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Economy & Business

Consumers plan on spending less, shopping smarter and staying closer to home

This article first appeared in the St. Louis Beacon: November 18, 2008 - Oh, the shopping season looks frightful -- whether you're a consumer, fretting about what to buy and how much to spend, or a retailer, worrying about sales, or an employee, wondering how much longer work will continue.

In September, the National Retail Federation projected sales for this year's holiday season would rise just 2.2 percent. That's half the 10-year-average growth of 4.4 percent.

"I'm expecting to see probably the worst level of retail sales in 20, 25 years," says Robert Sorensen, a professor of economics at the University of Missouri St. Louis.

But exactly what those expectations look like isn't clear. The models economic forecasters usually use don't work for the current situation, caused by the deterioration of the housing market and the clamp on credit.

And with most people just as unsure of the economy, Sorensen figures consumers will hold back, spend less and delay purchases when they can.

The one bright spot in the economy, so far at least, comes from gas and natural gas prices. Sorensen says those two things will give people a little more discretionary money, but consumers may not trust those prices to stay low, so they could just as easily save the money for tough times ahead.

He also expects people will use their credit cards less.

Overall, retailers are prepared, but could still end up with unsold goods. And that starts the cascade affect -- people spend less, stores sell less, they wait longer to purchase more, jobs are cut and people spend less.

"It's pretty gloomy out there," Sorensen says.

Recently, the St. Louis Beacon headed to shopping areas to talk with consumers about their holiday expectations. All were still planning on shopping, being with family and enjoying the holiday season. Like Tiffany Daggs, a 28-year-old teacher, they also all planned to spend nearly half what they had the year before. So it's just a budget of $500 for Daggs this year. She plans to look for sales, shopping at Macy's and the Gap, and buying for fewer people.

SALE AWAY

Sarah Thuet pretty much gets everything she wants for Christmas. And this year, the 12-year-old will again, as will her two sisters.

But their mom, Cindy Thuet, 43, is doing some things a little differently this year. In the past, Thuet, a nurse, shopped at most stores and saved her shopping until the holiday season began.

"Holidays are when you buy everything," she says.

But this year, Thuet will be looking for sales, and she won't be alone.

The NRF reports that sales and promotions were the most important factor in choosing where to shop for 40 percent of shoppers, more than selection, quality and convenience.

Thuet doesn't know how much she's spent in years past, but this year, "it'll probably be a little less than last year," like everything else.

Sarah, by the way, wants lots of clothes and shoes.

HOME FOR THE HOLIDAYS

Usually around the holidays, the Puliusz family heads to Chicago and San Diego to see Joanna Puliusz's family.

"Not this year," says the 50-year-old accountant.

"I think they're coming to us," says her daughter, Gloria, 17.

No, Puliusz says. They're not.

The Puliusz family always shops sales, and this year they plan on spending $400, compared to last year's $1,000 on presents. And staying home will also save big.

AAA predicts that 7 percent fewer people will fly during the holiday season than did last year and can expect to pay about 8 percent more. Slightly fewer will drive 50 miles from home, from 41.6 million last year to 41 million this year.

Puliusz will miss her family. "It's OK," she says. "Everyone understood."

CHRISTMAS LIGHT SPECIAL

Yvonne Reed already knows what her 12-year-old son wants. He likes video games.

"He tells me what's in," she says.

And he'll get something good, but Reed, 33 and in customer service, plans to spend just $300 this season on gifts. Last year, she probably spent $700.

To fit everything in, Reed will shop discount stores such as Wal-Mart and Target, she'll look for sales and do some online shopping.

According to the NRF, 69.7 percent of shoppers will hit the discount stores along with her. More than half of shoppers will go to department stores, and a little more than a third will make their purchases at electronics and clothing stores.

Still, the damper on the economy won't put a damper on Reed's holiday. Everyone's cutting back now, she says.

"I guess it's kind of a part of life."

SHOP SMART

This year for Christmas shopping, banker Mitch Baden will head to places he doesn't usually shop, like discount stores. He'll look for deals, and he may shop online. The key, for Baden, 53, will be shopping smarter.

Many online stores want to help with that. According to the NRF, online retailers are expecting 15 percent more sales that last year, and 78 percent will offer some kind of free shipping.

Baden hopes that will take the present budget down from last year's $3,500 to $2,000.

His bigger concern, perhaps, is his industry's new competitor -- the government. Baden worries that the media creates a self-fulfilling prophecy with so much reporting about the economy, and Sorensen at UMSL agrees that can be a factor.

But still, the shopping season looks frightful.

"I think people are probably scared," Sorensen says. "Some, for very good reasons."

Kristen Hare is a freelance writer in Lake St. Louis. 

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