Holiday Sets Stage for 2009

A recent survey from The Nielsen Co. offers insight into consumer shopping patterns this holiday season—and what retailers can expect as they move into 2009. According to Nielsen’s 2008 Holiday Forecast, more than one-third (35%) of consumers across all income levels expect to spend less this season.

The survey leaves little doubt as to where the holiday action is likely to be: mass merchandisers, dollar stores, supercenters, supermarkets and warehouse-club stores are expected to attract the lion’s share of holiday spending as consumers shift their purchases to more value-oriented channels. Convenience and gas retailers may also come out ahead, with 12% of consumers expecting to spend more in these locations.

Online retailers are another bright spot, according to the report, with consumers increasingly turning to comparison-shopping sites to find bargains and check competitive prices.

The season is likely to prove the biggest challenge for department stores and electronic stores, with almost one-third (28%) of consumers expecting to spend less in these outlets this year, Nielsen reported.

“Whether it’s lower prices, instant rebates or free-shipping offers, value messages will speak to bargain-seeking consumers in today’s tough economic climate,” said Todd Hale, senior VP, Consumer & Shopper Insights, The Nielsen Co., Schaumburg, Ill.

Necessities (as opposed to novelties and luxuries) will rank among the hot items this year, according to Nielsen, along with practical apparel (undergarments, socks, fleece jackets and the like) and household goods (basic kitchen supplies and bed/bath linens). Also in: categories aligned with at-home entertainment, DVDs, mobile phones, books, wine and spirits, and video games. Indeed, this last category appears recession-proof, according to the survey.

As to how retailers can survive this holiday season and reinforce consumers’ desire for value, Nielsen offers these suggestions:

• Manage inventory like never before to avoid extra inventory come January.

• Recognize that necessities will drive strong sales this season. Gift cards for basics—grocery items, toiletries, baby-care products, gas and car repair—are all expected to do well.

• Reach out to your best customers and make them feel special by providing special coupons or sale prices.

• Leverage consumer packaged goods (CPG) categories, from toiletries to pet care to food stuffs, to drive basic gifts and stocking stuffers.

With no easy end in sight to the economic crisis, the report makes clear that the results of this holiday season will serve as an important precursor as to what retailers can expect in the New Year. Looking into 2009, Nielsen predicts more of the same as existing patterns intensify, with fulfillment of basic needs taking precedence over discretionary spending. Consumers will continue to trade down, and variety and convenience will continue to take a back seat to value.

But all is not lost. Nielsen advises companies to use the current economic slowdown to build competitive advantage, differentiation and loyalty. It reminds retailers that those companies that help drive the trends, as opposed to those that just react, will be best-positioned to grow and succeed.