Fiscal fears 'scrooge' shoppers

Discount Store News, Nov 5, 1990 by Don Longo

Fiscal Fears `Scrooge' Shoppers

Retailers are facing what may be their bleakest Christmas in years as jittery consumers put the brakes on their holiday buying plans.

Consumers' outlook for Christmas took an abrupt downturn during the four weeks from mid-September to mid-October, according to the latest national survey of U.S. households conducted by Chicago-based researchers Leo J. Shapiro & Associates.

Ironically, despite the ongoing Mideast crisis which put a damper on spending for everyday items (and depressed store sales in August and September), the monthly Shapiro study found that in September consumer buying intentions for Christmas 1990 were the highest in the six years the firm has been conducting the survey.

In mid-September, 34% of households said they planned to spend more this Christmas than a year ago. By contrast, in September 1989, only 28% of consumers planned to spend more on Christmas than they had in 1988.

In the four weeks following the September survey, consumer fears about their job security, and the probability of lower commissions and lost bonuses intensified greatly. Their decision to go ahead and enjoy a jolly Christmas appears to have been reversed.

By mid-October, only 28% of U.S. households planned to spend more on Christmas this year than a year ago, the lowest percentage for that month since 1988. By contrast, last year, 34% of households expected to spend more on Christmas than the previous year.

Further, the percentage of consumers who intend to spend less this Christmas increased from 36% in September to 44% in October, the highest degree of spending pessimism in six years.

The results of the survey appear to indicate that domestic problems with the economy, such as inflation and the budget deficit, are more troubling to consumers than foreign problems like the possibility of war in the Mideast.

When asked to name the major problems facing the country: * 45% of consumers cited the chance that some member of their household would be laid off from work in the coming months, up from 38% in September; * 24% mentioned wasted government spending, up from 17% cited rising inflation, up from 14% in September.

"Now people feel this uncertainty about their jobs has turned into a real probability that they will have less money," said George Rosenbaum, vice president of the research firm which polled 450 households nationwide in each of the last three months.

The possibility of a shooting war before Christmas still looms, but worries over foreign problems declined in October: 31% cited foreign troubles as a major problem vs. 32% in September.

"The one redeeming finding of the survey is that there has been no increase in the number of people who say they have actually lost a job in the past year," said Rosenbaum. In October, 22% of those surveyed said a member of their household was laid off in the past year, the same percentage as in September.

"We're talking about fear of unemployment. As people stay out of retail stores, they will accumulate cash. If they are somehow relieved of their fears, such as a withdrawal of troops from the Mideast or some sign that the government budget problems are being addressed, there could be a big buildup for spending," said Rosenbaum.

And, that scenario just adds to retailers' traditional problem off figuring out how to keep their shelves stocked for the (hoped for) Christmas rush without taking excessive markdowns in January.

"There's a thin line between being aggressive and stupid," noted Ben Kae, national sales manager, chain and discount division of B.J. Design Concepts, a division of Oxford Industries that markets women's imprinted sportswear.

With consumers experiencing a real crisis in confidence, "retailers need to work more closely with their vendor structure to turn merchandise more quickly," noted Kae.

DSN economist Richard Mount of Mount Economic Forecasting agreed that the major problem retailers face is consumer psychology, not consumer spending.

Mount noted that most of the shortfall in oil caused by Iraq's invasion of Kuwait has been made up already. "The pressure will be on the oil industry to lower prices," he said. "Unfortunately for the holiday selling season, oil prices probably won't go down until the first quarter of 1991."

The economist, however, is more bullish on 1991 than many other forecasters. The conditions are simply not in place to mirror a repeat of earlier recessions, he said.

"Last time oil went up, we were hitting a recession, so the mood of the consumer already was to retrench," said Mount. "This time, as oil prices stabilize and if Hussein and Bush can back away from their no-compromise positions, the psychology of the consumers will improve and they can come back into the marketplace very quickly."

Mount added, "The whole system is better prepared to rebound than in the past."

That's small consolation right now for retailers trying to woo depressed consumers.

K mart disclosed at an analysts meeting in Atlanta that same store sales rose just 0.7% in September, down from 1.6% in August.