Following is a press release from independent market analysis firm, Datamonitor under embargo until Wednesday 25 November 2009.
Hyderabad, Wednesday, 25 November 2009 - While the 2008 holiday season was marked by the global economic slowdown, declining real estate valuations, inflation and weak employment levels, the retail sector is more positive about this holiday season due to signs of global economic recovery. Despite increased confidence, however, it remains unlikely that consumers will increase their spending levels drastically this winter, says Datamonitor’
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DATAMONITOR PRESS RELEASE
INDEPENDENT ANALYST COMMENT
Itty Gupta, Consumer Markets Analyst
Cautious consumer holiday spending amid economic recovery
Still premature to predict the beginning of a consumer-led economic recovery this holiday season. At best, increased consumer confidence will result in slightly better holiday sales compared to 2008 levels
Hyderabad Wednesday November 25 2009- While the 2008 holiday season was marked by the global economic slowdown, declining real estate valuations, inflation and weak employment levels, the retail sector is more positive about this holiday season due to signs of global economic recovery. Despite increased confidence, however, it remains unlikely that consumers will increase their spending levels drastically this winter, says Datamonitor’
According to various industry estimates, 2009 holiday spending in the US is expected to remain flat, with maximum growth of one to two percent over 2008. Although this signals an improvement against the decline of about 2.4% in 2008 over 2007, it is not encouraging for trade in general. Indeed, the World Bank has warned that although the global economy has shown signs of recovery, these just indicate a break in the economic fall rather than a complete turnaround.
Unemployment rates are currently hovering at an all time high of about 10% in many developed economies. As per the latest statistics from the US Department of Labor, the unemployment rate in the US was 9.7% in August 2009 and 9.8% in September 2009. Also, according to Eurostat, the unemployment rate in the 16 nations that comprise the eurozone was 9.6% in August 2009, while it was 9.1% for the EU27. Furthermore, according to the latest World Bank predictions, these already high unemployment rates are expected to increase further and will be slow to come down. As a result, 2010 will be a highly uncertain economic year.
Additionally, increasing unemployment is leading to a rise in the number of foreclosures. According to foreclosure tracking agency RealtyTrac, in the US foreclosure notices were up five percent in the third quarter compared to the second quarter, and up 23% from the same quarter a year ago.
The restriction on credit availability following the credit crunch is also curtailing consumers' spending power, Ms. Gupta says. Banks are levying stricter norms on consumers, especially after the passing of the Credit Card Act of 2009 in the US. Although the act is meant to protect consumers, it has some down sides, such as rate hikes, variable interest rates, a reduction in credit limits and the return of annual fees, which will affect consumer purchase decisions.
Furthermore, as consumers attempt to put lessons learnt from the recession into practice, they are saving at higher levels compared to the past decade, while simultaneously repaying debts. According to the Bureau of Economic Analysis (part of the US Department of Commerce), US consumers' personal savings rates reached 6.9% in 2009 - the highest level in the past 15 years. Also, according to Datamonitor's consumer survey, most respondents across the 15 countries questioned agreed that they had been "making an effort to save more money" during the recession. “This leaves little scope for extravagant holiday shopping or over-the-top festive indulgences,”
“Therefore, it is premature to predict the beginning of a consumer-led economic recovery this holiday season. At best, increased consumer confidence will result in slightly better holiday sales compared to 2008 levels as consumers cautiously let retailers have some share of their wallets,” Ms. Gupta says.
In Datamonitor’
* Consumer priorities will be well-defined, with consumers going shopping for a pre-defined shopping list, cutting out spending on discretionary items.
* Datamonitor's convenience and health mega-trends will remain unaffected, as in previous months of recession.
* Consumers will seek maximum returns on every dollar spent by seeking bargains, using discount coupons and opting for private label brands.
* As in the 2008 holiday season, the focus this year will be on family and friends, pushing sales of at-home festive meals and related spending on wine.
* Consumers are expected to practice smarter gift shopping by hunting for better bargains through online channels and discount shops.
* Consumers will continue to favor the online retail channel as it offers better deals (especially on electronic items) and saves consumers' time. The free shipping offers also find favor with consumers seeking better value for money in tough times.
Retailers and manufacturers that can refocus their marketing strategies and product positioning to target the above consumer trends can surely expect to grab the maximum share of the pie this holiday season.
Ends
Note for Editors:
About Datamonitor:
Datamonitor is a premium business information company specializing in industry analysis. We help our clients, 5000 of the world's leading companies, to address complex strategic issues. Through our proprietary databases and wealth of expertise, we provide clients with unbiased expert analysis and in-depth forecasts for six industry sectors: Automotive, Consumer Markets, Energy, Financial Services, Healthcare, Technology. Datamonitor maintains its headquarters in London and has regional offices globally. See www.datamonitor.com for further details
For further information:
Itty Gupta, Analyst with Datamonitor’
More information is available from the Datamonitor Group Media Team. Please contact:
India
Aartee Sundheep
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Matthew Dick
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Tanisha Kaul
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e: Tanisha.kaul@
