Shutdown may curb holiday spending, professor says
Will consumers continue their trend of spending more this holiday shopping season than last? One SF State marketing professor says, thanks to the government shutdown, maybe not.
"We haven’t resolved the deficit and the budget issue," said Professor and Interim Chair of Marketing Sanjit Sengupta. "It's just temporarily fixed to keep the government operating until January. So we're talking millions of workers who were affected by the shutdown who fear that if, come January, there is no permanent solution, there will be another deadlock and they will be out of a paycheck. So that has put a dampener on things."
Sengupta's view aligns with that of the National Retailers Federation, which expects holiday shoppers will tighten their holiday budgets by 2 percent this year, reversing a three-year trend of increased spending. But Associate Professor of Marketing Ian Sinapuelas has a more optimistic outlook.
"Everyone is getting more comfortable with the economy, more confident," Sinapuelas said. "Unemployment is decreasing, so there's more willingness on the consumer side to maintain or even increase spending." A more significant change from last year, he said, is the fact that there are only four weeks between Thanksgiving and Christmas this year, instead of the usual five.
"Holiday shopping doesn't really pick up until the day after Thanksgiving, and with the shorter time there's more pressure for retailers to push their products out with aggressive promotions," Sinapuelas said. "Whether consumers will take advantage of those incentives will probably depend on their outlook on the economy. As of now, there seems to be a positive outlook."
There's no disagreement, however, on what will be the hot items this year: electronics and toys, both perennial big sellers. But convincing consumers, some of whom are still skeptical of the improving economy, to make big purchases is trickier. Sengupta said retailers try to inject emotion into the decision of whether or not to buy something, taking the focus away from whether the purchase is rational.
"They may depict more of a positive mood or outlook that things are not as bad as they seem," he said. "Playing to standard themes like family and affection. Those are universal."
Retailers have begun advertising as early as Halloween, Sengupta added, because as consumer spending per capita has decreased in the wake of the recession, businesses looking to maintain profits need to attract more shoppers to make up the difference.
The holiday shopping season truly kicks off, however, on Black Friday, the day after Thanksgiving. Last year, some retailers even began opening their stores on Thanksgiving night and, despite some backlash, Sinapuelas expects many will do so again this year.
And while the impact of "Cyber Monday" -- the day when consumers returned to the office, where they had Internet access allowing them to shop online -- is diminishing as more people have access to the Internet on a regular basis, Sinapuelas said he expects online shopping to continue to grow.
"People are getting more comfortable buying on the web," he said. "Online stores are also able to offer more competitive deals. That's not to say brick and mortar stores aren't able to compete. They offer price-matching strategies. It's going to be a war between electronic retailers and brick and mortar retailers."