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Holiday Crystal Ball

Arthur Andersen says consumer are bullish on the economy with 77% of American expecting to spend the same or more this year on holiday gifts. As a result overall 1997 retail sales will increase 3%-5%. The ‘Arthur Andersen Holiday Outlook Survey’ says the average holiday budget is $774 per shopper. “Baby Boomers” will increase spending about 12% this year while “Generation Xers” will spend about 32% more this year. The survey also showed gift certificates are growing in popularity.

Despite the October Wall Street volatility, consumer confidence seems unshaken, with 77% of Americans expecting to spend the same or more than last year on holiday gifts, according to the Arthur Andersen Holiday Outlook Consumer Survey. This feeling of confidence is further evidenced by the 76% of consumers who feel that the economy will remain strong during 1998, and the 32% who are very positive about the state of the economy. “Consumers feel very secure about their jobs and about the economy in general. In recent years, we have been experiencing low inflation, declining unemployment and a continued rise in disposable income,” said Jay A. Scansaroli, Partner in Charge of Arthur Andersen’s Worldwide Retail Practice.

Job security is at an all time high with 90% of men and women with full or part time employment feeling secure about their jobs and most optimistic about the economy.

Views on the economy and job security also play a role. Those with a positive economic outlook say they will spend, on average, $876 this holiday season. Those with a negative outlook plan to spend $672 compared to the $774 average budget.

Almost 20% of consumers expect to spend more than last year, compared to 16% of 1996 shoppers. “This Holiday mood will be reflected in a 3-5% increase in retail sales,” Scansaroli predicted.

Gender and Generation Issues

With the average Holiday budget at $774, men, as a group, show a tendency to spend more than women ($883 vs. $671). On the other hand, women (46%) show a greater interest in price promotions than men (29%). “While historically men buy for fewer people, research shows that they are more likely to be last minute shoppers and are less likely to hunt for markdowns,” said Scansaroli.

In a surprising move, 36% of women surveyed will purchase sporting goods for the Holidays compared to 31% last year. They are fast catching up to the 40% of men shoppers who will do so this year. “With more Americans becoming fitness conscious and sporting goods ads targeting women, this trend will become even more prevalent,” Scansaroli said.

According to the survey, Baby Boomers (35-49) intend to spend the most ($900), and the biggest jump will occur among 25-34 year olds who say they will increase their holiday budget to $863 — up from $737 in 1996. Generation Xers will increase their spending by 32% compared to 12% in the older age brackets.

Apparel and Toys are Still Preferred

Apparel, followed by toys, continues to top the list as most popular category this year. Of those surveyed, 64% said they plan to give apparel as gifts and 24% said they plan to spend the most in this category. Among families with children, toys are the most frequently mentioned holiday gift item (75%), compared to 47% in other households.

Sporting goods surpassed jewelry and fragrances as gifts, with 38% of those surveyed planning to make such a purchase this year. According to Scansaroli, “The growing passion for fitness and sports is obviously influencing consumer choices this season.”

Also growing in popularity are gift certificates (36%), especially among time conscious women (56%) who say they plan to use them. Forty-five percent (45%) of consumers earning $40,000-$49,000 will use gift certificates, up from 41% last year. Of those with incomes over $50,000, 42% will use gift certificates, up from 38% in 1996. “As time becomes more valuable, shopping for the perfect gift is, for many, not an option,” Scansaroli pointed out.

Membership Clubs & Catalogues Appeal to Higher Income Levels

Membership clubs are gaining (36%) in popularity with those making $40,000 or more. Thirty-five percent (35%) with incomes over $50,000 plan to use catalogues for their holiday shopping.

“Here again, the growing popularity of membership clubs and catalogues indicates that time is a key driver in determining where people shop for holiday gifts this year,” said Scansaroli.

Home Improvement and Vacations Will Grow In 1998

Thirty-eight percent (38%) of those surveyed said they spent more than they expected on their home, and an equal percentage indicated that they anticipate increasing their spending in this category during 1998. Vacations are a top priority with 74% who clearly indicated that they are budgeting the same amount or more for the coming year. “Quality of life seems to be a priority for the year ahead among consumers,” Scansaroli remarked.

Investment In Well-Being

Twenty-four percent (24%) of those surveyed will be spending more next year on enhancing their sense of well-being. Respondents in the West and the South lead the nation — 29% and 27%, respectively — as they anticipate spending more than last year indulging themselves, while Northeasterners only plan to increase their spending by 15%.

Indulgence is becoming a way of life for the young (18-24 years of age). Forty-one percent (41%) say they overspent on personal pampering this year and anticipated spending more for the coming year, compared to 21% among those 25 or older.

Preferred Destinations: Department Stores and Discount Merchandisers

Department Stores and Mass Merchandisers will again be the preferred destinations for most shoppers. While forty-three percent (43%) plan to spend most of their money in Discount Stores, traditional Department Stores will be shopped by half (50%) of those surveyed. High-income earners $50,000 and over will shop equally in both. Many (35%) will visit Specialty apparel stores.

“Just as Department Stores are continuing to hone in on consumer taste and needs, discount and mass merchants are doing a better job delivering a message of good quality, value and selection to consumers,” Scansaroli said. “Today cross shopping is occurring at all income levels.”

Expectations that the Internet would become an important shopping destination have not materialized as only three percent (3%) of consumers indicated that they would do so.

Quality and Selection, Not Price, to Drive Most Yuletide Shoppers

Better quality merchandise, followed by larger selection, is uppermost in the minds of consumers as they shop this holiday season. Consumers rated quality merchandise (46%) and larger selection (39%) as the two most important reasons for selecting a store. Price promotions (38%) and customer service (37%) are secondary factors this year for consumers when making their decision to shop at particular stores, regardless of income levels.

People with children are as likely as those without children to stress the importance of quality merchandise (60%). Among those with children, however, the importance of larger selections (58%) and price promotions and markdowns (56%) is greater than among people who do not have children (larger selections, 45%; price promotions and markdowns, 40%).

Geographical Differences

Thirty-nine percent (39%) of Westerners and 33% of Southerners are optimistic about the economy. Those living in the North Central states (30%) and in the Northeast (27%) have a less rosy outlook.

In the Northeast and the West, equal proportions of people plan to buy apparel (58%) and toys (60%). In the North Central and Southern regions, more people will buy apparel than toys.

                              Planned Purchases
           Regions                    Apparel                  Toys

         Northeast                      60%                     59%
         North Central                  70%                     62%
         South                          67%                     55%
         West                           58%                     58%

Income Effect On Purchases
People with household incomes of $40,000 or more are likely to buy a wider range of gifts than people in households making $30,000 or less. Intentions of those earning $30,000 to $40,000 fall in between the two income groups. For four of the items — toys, cosmetics, home furnishings and appliances — purchase intent between the two income groups is closer.

                  Intent to Purchase Various Items as Gifts

    Plan to purchase...    Income under $30,000    Income of $40,000 or

    Apparel                         56%                     74%
    Jewelry                         27%                     45%
    Gift certificates               29%                     43%
    Computers                       12%                     25%
    Sporting goods                  34%                     45%
    Electronics                     21%                     32%

    Toys                            56%                     64%
    Cosmetics                       33%                     40%
    Home furnishings                18%                     20%
    Appliances                      15%                     16%

About The Methodology
The Arthur Andersen Holiday Outlook was conducted from October 31 to November 2, 1997. A nationally projectable sample of 1,008 adults, 18 years of age or older, were interviewed using a CATI (Computer Assisted Telephone Interviewing) system. The poll has a margin of error of plus or minus 3%.

About Arthur Andersen

Arthur Andersen is a leading provider of professional services to the Retail Industry. Its professionals combine extensive technical competence and industry experience with innovative and progressive thought to assist clients in improving business performance. Arthur Andersen is the business unit of Andersen Worldwide, the world’s largest professional services provider, with more than 100,000 personnel in 79 countries. Its global practice is conducted by member firms in 381 locations.

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