Concerns about the economy are still weighing heavily on the minds of 90 percent of U.S. consumers, according to a new survey by BIGresearch for the National Retail Federation.
This story first appeared in the July 22, 2011 issue of WWD. Subscribe Today.
“Consumer sentiment can’t get much worse than it is now,” said Matthew Shay, president and chief executive officer of the NRF. “Nine out of 10 consumers are saying the economy is impacting their [buying] decisions. Consumers have even less to spend than they did a year ago. Saving and frugal spending are key.”
Only 26.5 percent of those polled were confident or very confident about the economy, BIGresearch’s lowest reading in over two years. Confidence in a rebound is also fading fast, with just 27.8 percent of those surveyed optimistic about a return to better days, a 38 percent decline from 2009.
The NRF is projecting a 4 percent increase for retail sales in 2011, but Shay said, “That’s still way below where we need to be and way below a number that would represent a growing and expanding economy that’s starting to chip away at unemployment and the uncertainty that exists. The comparisons are going to get more challenging because a year ago, we were comparing to 2009 numbers and most of the pent-up demand is exhausted.” The organization has been aggressively lobbying to push forward its agenda, which includes quick passage of free trade agreements and reforming the corporate tax code.
More available consumer credit would be helpful, too, not that Shay wants to see a return to 2006’s “unhealthy levels of debt or consumption. There needs to be appropriate restraints on credit.” Now there’s arguably too little access to credit, an overcorrection in the other direction, he added.
“The recovery of the last 24 to 26 months has been underwhelming at best,” said Shay. “We’re only seeing 25,000 jobs created every month, not enough to chip away at unemployment. [The retail industry] represents one in four jobs in the U.S., nearly 20 percent of the gross domestic product. The retail industry is a good proxy for the overall economy. We see more clearly than any other segment what consumers are thinking about and where they’re spending their money.”
Shay said projections for back-to-school and back-to-college will be flat or up slightly, with $68.8 billion in sales for the period, the second-largest consumer spending event behind Christmas and a harbinger of holiday sales trends. “We expect the economy to continue impacting consumers into the holiday season,” Shay said.
While discounters remain the most popular channel, department stores are continuing to chip away at their advantage, said Ellen Davis, NRF vice president. “The best performance for b-t-s will be in department stores,” she said. “They’re largely taking share away from discounters such as Wal-Mart, Target and the dollar stores. Retailers that have done a nice job of focusing on low prices are seeing customers move to stores that have done a nice job of focusing on value.”
In addition to gaining market share, online players are enjoying higher average sales than physical stores. Families with children in grades K-12 will spend an average of $600 in brick-and-mortar stores, and families of college students, $800. Online shoppers will spend $850 on b-t-s items and $1,100 on college products, a 40 percent increase, according to BIGresearch. “There’s no question,” said Shay. “Online will be a winner again this year.”
While retailers have yet to pass on commodity price increases, such as cotton’s reported 38 percent hike, to consumers, they will eventually trickle down to shoppers. “Most retailers have tried not to pass increases on to consumers but that can’t go on forever,” said Shay. “If there are going to be price increases, we’ll see them this fall.”