings rate” is the difference between income and spending. The “savings rate” includes paying down debt and it is likely a good portion of that number is paying down debt. Consumption over the last decade or more was not driven by increases in income. It was driven by borrowing on credit cards and home equity. Today, many of those options have disappeared and won’t reappear anytime soon. The economic concern for the U.S. economy, of course is that it never returns. An economy that is 70% supported by consumer spending is at tremendous risk to be vulnerable to even small changes in consumer buying habits. Imagine if the consumer’s replacement cycle were to be stretched by just one year. Imagine, if… Read more »
Roger Selbert, Ph.D.
Guest
Roger Selbert, Ph.D.
11 years 11 months ago
If there is one iron-clad rule when it comes to the life cycle of recessions, it is that when things get cheap enough, buyers appear. In other words, there is a bottom somewhere, if for no other reason than even after the worst disaster, survivors must move ahead with their lives. And we all have to buy the basic staples (even the bare necessities add up to billions of dollars in expenditures). Will we completely change our lifestyles, living in smaller places, driving smaller cars, consuming less, become more frugal, less ostentatious, opting for voluntary simplicity, etc.? Fugetaboutit. I get asked about this during every downturn and I always say the same: only those who already have everything seem to buy into the notion of doing with less. And, as it turns out, they have to spend freely in order to impress themselves that they are living frugally. What about consumers and consumer spending, such an important component of economic activity? Optimists point out that most people (upwards of 90%) are still working, earning, making… Read more »
Liz Crawford
Guest
11 years 11 months ago

Sudden thrift, after years of spending, is like an overweight person going on a crash diet. Real, long-term change requires lifestyle shifts that persist after the weight is lost (or money saved).

Rabid American consumers have spending “slips” because tightening the belt isn’t fun, and doesn’t feel “normal.” Who likes to feel deprived? When, or if, credit gets more stringent–then we’ll see more permanent change.

Mel Kleiman
Guest
11 years 11 months ago

It is amazing what a positive move in the stock market is having on the way people feel. I just got back from a convention of people in the high-end Salon and Spa business and even though business is still way off the people at the convention see people coming in more often. Americans just want to see the economy getting better.

One caveat; if the price of gasoline continues to rise, all bets are off.

Bruce D. Sanders, Ph.D.
Guest
Bruce D. Sanders, Ph.D.
11 years 11 months ago
I come away from that Time Magazine article with a sense that the optimism is rooted more in “I’m tired of watching every little penny” than in “There are some good solid signs of recovery here.” To be sure, the Conference Board’s index of leading economic indicators is up and economists are predicting good things for 2010. But, according to the article, how is real estate broker’s assistant Christina Calleja, age 25, deciding to handle her recession fatigue? Buy a car? Some consumer electronics? No, she’s scooped up a bargain airfare to France. She’s quoted as saying, “Screw it. I’m going to go here.” Oh yes, she did grab a few new threads as an afterthought. I predict that business will be better for retailers in 2010 than it is now overall. But hey, I’m a consumer psychologist, not an economist, and my prediction is based on a limited number of contacts, so what do I know? Well, okay, I do know that I’m warning operators of retail businesses that the most dangerous time to… Read more »
Bob Phibbs
Guest
11 years 11 months ago

Customers are tired of the endless parade of doom and gloom. We may have dodged a bullet but there’s no apocalypse. Smart retailers will find customers regaining their optimism–give ’em a reason to come back and feel good about buying again.

Mark Burr
Guest
11 years 11 months ago
Consumer confidence measures do not necessarily equate to increased purchases or do they? One indicator in my view is reported same-store sales. These have been mostly negative or weak in the latest reports. So in that light, I am not seeing a huge shift. As we watched the recession emerge, it was mainly driven by fuel prices, from my view. We all looked for a break point. While we thought that it was likely the point of $4 it was at that point where the slide was inevitable and the real point had likely past when it reached $3 and the impact had not been completely seen until $4. Fuel prices are back on the rise and will likely be again over $3 by mid-summer. That being the case, any minor up tick in spending will quickly be stunted. Consumers now have the knowledge of what the cost of fuel did to their budgets and are much more conscious of it. It’s certainly the case that car sales to more fuel efficent vehicles have not… Read more »
Peter Milic
Guest
Peter Milic
11 years 11 months ago
When I saw this topic, the first thing I wondered was how many times will this question be asked over the next few months. Every metric that we use to measure a phenomenon such as intent to spend, consumer confidence does not straight-line forever. When the air goes out of a balloon, the force at which it dissipates may diminish, but the fact remains that the balloon is flaccid. Many consumers have seen their nest eggs vanish overnight as people who lost their jobs were forced to use up their savings. Those close to retirement have seen their nest eggs vanish as a result of irregularities in the equity markets. Clearly, we all need to replace things and to spend on ourselves to make life enjoyable, but will things ever return to the way they were? My final thought on this relates to my parents. They lived through some very difficult economic times. This memory of the difficult times stayed with them forever and their spending habits reflected a degree of frugality that was not… Read more »
Li McClelland
Guest
Li McClelland
11 years 11 months ago

I would like for things to look more optimistic for retail right now–I really would–but just don’t see it. An awful lot of kids graduating from good universities this spring are having a devil of a time finding jobs. Several engaged couples we know of have put off setting an actual wedding date due to job market and financial uncertainty. A few empty-nester couples we know of have had kids and/or grandkids move back home temporarily due to housing issues or job loss. Sure this is all anecdotal, but across the middle class for each new job not acquired or lost, for each apartment or household that is NOT being set up this year (or is being UN-set up), there are fewer clothes, household goods and decor, electronic toys, and appliances to be purchased. As Cub fans always say, “Maybe next year.”

Sasha Pardy
Guest
Sasha Pardy
11 years 11 months ago

My family operates a retail store in its second year of business in a New York tourist town. Our season really started a couple weeks ago and there’s an obvious attitude change taking place. Our customers, while not going crazy, are definitely ready to enjoy their vacations and are spending more freely than they were between June – December 2008. This is particularly obvious as customers are making the choice to buy frivolous trinkets or gifts for themselves in addition to buying a few more of our core product.

Janet Dorenkott
Guest
Janet Dorenkott
11 years 11 months ago

Consumers may be willing to spend a little more, but it’s going to be on small luxuries. Vacations at home, going to the movies or a local amusement park. As they loosen their purse strings, I believe the expendable money they have will be spent more on services to repair and restore current possessions. Frugal is in. Somehow the government keeps reporting that consumer confidence is up, but none of the economic indicators give a good reason why that would be the case.

I think private labels and less-expensive items will continue to do well. Luxury items are out and consumers looking to treat themselves will do so very modestly. The stock market traditionally takes a dive in September/October. I expect that to be the case again and the little spending that consumers are doing will be short lived.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
11 years 11 months ago

Movie attendance burgeoned during the Great Depression and WW II, too. You could look it up. It’s symptomatic of tough times and by no means an indication of increased consumer confidence. You could also look this up: The very first family expenditures to recover to previous levels during a recession are for groceries (that’s store-bought, not drive-through-bought). Watch grocery sales, they’re the barometer, the first to bounce back. We love our vittles. After all, it’s where the term “consumer” originated.

Mike Romano
Guest
Mike Romano
11 years 11 months ago

Retailers take note: before you get too optimistic about future and consistent upward trends in consumer spending. Unlike previous down cycles, this recession has had a deeper impact on personal savings. What you will more likely see is that consumers will allocate more discretionary dollars to their personal savings in an effort to repair damaged 401K and retirement plans, rather than using those dollars, as in past recessions, towards increased consumer spending. You will see a minimal uptick later this year, but not enough to offset for your down CSS the past year.

So, the recession may lighten later in 2009, but expect a lag period of about one year before you start to anticipate more consistent upward revenue trends.

Kai Clarke
Guest
11 years 11 months ago

Not now. We have too many unemployed Americans that still have to get jobs and become employed before this will change. It is slowly changing, but until we see a change in the unemployment status–which is a lagging indicator to spending by 3-6 months–we will not see shoppers spending much more. At 8% plus, we need several successive months of decreasing unemployment to have a significant impact on our economy and change the spending impetus which drives our economic figures.

Ted Hurlbut
Guest
Ted Hurlbut
11 years 11 months ago

I think the recent Conference Board Consumer Confidence Index for May painted an accurate picture. The Index for May came in at 54.9, up from 40.8 in April. What was most interesting to me, however, was that the Present Situation Index was up a modest 3.4 points, to 28.9, from 25.5 a month ago, while the Expectations Index was up 21.3 point, to 72.3, vs. 51.0 in April.

Consumers are currently holding their dollars very close to the vest, and remain very value conscious and focused on basics. What they are indicating, however, is that they believe things are going to improve, and that they expect to be buying more, but most likely not until we get into the fall.

Roger Selbert, Ph.D.
Guest
Roger Selbert, Ph.D.
11 years 11 months ago

Surprisingly strong upswing in US Consumer Demand–the CDI is now at the highest level since September 2008. The May survey shows a significant upswing from minus 23 points in April to minus 5 in May, driven by improvements in the index for clothing and the index for food and other grocery store items. These two important indices were the last to collapse when high fuel prices sent the US CDI south last year. It’s a fairly strong indication that the decline in US private consumption expenditure is bottoming out.

Feel free to contact me for more information.

Tim Henderson
Guest
Tim Henderson
11 years 11 months ago
There’s definitely a lot of pent-up desire to buy. And recession fatigue is an issue that consumers are learning to grapple with. But I don’t think the WSL findings (about consumers having cut back in so many areas that they can’t cut back anymore) indicates consumers are willing to spend. In truth, that data appears supports a trend dubbed the New Bottom Line, i.e., consumers have, in part, developed money-saving skills and established a level of comfort with being a “recession shopper.” Essentially, they’ve created a New Bottom Line for spending, and in most cases, that bottom line means less to spend than consumers had just a few years ago. As for whether the economic data supports an ending of the recession, it doesn’t matter. Keep in mind that there are actually two post-recessions. The first is the official declaration from bureaucrats and economists. The second and more important one for retailers and manufacturers is the consumer’s “personal post-recession.” Not everyone will enter this latter post-recession at the same time because of the magnitude of… Read more »
wpDiscuz

Take Our Instant Poll

How much more willing or reluctant are consumers to resume spending at retail compared to where they had been in late 2008 and earlier this year?

View Results

Loading ... Loading ...