After three-straight years of trimming their holiday budgets, Twin Cities shoppers have reversed course, according to data collected in the ninth annual University of St. Thomas study released today of Twin Cities holiday shopping trends.
The University of St. Thomas Holiday Spending Sentiment Survey was conducted in late October and is designed to measure how much Twin Cities shoppers think they will spend for holiday gifts, what they will spend it on, and where they will spend it. The research is conducted by Dr. Lorman Lundsten, Dr. Dave Brennan and Dr. John Sailors at St. Thomas’ Opus College of Business.
According to the survey, household spending for holiday gifts is predicted to be 6.8 percent more in the Twin Cities this year than in 2009. This marks the first year since 2006 that holiday shoppers predicted they will spend more rather than less.
This year's predicted household spending for holiday gifts, $680, compares to last year’s $637, which was the lowest since St. Thomas began the study in 2002. The highest predicted outlay, $796, was in 2004.
Twin Cities Holiday Shopping Trends
“The tone among today’s Twin Cities shoppers is clearly more upbeat than last year, and it’s more upbeat here than in the nation as a whole,” Brennan said. “Does this mean happy days are here again? Well, yes and no. It is better than last year, but not back to what it was before the recession.”
“Our survey is designed to track the intentions of shoppers,” added Lundsten. “The responses are pointing to a rebound … but we haven’t seen that rebound just yet. If we are going to spend our way out of a recession, then consider this good news.”
One of the strongest indicators in this mood shift is the marked decrease in shoppers who plan to spend less this year than last. This year’s percentage of 30.1 is the lowest since St. Thomas began the study in 2002 and is significantly lower than last year’s percentage of 53.8. The number of respondents who said they would spend “about the same” this year, 61.4 percent, was the highest since the study began. The percentage who said they will spend more, 8.5, was average.
Over the years, the St. Thomas study has mirrored or painted a slightly more pessimistic shopping picture than national surveys. Not this year. While St. Thomas predicts a 6.8 percent increase, most national surveys are less than half that. Deloitte & Touche predicts a 2 percent increase, the National Retail Federation predicts a 2.3 percent increase and the International Council of Shopping Centers predicts a 3 to 3.5 percent increase.
Based on the local responses and the population of the greater Minneapolis-St. Paul metro area, the researchers predict that the metro-region shoppers will cumulatively spend $875 million this year, up 8 percent from last year's predicted $810 million. The highest was a predicted $959 million in 2004.
The three professors who conducted the study emphasize that actual spending might be different because shoppers could spend more or less than they planned once they get into the stores.
The professors feel that retailers have learned lessons from recession-era holiday seasons and appear better prepared for 2010 shoppers.
“They are managing their stores more effectively and have less merchandise on their shelves. We can expect to see sales, but they won’t be those massive, early sales we witnessed a couple of years ago,” Lundsten said.
“The retailers are not panicking,” Brennan added, “and we are not seeing the same level of Christmas creep as in past years, when holiday goods were being heavily advertised and discounted in October. Store-based retailers are waiting until closer to the holidays; I expect it will be a robust but more compressed season. On the other hand, Internet retailers have been highly promotional on price and free delivery.”
And while retailers are showing confidence, Brennan also feels that those consumers who are employed “are not running scared like they were last year.”
A peek under the tree
What will Twin Cities shoppers buy with their $680? The professors created an index to analyze the relative popularity of a dozen gift categories. It sheds light on the “what’s hot” question and allows year-to-year comparisons.
The categories -- listed by most-popular first -- are:
- gift certificates
- clothing and accessories
- toys and hobbies
- cash, consumer electronics
- computers and related gear
- video games and related gear
- sporting goods
- cell or mobile phones
That's close to last year, but there have been some changes. Gift certificates continue to reign supreme, but books bumped out clothing for this year’s No. 2 spot. This could be related to e-book readers and the iPad. Entertainment moved up from seventh to fourth and computers moved up from 1oth to eighth. Cash dropped from fourth to sixth and video games dropped from sixth to ninth.
“The rankings of books, consumer electronics and computers indicate that electronic book readers will be popular gifts this year,” Brennan predicted.
Where they spend
For the past nine years the survey has asked shoppers where they plan to spend their money. This year's results bode well for shopping malls and continue to reinforce a gradual trend toward the Internet and away from catalogs.
This year, shoppers said they plan to spend 21.8 percent of their holiday budget using the Internet. That's consistent with last year, but three times the percentage reported in 2002 when the St. Thomas study began. That compares to 4.4 percent of shoppers this year who will use catalogs, a category that has seen steady but gradual declines since 2002. That year, catalogs, at 9 percent, were more popular than the Internet, at 7.3 percent.
Shoppers also said this year that they plan to spend 46.5 percent of their budget at the nine regional shopping malls or downtowns. That’s up significantly from 38.4 percent in 2009 and 36.2 percent in 2008, but similar to the years 2002 to 2006. “This reflects the more upbeat mood of shoppers willing to visit the more upscale regional malls and downtown stores,” Brennan said.
Shoppers will spend another 27.4 percent of their budget at non-mall stores this year, a marked decrease from 35 percent last year.
“It looks like the big winners this year will be stores located in malls,” Brennan said.
Most-popular malls and stores
Which of the regional malls (and two downtowns) are going to attract the most shoppers?
The researchers approached that question from two perspectives: first, which mall in the region are metro-area consumers planning to visit for holiday shopping; second, which mall are they planning to shop at most for the holidays. The results are not the same.
When asked which malls or downtowns they planned to visit for their holiday shopping this year, survey respondents listed, from most-popular to least-popular:
- Mall of America
- downtown Minneapolis
- Eden Prairie
- downtown St. Paul
However, when asked which mall or downtown they plan to shop at most for the holidays, respondents listed, again from most-popular to least-popular:
- Mall of America
- Burnsville and Northtown (tied)
- downtown Minneapolis
- Eden Prairie
- downtown St. Paul
By comparing the malls of choice and where the respondents live, the survey results show that shoppers favor malls closest to home.
Rosedale has ranked at or near the top of the “shopped at most” category over the years. In 2010 it returned to its familiar No. 1 spot after uncharacteristically slipping to No. 4 in last year’s survey.
The Mall of America has been the top “holiday shopping” mall for all nine years of the survey with the exception of 2004-2006 when Rosedale was No. 1.
“Activity softened a bit at the Mall of America in the mid-2000s,” Brennan said. “But it is really coming back. The Mall is updating its appearance, attracting popular new tenants, and for the first time since 1992 is 100 percent leased.”
Lundsten and Brennan are both longtime members of the Opus College of Business faculty. Sailors joined the faculty in 2005.
Lundsten is a professor of marketing and chairs the university’s Marketing Department. He holds a doctorate from the University of Michigan.
Brennan, who holds his Ph.D. from Kent State University, is a professor of marketing and co-director of the university’s Institute for Retailing Excellence.
Sailors is a specialist in consumer behavior, marketing research, and brand equity and loyalty; his doctorate is from Northwestern University.
The Institute for Retailing Excellence, part of the St. Thomas Opus College of Business, conducts research and offers educational programs for those who work in retailing.
This year’s holiday spending survey included 306 responses from households in the 13-county Minneapolis-St. Paul Metropolitan Statistical Area, which includes two counties in western Wisconsin.
The respondents reflect the demographics of the area as well as those who responded to previous holiday spending surveys. There were more female respondents (81 percent) than usual this year. There also was a decrease in the number of respondents from lower-income households and an increase in the number from upper-income households.