Southern California Shoppers to cut Budgets, Seek Value This Holiday Season, but Still Plan to Spend Significantly on Home

LOS ANGELES, Nov. 6 CA-Deloitte-Shoppers


Deloitte Annual Holiday Survey Shows Consumers Changing Their Shopping Habits; More Southern Californians to Pay with Credit Cards; 11 Percent Still Paying Off Holiday Debt from Last Year



LOS ANGELES, Nov. 6 /PRNewswire/ -- With the economy weighing heavily on their minds, many Americans plan to spend less and shop differently and more carefully during this year's holiday season, according to Deloitte's 23rd Annual Holiday Survey of retail spending and trends.  



A record number of consumers say they are pessimistic about the economy. Nationally, over half (53 percent) of those surveyed say they expect the economy to weaken next year -- the highest in more than 10 years of asking this question -- compared with 43 percent last year. That number is consistent with the sentiment in Southern California, where 52 percent of consumers expect the economy to weaken next year, versus 44 percent last year. Almost one in five consumers (19 percent) nationally and in Southern California said they feel that their jobs are not very secure or not secure at all -- the highest percentage since 1997, when the question was first included in the survey. 



Almost six in 10 consumers (59 percent) surveyed nationally and regionally expect to reduce their spending this holiday season. Higher food prices were cited as the number one reason consumers expected to reduce their spending -- both nationally (73 percent) and in Southern California (69 percent).  However, Southern California consumers differed significantly on the other factors affecting their spending plans. For example, nationally, 69 percent of respondents cited higher energy costs as the second most common reason for spending less, versus 54 percent in Southern California. The second most common reason for cutting back on spending among Southern Californians was a lack of extra cash (65 percent). Southern California consumers are also more concerned about the declining value of their homes (19 percent versus 13 percent nationally), higher debt levels (29 percent versus 25 percent nationally), volatility in stock market (27 percent versus 23 percent nationally) and job loss (20 percent versus 17 percent nationally).  



Spending on Home Down Nationally, Up in Southern California

At a national level, the categories in which spending is likely to be down the most are home improvements and home/holiday furnishings. However, in Southern California, consumers surveyed plan to spend $453 this season on home improvements, a dip from last year's average of $494, but more than twice the national average of $201. Southern Californians plan to spend an average of $140 on home/holiday furnishings -- double last year's average of $70 and almost three times the national average of $48. In addition, consumers in Southern California plan to spend $167 this year on entertaining at home, more than the national average of $135 and the 2007 average of $160. Nationally and in Southern California, non-gift clothing and socializing away from home also showed marked cutbacks, while charitable donations showed smaller declines. 



Southern California consumers surveyed plan to spend more than the national average in every category except gifts. Nationally, consumers say they will spend an average of $532 on gifts this holiday season -- a decrease of 6.5 percent. They also plan to buy fewer gifts this year -- 21.5 gifts on average compared to 23.1 gifts last year. Southern Californians expect to spend approximately $469 on gifts, a decrease of 8.9 percent from last year.  However, local consumers want more for their money -- despite wanting to spend less, they plan to buy an average of 22.9 gifts, approximately the same amount as last year (22.8). 



"Among the economic challenges Southern Californians are facing, consumers are struggling with rising foreclosures, increased gas prices and a severe credit crunch this holiday season," said Jackie Fernandez, Deloitte's Retail leader in the Pacific Southwest. "In these difficult times, consumers appear to be reining in their holiday spending, while trying to preserve the tradition of gift giving and the spirit of the holidays."



Consumers Will Shop Differently

With economic concerns high, value-oriented stores are expected to be the top shopping destinations. More consumers surveyed say they will shop at venues such as discount/value department stores, warehouse clubs, dollar stores, outlet stores, and off-prices stores.  Drug stores and supermarkets also showed big increases from last year. In addition, Southern California consumers cited flea markets (8 percent) and resale/used merchandise stores (4 percent) as destinations. Consumers are looking for value: 71 percent of consumers in Southern California said the best value for the money will cause them to shop a particular retailer this season, and 69 percent said low prices. Convenient location, quality and selection of merchandise and customer service/experience all ranked lower.



Almost seven in 10 Southern California consumers (69 percent) surveyed also plan to change the way they shop due to economic concerns. The top strategies in the region will include buying more products on sale (79 percent), buying more lower priced items (66 percent), and using more store coupons (59 percent). Nationally, 58 percent of consumers are also planning on limiting/consolidating shopping trips to save on gas; however, in Southern California, only 45 percent plan to do so.



Although Southern California consumers plan to reduce their holiday spending this year, more of those surveyed will use credit cards to pay for their purchases. Regionally, 38 percent of consumers plan to use credit cards, a significant increase over the 27 percent who used them last year and the 32 percent nationally who expect to use them this year.



Some consumers have another good reason to cut back on spending: 11 percent nationally and in Southern California said that they are still paying off holiday debt from last year. On a more positive note for retailers, consumers surveyed who received a federal government stimulus check this summer said that on average, 20 percent of their check -- 21 percent in Southern California -- was still not spent, meaning those funds are available for holiday purchases, if needed.



"Low inventory levels may enable retailers to avoid 'fire sales,' but consumers are looking for deals and value," said Richard Giss, Los Angeles Retail partner, Deloitte & Touche LLP. "Retailers will likely not be penalized for their leaner staffing levels since consumers are focused on value rather than on other factors, such as customer service. As we saw in the back-to-school season, price-oriented retailers have an edge in this environment, as well as an opportunity to enhance their market share and positioning.  At the same time, retailers will be focused on demonstrating the value they bring to their customers beyond price, such as expanded private label lines and enhanced loyalty program awards." 



Gift Cards Still #1; Southern Californians Prefer Services Over Products 

For the fifth straight year, gift cards are expected to be the top gift purchase. Nationwide, 66 percent of consumers surveyed, and 67 percent in Southern California, plan to buy them, just slightly below last year's national average of 69 percent.  Gift cards are popular among local gift recipients, too: 44 percent of Southern Californians prefer to receive them instead of merchandise, compared to 39 percent of consumers nationally.



Southern California holiday shoppers surveyed are also planning to buy fewer cards on average: 5.7 cards this year, compared with the 6 cards they planned to buy last year. Reversing last year's trend, Southern California consumers are also spending less in total on gift cards and less per card: $27.54 per card on average compared with $30.87 last year. Gift cards for stores/products are less popular among Southern Californians: only 46 percent of consumers plan to buy them, compared with 51 percent last year. On the other hand, gift cards for gasoline increased to 15 percent from 10 percent, another sign of this year's focus on necessities. In contrast to the national average, Southern California consumers plan to buy many more gift cards for "experiences" or services such as manicures or movie tickets -- 25 percent versus 19 percent.



In Southern California, more than half of consumers (53 percent) surveyed have at least one unused gift card; on average, these consumers have 6.2 unused cards. Almost one in five Southern Californians (18 percent) say they have too many gift cards, and a similar number (17 percent) say it's unlikely they'll ever redeem all their cards. More than one in four (28 percent) are concerned about the store closing before they can use a card, and a similar number (25 percent) has had at least one card expire before they could use it. 

 

"Gift cards continue to appeal to consumers' desire for convenience," said Fernandez. "However, with the growing number of unused gift cards, and given the current economic environment, we could see a higher gift card redemption rate in January as gift card recipients make sure they use their cards while they can. At the same time, retailers have an opportunity to capitalize on this important revenue stream by implementing more creative and aggressive gift card redemption programs."



About the Survey:

The survey was commissioned by Deloitte and conducted online by an independent research company between September 26 and October 7, 2008. The survey polled a sample of 13,276 consumers with a Southern California sample size of 696. The survey has a margin of error for the entire sample of plus or minus one percentage point.



For the purposes of this survey, the term "Southern California" encompasses Los Angeles County, Orange County, Riverside County, San Diego County, the San Fernando Valley and Ventura County.



For more information about Deloitte's Annual Holiday Survey, including interesting statistics, historical data and useful links, please visit www.deloitte.com/us/2008HolidaySurvey.



About Deloitte 

As used in this document, "Deloitte" means Deloitte LLP and Deloitte Services LP, a subsidiary of Deloitte LLP.  Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.





SOURCE  Deloitte