AMES, Iowa -- The National Retail Federation's (NRF) recent holiday survey of consumers suggests that it might be a slightly better year for retailers, despite the sluggish economy. And an Iowa State University business professor concurs that consumers may be more willing to spend as they make their holiday purchases.
Laura Smarandescu, an assistant professor of marketing in ISU's College of Business, says the NRF survey indicates that gift cards and clothing will remain the most requested holiday items by consumers this season. But she says Americans may be a little less practical, too.
"The NRF report indicates that people are starting to shift away from necessities toward more pleasurable purchases like jewelry [up 3 percent from a year ago] or personal care and beauty items [up 1.2 percent]," said Smarandescu, who conducts research on consumers' decision-making and use of gift cards.
"There are also indications that instead of focusing on price alone, consumers will focus more on value this holiday season," she continued. "So when faced with a choice, shoppers may be looking at other aspects besides price, such as quality, quantity, functionality, brand name and the level of customer service. Also, today's consumers tend to give more weight to the brand experience; thus promoting strong brands that consumers recognize and desire would pay off more than low prices."
More people buying for themselves, online
The NRF survey also found that 5 percent more consumers will take advantage of holiday sales to make non-gift purchases for themselves this year. And many of them may be looking for those deals online, with the survey reporting that online consumers are likely to spend 24 percent more than those who shop in brick and mortar stores.
"This is not surprising as online shopping is more likely to result in impulse purchases -- especially under limited time or limited inventory conditions," Smarandescu said. "In these scenarios, online shopping is more likely to result in a 'buy now' decision, as many websites have also adopted one-click shopping."
That's a concern to financial literacy scholars like Tahira Hira, an Iowa State professor of personal finance and consumer economics in the department of human development and family studies, who urges consumers to avoid impulse buys. She recommends planning before the purchases. She particularly advises cash-strapped families to discuss their current financial challenges and the need to avoid additional debt during the holidays.
"They may want to rethink the family philosophy about holidays and gift-giving and what will be the 'right' thing to do to avoid financial challenges," Hira said. "They may want to think creatively about gifts that properly communicate holiday sentiments, but don't require money -- such as a gift of your time, or an 'I owe you' to do something meaningful that would cost the recipient money if they didn't do it."
And for families who don't want to bust their holiday budgets, Hira offers these tips:
1. Set a dollar limit. "Set aside some
money for your holiday shopping. While there's not much
time left this year to do that, we should start planning for
next Christmas soon too," Hira said. "But you should
spend only that much money that you set as your limit. Leave
credit cards home when shopping."
2. Avoid being lured into impulse buys by in-store and
TV advertisements.
3. Make purchasing decisions based on your plan, not
driven by emotions or a desire to "Keep up with the
Joneses."
"It's an emotional
time," Hira said. "Gifts are bought and given to
communicate things that we don't always say. Gifts are also
given to sometimes keep up with what others are doing. There
are also strong messages being marketed to people to ignore
reality, follow their emotions and just swipe this card and
join the crowd."
4. Avoid the dangers of using credit to make holiday
purchases. "More debt and more payments leave you
with less money at your discretion to meet your needs in the
future," she said. "You lose control over your own
financial situation as more and more money is pre-committed to
debt payments. So shopping with cash is a good strategy."
Shopping with cash has other advantages, too. Smarandescu reports there's a new trend showing that some retailers are even offering discounts to consumers making cash purchases.
"So consumers spending cash will be at an advantage for
two reasons, the first being the discount on the
purchase," she said. "But my research also shows that
consumers are more likely to under spend cash when compared
with other payment formats, such as credit cards or gift cards.
The reason is that paying with cash is associated with more
pain of paying than other payment formats. That's because
cash is more likely to be viewed as part of our current
spending account from which we balance our income and expenses,
while gift cards or credit cards are viewed as independent
mental accounts -- generally reserved for discretionary
spending."
