Holiday spending on the rise...maybe

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November 29, 2004 // UPDATED 4:46 pm - April 25, 2007
By: Sarah McKenzie
Sarah McKenzie

Survey says Dowtown to bounce back a bit from the end-of-year blues

Holiday spending is expected to increase in skyway-land this year, according to a University of St. Thomas survey.

Downtown ranked sixth of the top 11 shopping destinations in Minnesota for the holiday season, up from number nine in 2003. The University of St. Thomas Institute for Retailing Excellence's ranking is based on a survey completed by more than 300 people in the Twin Cities area.

All told, metro-area households are expected to spend $796 each, $959 million altogether, up 2.2 percent, or $17, from last year, according to the third annual survey conducted by Institute researchers and co-directors Lorman Lundsten and David Brennan.

However, the accounting firm Deloitte & Touche is calling for less fair weather, predicting an 8 percent drop in overall spending in the Twin Cities. On average, Twin Cities shoppers are expected to spend $1,015, compared to $1,109 a year ago, Deloitte's report noted.

Unlike the Institute, however, Deloitte's information was gathered from a national survey of more than 15,000 shoppers. Also, the study did not compare shopping trends within the Twin Cities or include detailed information about Downtown-specific spending patterns.

More than half of the University of St. Thomas survey respondents -- 56 percent -- indicated they would spend the same as last year on holiday gifts. Meanwhile, the number of shoppers reporting plans to spend less than last year dropped slightly -- 32 percent compared to 35 percent in 2003. The slight optimism comes from the number of shoppers planning to drop more cash on gifts this year -- 12 percent compared to 9 percent last year.

While the large suburban malls, such as Rosedale, the Mall of America, Southdale and Ridgedale are expected to draw the vast majority of shoppers, Downtown has gained some traction this year. Shoppers ranked it above shopping hubs in Burnsville, Eden Prairie, Brookdale, Northtown and downtown St. Paul.

"Compared to the large regional malls, the downtowns of Minneapolis and St. Paul did move up in the rankings of where respondents planned to shop at least once," the researchers wrote.

"By comparing the malls of choice and where the respondents live, the researchers found that shoppers clearly favored malls closest to home. Shoppers occasionally, but not routinely, will drive past one mall in order to visit another mall."

According to the survey, 12.7 percent of respondents said they planned to do the majority of their shopping Downtown, compared to 9.3 percent in 2003 and 6.7 percent in 2002, Brennan said. Rosedale ranked first with 18.5 percent of respondents indicating they would shop there most. (Rosedale does boost a 1-million-square-foot shopping center, however, the report did not offer further explanation about why the mall ranked number one among shoppers).

Brennan attributes the increase toward shoppers' plans to spend more at upscale retailers and department stores. Downtown tends to have more high-end retail compared to some suburban shopping centers.

In a recent Skyway News article about Downtown's retail scene, Brennan said the retail market has steadily declined each year, citing previous holiday spending surveys. Many retail observers point to the 1992 opening of the Mall of America as a major factor in the drop in business.

"Each year, the Downtown area of Minneapolis has declined -- not as rapidly as St. Paul, but more than regional malls," he said.

Results from the 2004 survey are a bit more optimistic than previous Institute studies.

The researchers have spotted the following trends based on this year's study:

- Retailing had three "lackluster" years from 2000 to 2002 (2001 was especially dismal following the Sept. 11 terrorist attacks). Shoppers spent more in 2003 and are expected to do the same this year -- showing a slow but steady increase since the 2001 retail slump;

- Shoppers are expected to hit the stores less this year, but are expected to spend more per outing and per gift;

- Upscale retailers, such as Talbot's and Brooks Brothers, and department stores, such as Marshall Field's and Nordstrom, are expected to fare better this holiday season than discount chains, such as Wal-Mart and Kmart. Brennan noted that the spending on big-ticket items is often an indication of an improvement in economic conditions. Consumers tend to postpone those purchases in a weak economy. Stores that sell "big-ticket items," like Best Buy, are also expected to see more shoppers; and

- While most shoppers continue to purchase items at stores, buying items through catalogs, television and the Internet is increasingly popular.

What's hot

Clothing and accessories top shoppers' lists, according to the 2004 survey. About 92 percent of survey respondents said they planned to buy those items for loved ones and friends.

Downtown bookstores should also see a steady stream of customers this season: 88 percent of shoppers said they planned to buy books.

Toys, hobby items, gift certificates, music and moves also ranked high on the list of shoppers -- topping the lists of about 80 percent of shoppers.

Gifts of cash, sporting goods, jewelry, electronics, furniture, video games and computers also made the list.

The 2004 holiday spending study is based on a survey conducted between Oct. 12 and Nov. 5, 2004. The St. Thomas researchers received 308 surveys of 3,000 sent to Twin Cities-area households in a 13-county area (two counties in western Wisconsin were also included).

Most of the respondents were married or women (65 percent and 64 percent, respectively). Most, about 43 percent, reported earning between $40,000 and $80,000. Twenty-two percent reported household incomes under $40,000, 12 percent between $80,000 and $100,000, and 24 percent were listed as high-income families with household incomes above $100,000.

Lundsten and Brennan predict that the shoppers might spend more than they originally planned earlier in the year.

"Our earlier studies in the Twin Cities have followed national trends," Lundsten said. "But it is almost a universal trait to underestimate actual spending when you are answering survey questions in October. Shoppers often make unplanned purchases once they are in stores."

The Institute also plans to release a study Dec. 10 analyzing the holidays' impact on shoppers' spending habits.

The Institute for Retailing Excellence is a research arm of the university's College of Business that also offers educational programs for local retailers. For more information on the Institute, go to www.stthomas.edu/cbe/IRE.htm.