Floridians expect to dramatically reduce holiday shopping, survey shows

November 19, 2008

GAINESVILLE, Fla. — Tough economic times are forcing Florida consumers to drastically cut plans for holiday spending, leaving retailers with what may be their worst season in decades, according to telephone surveys of more than 500 state residents.

The University of Florida’s Bureau of Economic and Business Research conducted the survey, designed and analyzed by the David F. Miller Center for Retailing Education and Research at UF, in September and October. The bad news for retailers: expectations fell as the season grew closer. The September survey showed a 38 percent decrease from last year — from $1,324 per resident to $828 — and the average dropped to $802 in the October survey.

Barton Weitz, executive director of the Miller Center, said, “The 2008 holiday season will be one of the worst for retailers in decades. In sharp contrast to previous years, decreased spending intentions were reported across all income brackets.”

Just over 50 percent of consumers in the lowest income bracket (those earning less than $30,000 per household annually) intend to spend less, compared with 37 percent of middle-income households (less than $60,000) and about 19 percent of upper-middle-income households (below $100,000). For the first time, even high-income households (more than $100,000), which have typically been immune to economic slowdowns in recent years, are expecting to decrease spending, with more than a third of these more affluent consumers reporting a dramatic reduction in spending intentions.

Expectedly, the lowest income group planned to spend the least — only about $195. But, surprisingly, the surveys showed the biggest drop to be among the highest income households. According to Weitz, that dramatic drop spells trouble for luxury retailers.

“Retailers selling luxury products will suffer,” Weitz said. “They haven’t adequately planned for this tough year — in contrast to other general retailers — who have been preparing with better merchandising decisions, slimmer inventory and cautious operational spending.”

Department and specialty stores will also be vulnerable to a downfall in sales, as consumers will withhold their discretionary spending until the economy turns around. But discounters such as Wal-Mart, Save-A-Lot, and Target may have opportunities to lure more middle- and high-income consumers into their stores.

Weitz said that with all the challenges that retailers face for the coming holiday season, they must be innovative in order to survive. Targeting their core customers, while maintaining a slim inventory, may help retailers save on operating costs and survive this tough year.

Overall, holiday spending intentions unveiled a growing lack of consumer confidence. While 63 percent of Floridians surveyed in September believed their holiday spending would remain the same or increase, just over half of consumers expressed similar intentions in October. As a result, while Florida has been a relatively healthy retail market in comparison with the national average and other states, Florida’s sales may dip below other states during this holiday season, Weitz said.

In other trends, gift cards continue to appeal to consumers, with nearly 60 percent indicating they will spend the same or more for them than in 2007. But shopping malls will be less crowded, with 15 percent fewer consumers expecting to shop there, according to the September and October surveys. Instead, online shopping is predicted to fare much better this year (with just under a 1 percent decrease), as gift givers actively seek deal- and value-driven products. Additionally, they may search for ways to pare their spending further by finding a “family gift” instead of multiple individual gifts.

The survey of 517 Florida residents in September and 504 residents in October was conducted by the David F. Miller Center for Retailing and Bureau of Economic and Business Research at the University of Florida. The margin of error is 3 percent.