In times of uncertainty and frugality, be ready

Early indicators show consumer confidence is improving. According to Reuters and the University of Michigan’s consumer sentiment survey, December’s preliminary reading of 73.4 is one of the highest consumer sentiment readings this year though September registered the highest reading of 2009, 73.5. The RBC CASH (Consumer Attitudes and Spending by Household) Index showed an increase in consumer confidence for December also. And, in November, the Conference Board reported a gain in consumer confidence to 49.5 from a reading of 48.7 in October.

Is this a sign that consumers are breaking down the cloud of gloom that came with the recession or is this confidence just a temporary blip? Tom Porcelli, RBC Capital Markets U.S. economist, stated in the December RBC CASH news release “Traditionally, the holidays are a season of hope and optimism. Despite continuing high unemployment and weak assessments of personal finances, the RBC Index shows that American consumers are optimistic that the economy will soon begin to improve.” Lynn Franco, Director of The Conference Board Consumer Research Center noted in November’s consumer confidence press release, “Income expectations remain very pessimistic and consumers are entering the holiday season in a very frugal mood.”

A frugal mood is perhaps why many consumers have not completed their holiday shopping. According to the National Retail Federation (NRF), 19.1% (about 42 million) of consumers had not started their shopping as of late last week and only 8.6% of consumers had completely finished their holiday shopping per the survey. However, delaying holiday shopping may be a smart and deliberate tactic. The December American Express spending survey revealed 31% of shoppers are holding out for the best deals. And, retailers are aware of this practice and will be ready according to NRF. “Retailers know the final lap counts the most and are planning to emphasize promotions and discounts to bring in last-minute shoppers,” said Tracy Mullin, President and CEO, NRF.

Bottom line - even with consumers in a frugal mood, confidence is up slightly and the holidays are a season of hope. So be ready for those last-minute shoppers looking for just the right gifts for loved ones and friends. Your store may provide what consumers seek.

Happy Holidays.