Murry Assesses Mood of Iowa Holiday Shoppers
Iowa retailers hope a shopping season that started strongly with Black Friday will continue over the next week as consumers wrap up their holiday spending.
Managers of Iowa’s largest malls and some retailers expect big crowds through Christmas. But it’s unclear whether consumers can overcome enough economic uncertainties about jobs, income, and their investments in their homes and 401(k)s to spend more this year.
“We see economic news that is more positive for the U.S. economy,” said John Murry, a University of Iowa marketing professor. “But to make large Christmas outlays, people have to feel comfortable about the months ahead. Markets gyrating 3 or 4 percent each day tend to make people nervous.”
The National Retail Federation pushed its holiday sales expectations Thursday to a 3.8 percent increase over 2010 spending, to a record $469.1 billion. That’s up from a previously projected 2.8 percent increase. The group warned, though, that the European debt crisis, political wrangling or other economic factors could hurt holiday spending.
“Consumer spending this holiday season has surpassed expectations, though many shoppers continue to stick to their budgets and buy only what they need,” said Jack Kleinhenz, the group’s chief economist.
Vicki Giesselmann of Johnston said she has reduced how much she spends on gifts and other seasonal goods by about two-thirds. “The winter is long, and I have to make a buck stretch,” said Giesselmann, 42. “My husband’s work is seasonal, so I have to tighten my belt.”
The retail federation upped its forecast after Black Friday weekend sales hit a record $52 billion and November retail sales—minus car, gas station and restaurant sales—rose 0.9 percent over October and 4.5 percent from a year earlier. It also said only 46.5 percent of consumers had completed their shopping vs. 49.5 percent at the same time last year.
“It feels like the good old days right now,” said Toby Joseph, owner of Josephs Jewelers, a family business with three central Iowa stores. He credits Iowa’s healthy farm profits for this year’s strong sales, the highest since 2007.
Landowners, implement dealers and others connected to agriculture have had a great year. “A lot of people are celebrating because they have told me it’s their best year ever,” he said.
“Saturday will be a very good day, but it really starts Monday the following week. We’ll have about 15 to 20 percent of the whole year’s sales in those seven days,” Joseph said.
Other retailers are cautious about how the all-important holiday sales season will end.
Randy Traviss, owner of Traviss Audio & Video in Des Moines, estimated his sales so far this season are up 10 to 15 percent over last year.
“In the previous three years, this was a busier time of year, too, but we were not doing as well,” he said. “I’m cautiously optimistic that may be a sign the economy is coming back a little.”
Tom Root, a Drake University finance professor, said consumer uncertainty may have lessened from a year ago. “People don’t feel real good about the economy yet, but they might feel like they’re on firmer ground than a year ago,” he said.
“We’re seeing some strange dichotomies. Perceptions of the future go up and down daily,” Root said.
Chelsea Armstrong of Elkhart said she has cut back an estimated 40 percent from last year’s spending. She’s shopping for bargains for herself and others. “I cut some people off the list and my family went to more of a gift exchange, so instead of buying for everyone, we just buy one gift,” said the 23-year-old.
“We’re spending about the same as last year, but I’d say we’re doing a different kind of shopping this year,” said Colleen Schumacher of Urbandale. “We’ve adopted a couple of families to buy for and cut back on the personal spending,” she said.
Root said a recent Federal Reserve report that shows consumer borrowing increased to $2.46 trillion in October, the highest level in two years, could mean Americans are more confident about the economy and their ability to repay—or more of them are struggling financially.
Traviss said buying habits have changed since 2007. “They’re not spending money as freely as they had been in the early 2000s, or the 1980s and 1990s,” he said. “They do use credit cards, but we’re not doing as much (in-house) financing.”
Rising spending could have multiple drivers, Root said. Consumers who have delayed making purchases for a couple of years may be forced into replacing appliances, cars, clothes, and other products, he said. Or they “are more comfortable making purchases. It’s difficult to sort out.”
The National Retail Federation said increased holiday spending would be good for the economy.
“Retailers are cautiously optimistic that this season will turn out better than initially expected, bringing added stability to our recovering economy at a time when America needs it most,” said Matthew Shay, the group’s chief executive.
Joseph said business has been so good he recently hired four full-time employees, bringing the total number to 79. And he’s not alone. Iowa had 3,000 more retail jobs in October than a year earlier. Retail employment, though, remains at 2,700 fewer jobs than October 2008, about when the recession gripped Iowa.
Murry, the marketing professor, said any holiday improvements are likely to be small, given that consumers would need a significant boost in confidence to greatly increase spending.
“Consumers need a greater sense of security ... and there is a lot of mixed news out there,” he said.