Retail outlook: Lump of coal

  • Article by: STEVE ALEXANDER , Star Tribune
  • Updated: November 18, 2009 - 9:19 PM

Holiday retail sales were off in 2008, and this year looks to be even worse, a survey of Twin Cities consumers finds.

Still reeling from the Great Recession, Twin Cities consumers are cutting back their spending again this holiday, according to a metro-area survey by the University of St. Thomas.

"We have a gloomy group of shoppers out there this year," said David Brennan, professor of marketing and co-director of the Institute for Retailing Excellence at the University of St. Thomas in St. Paul. "This is what the holiday shopping season looks like in a jobless recovery."

Consumers in the Twin Cities collectively plan to spend 2.7 percent less on holiday purchases than last year, or about $810 million, according to the St. Thomas survey, which included 303 households in the 13-county metro area.

But consumers won't be able to make their shopping dollars go as far as they did last year, when merchants slashed prices sharply to clear out unsold Christmas inventory, Brennan said.

Despite headline-grabbing price cuts by retailers such as Wal-Mart, retailers overall have ordered far less merchandise this time, meaning that there won't be as many dramatic sales and that shoppers who wait until the last minute may find stores are out of the products they want.

This year's projected drop in holiday spending is only about a quarter of the drop that consumers predicted in last year's holiday spending survey. But while some economic indicators show the economy is slowly improving, consumers remain uncertain about the future, Brennan said.

The evidence can be found in how much consumers say they will spend during the holidays. The average Twin Cities household will spend about $637 this holiday season, the lowest since the survey began in 2002, and down 3.9 percent from $663 per household last year, Brennan said.

Nearly 54 percent of consumers surveyed said they will spend less than last year, while only 7.6 percent said they would spend more.

However, compared with national surveys of consumer spending intentions, people in the Twin Cities tend to be more pessimistic about their holiday spending by 2 or 3 percent, Brennan said. That's because historically the Midwest tends to be more conservative in its spending outlook, he said.

The survey also asked people where they are likely to shop: The Mall of America was the most popular shopping mall, followed by Rosedale (No. 1 from 2004 to 2006) and Ridgedale.

However, shopping malls continued to lose ground among consumers, who are increasingly shopping at stores located outside of malls, Brennan said.

The survey results are accurate within plus or minus 4.5 percent, Brennan said. An independent survey firm selected the households for the survey, then asked the residents to fill out an online questionnaire.

Steve Alexander • 612-673-4553

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