Holiday shopping forecast looks bleak

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November 23, 2009 // UPDATED 8:21 am - November 23, 2009
By: Amanda Kushner
Amanda Kushner
// Despite gloomy outlook for sales, Downtown retailers expect to see more customers than 2008 //


As expected, holiday spending is projected to drop this season in the Twin Cities, but Downtown will likely see more shoppers than year’s past, according to a University of St. Thomas survey.

Downtown ranked fourth out of 11 regional malls for where customers plan to shop this season in the university’s eighth annual “Holiday Spending Sentiment Survey.” This is up from eighth place in 2008. This season, 9.2 percent plan to shop Downtown, an increase from 6.7 percent last year.

The average spending for metro-area households is $637, which is down 3.9 percent or $26 from 2008. The total aggregate for the 13-county area is estimated at $810 million, down 2.7 percent from $832 million last year. The reason for the difference in the percentages can be accounted for by the increase in households in the past year, said Dave Brennan, one of the researchers conducting the study along with Lorman Lundsten and John Sailors.

The survey was competed online the last week of October and first week in November by 303 households to examine spending plans or shopping intentions.

Although there is a decrease of 2.7 percent in aggregate spending, this does not compare to the 10.9 percent decrease last year, Brennan said. The 2.7 percent decline is more pessimistic than national surveys including Deloitte & Touche, which predicts no national change from 2008 spending. The National Retail Federation predicts a 1 percent decrease. The International Council of Shopping Centers expects a
1 percent increase at chains and a 1.8 percent increase at shopping centers.


Why a rise in shopping Downtown?


Brennan attributed the 2.5 percent increase in Downtown shoppers to the employment base that provides shopping opportunities for workers and retailers Downtown. Also the margin of error is plus or minus 4.5 percent and may be an influencing factor.

“I think what it shows is the strength of the employment sector, which is 160,000-plus in the Downtown area, and that’s why it gains so much in terms of a shopability standpoint,” Brennan said. “But it is important to note that downtown Minneapolis, when you look at it in terms of where they plan to do most of their shopping, falls down to 3.6 percent.”

In 2008, 2.2 percent of shoppers planned to do most of their shopping Downtown.

The Mall of America is the No. 1 destination for planned shopping followed by Rosedale and Ridgedale. Downtown St. Paul and Brookdale are at the bottom of the list. Most shopping destination decisions are related to proximity, but the Mall of America is first because its size has a drawing power, Brennan said.


Don’t expect deep discounts

Also customers shouldn’t expect to see the same rush of sales while shopping this season. Inventory levels have been adjusted for their anticipated sales levels, unlike last year when it was too late to adjust levels since goods had already arrived. Last year there were huge discounts because companies had to liquidate inventory at an incredible depth, he said.

Last year retailers were scared following the financial meltdown and stock market crash, but this year customers won’t see that kind of panic, he said.

“... We are going to see more promotions rolling out on a very logical and systematic basis throughout the whole holiday spending period unlike what we saw last November … when retailers just started liquidating,” he said. If there’s an item a customer really wants they should grab it sooner rather than later when it may be gone, he said.

The survey finds that the hot items, listed by popularity, for the season are gift certificates, clothing and accessories, books, cash, toys and hobbies, video games and gear, entertainment, sporting goods, furniture, computers and gear, consumer electronics and jewelry. In 2008 books were at the top of the list. Also in a section where participants could fill in answers the researchers noticed a trend of food and groceries listed as gifts.

And where will shoppers go to find these hot items? A new question on the survey asked what two stores customers planned to shop at this year. Target came in first at 38 percent, and Walmart followed at 22 percent. Kohl’s and
JCPenney tied for third while Macy’s came in fifth.

“It is certainly great to see that residents in this area appreciate and think of us as one of their top shopping destinations,” said Target spokesman Eric Hausman. “We hope that the value and products and assortments and guest experience that we offer is appreciated by not just guests in the Twin Cities but across the country, and it is certainly encouraging to see results where we are named as a top destination.”

The survey also examined planned spending by category, and the Internet continues to grow as a source for shopping. When the survey was first conducted eight years ago, 7.3 percent of shopping was online. That’s nearly tripled to 21.8 percent this year. While Amazon.com came in first for most popular online shopping, Target.com tied for third.

Since Target’s headquarters is Downtown, the information probably overstates the company, as far as importance.

“If you looked at that from a nationwide stand point Walmart would certainly be much higher,” Brennan said. Traditional department stores share of total general merchandise or department stores sales is declining as discount stores, warehouses and clubs are increasing, he said.