Holiday Spending Season: Consumer Intentions and Attitudes in Q4 2010 October 2010

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According to the National Bureau of Economic Research, the so-called “Great Recession” technically ended in June 20091. But as we head into the fourth quarter of 2010, consumer pessimism remains stubbornly high. In this environment of economic uncertainty – coupled with noisy mid-term elections – the American consumer sits on the sideline, mindful of their spending, waiting for prospects to brighten.

With the holiday season rapidly approaching, marketers and retailers are looking for signs that consumers will reemerge and start spending again. Our September 2010 survey of 2,600 online U.S. adults aged 18 and over does not deliver a clear beacon that consumers are back; however, it does find a glimmer of hope as the majority of consumers do not plan to cut back on spending from last year’s levels.

Key Findings:

• The holiday shopping season may not be all doom and gloom: the majority of consumers say they will spend the same or more on gifts in 2010 than they did in 2009.
• More than half of consumers anticipate purchasing gifts online this season.
• Consumers continue to have concerns when making an online purchase; security of information and privacy concerns top the list.
• Cash makes a comeback: consumers plan to use cash, checks or debit cards more than their credit cards this holiday season.

Insight #1: Consumers Are Slowly Warming Up to Spend This Season

Our study found that more than one-third (36.0%) of respondents expect to spend the same on holiday gifts this year compared to 2009, 17.4% plan to spend more and 34.6% anticipate spending less. The number of respondents planning to spend less (current year versus previous year) is similar to findings from our 2009 holiday spending study conducted last year at this time. But for retailers it’s not all coal in the stocking: at least one-fifth of men (see chart #1) and respondents reporting a household income of $75,000 or more say they’ll spend more in 2010 vs. 2009.

We also asked respondents about their holiday entertaining plans, and one-fifth (19.5%) say they’ll spend more on entertaining this season compared to 2009; three-in-ten (30.9%) expect to spend less and 37.8% expect to spend the same. Interestingly, the segments that anticipate spending more on holiday entertainment in 2010 compared to 2009 are, again, men (particularly young men aged 18-34) and respondents reporting a household income of $75,000 or more.

Insight #2: Online is the Bright Star in the Sky

Online sales have been growing in the months leading up to the holidays: July 2010 sales grew 10.9% year over year, according to MasterCard Advisors’ “SpendingPulse” report – and the U.S. Census Bureau reported that retail ecommerce sales were solid in Q2 2010, growing an estimated 13.7% year over year2.

This growth trajectory may continue, considering the fact that 56.5% of respondents to our survey expect to make a gift purchase online this holiday season. More good news for online retailers this holiday season is our finding that one-quarter (26.8%) of holiday consumers who bought online last year say they’ll purchase more online this year, and one-half (52.9%) say they’ll purchase about the same amount. Our study also found that 9.0% of respondents who did not make an online holiday purchase in 2009 anticipate making an online purchase this holiday season.

Interestingly, the traditional start of the holiday shopping season, Black Friday, is looking like a relic of years past with only 9.5% of respondents saying the day after Thanksgiving is when they start buying for the holidays. That said, savvy consumers – knowing that retailers are posting some of their best Black Friday deals online – will shop the web on Black Friday from the comfort of their homes rather than rise early to face crowded stores3.

Insight #3: Consumers Use the Internet to Research and Compare Products

Online shopping encompasses much more than making an actual purchase, and our study found that consumers use the Internet for a variety of “window shopping” activities. Overall, the most popular online “window-shopping” activities are researching and comparing different brands (33.6%), comparing different retailers and finding the best prices (33.5%), finding the closest store location where they can make a purchase (23.8%) and finding products only available online (21.6%).

Interestingly, when asked about last year’s holiday shopping season, one-third (33.5%) of consumers say they researched gift ideas online but ultimately purchased the gift(s) offline at a physical retail location.

Insight #4: Concerns Can Impact the Online Shopping Experience

Compared to our findings last year, consumers in 2010 are feeling a bit more secure with their online shopping experiences. That said, the security of credit and/or debit card(s) is again the top concern for both men and women: this year, 63.1% of women cited it as a concern (69.4% cited it in 2009) and one-half (51.5%) of men find it concerning (58.0% cited it last year).

Other issues cited as concerns leading into this year’s holiday season include shipping costs (57.7% women; 44.2% men), the privacy of personally identifiable information (53.4% women; 42.0% men) and product quality (47.0% women; 43.9% men).

Interestingly, men overall appear less concerned than women about online shopping issues. The only category where men showed more concern than women was product availability: one-third (32.7%) of men say it’s a concern while 28.6% of women do.

Insight #5: Consumers Are Mindful About How They Spend

This season, it appears that cold hard cash will make a comeback. Overall, nearly three-in-five (57.3%) consumers will use cash, checks or debit cards as the primary means to purchase gifts and entertaining-related products this holiday season. One-third (32.4%) of all respondents say they plan to use debit card(s), cash and/or checks more frequently in 2010 than they did in 2009. Interestingly, men are more likely than women (35.3% vs. 29.7%) to say they will be using cash, checks or debit cards more frequently this year compared to last year.

Only one-fifth (22.7%) of respondents say they’ll primarily use credit cards to make their holiday purchases this year.

How You Can Use This Information

The most significant recession in decades may be over on paper, but consumers are still feeling the pinch and will be mindful of where – and how – they spend their dollars this holiday season. Online and offline marketers alike should strategically leverage the use of price and convenience-based incentives, which can include coupons, time-sensitive calls to action, exclusive online promotions, etc. These types of initiatives can be delivered to consumers in rich media advertising creative that offer marketers the powerful opportunity to create fully interactive ads that allow consumers to gather product information, download coupons or even use a store locator.

Compared to the past two holiday seasons, online retailers are poised to find relatively more success in 2010. Ecommerce sites and web-based merchants will please holiday shoppers if they simplify and update their brand research and comparison processes (e.g., easy webpage navigation, emphasize social sharing, etc.) as well as mitigate any issues on the security, privacy and other common online shopping concerns.

FOOTNOTES:
1National Bureau of Economic Research: “Business Cycle Dating Committee, National Bureau of Economic Research.” September 20, 2010.
2eMarketer: “What Retailers Need to Know About Online Holiday Shopping.” September 2, 2010.
3eMarketer: “Online Holiday Shopping Preview: What Retailers Need to Know.” August 2010.