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Consumers remain cautious as back-to-school shopping ends
Consumers remained cautious in their spending last month, according to two recently released reports. A third report says 46% of consumers intend to spend the same amount and 43% a smaller amount than they spent last year during the holidays.
Managing Editor, International Research
Consumers remained cautious in their spending in August. Just how cautious is a matter of debate as research organizations came out with differing numbers this week.
On top of that, a report from the retail consulting practice at Grant Thornton says that when consumers do start buying again, they’ll have many fewer places to spend their money.
The International Council of Shopping Centers and Goldman Sachs index of retail sales reports that sales for August were down 2% compared to August a year ago.
And while a year-over-year sales decline might not sound like good news, Michael P. Niemira, chief economist and director of research of the Shopping Centers Council, says such news is encouraging. It’s the strongest reading since year-over-year sales were down 1% in September of last year, he says. "August sales were better than anticipated," he says. "These sales figures reflect a turning point in the retail cycle, as retailers have been describing the month’s sales as better than expected."
A week ago, the Shopping Center Council was predicting that August sales would be off by as much as 4% from a year ago.
Meanwhile, ShopperTrak’s National Retail Sales Estimate, which is based on foot traffic at malls and U.S. Department of Commerce numbers, reports that year-over-year sales of general merchandise fell 5.8% during the last week in August.
“Although retailers offered attractive pricing throughout the 2009 back-to-school shopping period, cautious consumers still limited their spending to necessities, resulting in lower overall GAFO (which stands for general merchandise, apparel and accessories, furniture and other) retail sales levels last week and throughout the critical back-to-school season,” ShopperTrak reported. “Additionally, ShopperTrak’s data supports the findings of many economists who believe the majority of discretionary spending normally allotted for back-to-school items was most likely redirected on auto purchases during the government’s Cash for Clunkers program.”
Spending increases may be on the horizon, however, if what consumers told retail consultants Retail Forward’s ShopperScape survey holds.
“Reinforcing an encouraging trend this year, shoppers’ intentions to spend in the coming months improved dramatically in August,” Retail Forward says, adding:
- 53% said they planned to spend about the same amount in the coming months as they did last year during the same period. Retail Forward reports this is the first time since February 2008 that this share has exceeded 50%.
- The percentage of shoppers saying they plan to spend less in the next month reached its lowest point in more than a year. August’s 38% was the lowest since February 2008.
- “The August numbers reinforce a zigzagging trend developing since early 2009, suggesting a declining percentage of shoppers planning to spend less and a growing percentage of shoppers planning to spend about the same compared to the prior year.”
Shoppers, however, have more modest intentions for holiday shopping, Retail Forward says:
- 46% plan to spend about the same as last year.
- 43% plan to spend less than last year.
- Only 6% plan to spend more.
"In the end, shoppers intend to hold the line on back-to-school spending and their early plans for the December holidays are restrained. Over time, however, shoppers continue to give encouraging signs that they are slowly easing their iron grip on their spending plans," says Frank Badillo, senior economist at Retail Forward.
Grant Thornton’s Corporate Advisory and Restructuring Services division says as many as 10,000 retail stores could close by the end of 2009. Among survival strategies the group recommends: promote your web site.
“Buyers are choosing clicks over bricks,” the report says. “Consumers may not be buying much, but online sales have suffered less and, in certain categories, grown more than in-store sales. Retailers are also using social networking sites to expand their business.”
The groups also recommends creating private-label products, stressing green initiatives, and creating customer loyalty programs.
"Although there`s high risk in the retail industry, now is the time for companies to fine-tune their business and take advantage of new opportunities," says Scott Davis, principal of the restructuring group. "The winners will be the disciplined companies investing the time, effort and resources to reexamine their strategies and position themselves for growth."