Annual Survey Finds Twin Cities Holiday Shoppers in an Enthusiastic Mood This Year St. Thomas Newsroom November 14, 2012 Twin Cities holiday shoppers appear to be in an enthusiastic mood not seen here since the recession, according to research conducted by marketing professors at the University of St. Thomas.The 11th annual University of St. Thomas Holiday Spending Sentiment Survey has been conducted in late October since 2002 and provides more than a decade’s worth of longitudinal data on Twin Cities holiday shopping trends.The survey measures the intent of Twin Cities shoppers: how much they think they will spend for holiday gifts, what they will spend it on, and where they will spend it. The research is conducted by Dr. Lorman Lundsten, Jon Seltzer and Dr. John Sailors of St. Thomas’ Opus College of Business.According to the survey, household spending for holiday gifts is predicted to be 9.95 percent more in the Twin Cities this year than last. Data shows that a decline in holiday spending began in 2007, but was especially pronounced in 2008 when shoppers said they were trimming budgets by more than 10 percent. The turnaround began in 2010, with a predicted 8 percent uptick, and continued in 2011 with a predicted 3.4 percent increase.According to the survey, 21 percent of shoppers said they would spend less this year. That is less than last year’s 31 percent and significantly less than the 54 percent who said they’d shop less back in 2008 and 2009; meanwhile, 18 percent said they would spend more this year; that compares to 10 percent last year and is significantly higher than the 4 percent who said they’d shop more in 2008.A decade ago, 33 percent of Twin Cities shoppers said they would spend less than the previous year and 7 percent said they would spend more.This year’s predicted household spending for holiday gifts, $773, compares to $703 last year and $680 in 2010. Over the past 10 years, the lowest was $637 in 2009 and the highest was $796 in 2004.In its first eight years, the St. Thomas study mirrored or painted a slightly more pessimistic shopping picture than national surveys. For the past three years, St. Thomas’ data has been more optimistic. The university’s predicted increase in household spending of 9.95 percent compares to the nationally projected increases by Deloitte & Touche at 3.5 to 4 percent, the National Retail Federation at 4.1 percent and the International Council of Shopping Centers at 3 percent.Based on survey responses and the population of the greater Minneapolis-St. Paul metro area, the researchers predict that metro-region shoppers will cumulatively spend just over $1 billion this year, up 9.3 percent from last year’s predicted $915 million. This year’s predicted spend is the highest in the 11 years of the survey; the previous high was $959 million in 2004.A peek under the treeWhat will Twin Cities shoppers buy with their $773? The professors created an index to analyze the relative popularity of 14 gift categories. It sheds light on the “what’s hot” question and allows year-to-year comparisons.The categories – listed by most-popular first – are: cash, clothing and accessories, gift certificates, travel, computers and related items, books, toys and hobbies, entertainment, video games and related items, furniture and home furnishings, sporting goods, cell phones, consumer electronics and jewelry.That’s close to last year, but there have been some changes. Gift certificates had reigned supreme four years running – from 2007 to 2011 – but dropped to third this year. Cash was in fourth place last year but rose to the top in 2012. None of the other gift categories moved up or down more than two spots on the list this year except furniture and home furnishings, which climbed from 14th to 10th. Books came in at No. 2 in 2010, No. 5 in 2011 and No. 6 in 2012. The decline could be related to e-book readers and tablets.Where they spendFor the past 10 years the survey has asked shoppers where they plan to spend their money. This year’s results show that shopping malls remain popular – accounting for about half of all shopping – but they gave up some ground to non-mall stores and to the Internet.Respondents plan to spend 46.6 percent of their holiday budget at the region’s 14 malls and shopping areas. That’s down from 53.1 percent last year, but remains well above the 10-year low of 36.2 percent back in 2008. Ten years ago, it was 51 percent.They will spend 19.5 percent at non-mall stores this year. That’s up from 16.7 percent last year, but still below the 27.4 percent in 2010 and the 10-year high of 39.2 percent in 2008.The Internet continues its gradual but steady gains. This year shoppers plan to spend 29.7 percent of their holiday budget using the Internet. That’s up from 26.1 percent in 2011, 21.8 percent in 2010, and four times the 7.3 percent reported in 2002 when the St. Thomas surveys began.The increase in online shopping is reflected in a recent prediction by FedEx that it will ship a record 280 million packages between Thanksgiving and Christmas, a 13 percent increase over last year.Catalogs, meanwhile, will account for 4.5 percent of this year’s shopping dollar. That’s up a percent from last year, but half the 9 percent reported back in 2002.What kind of Internet sites are most popular with shoppers? To find out, researchers asked respondents to indicate what portion of their spending would be done on four kinds of online sites. “Bricks and Clicks” sites, operated by stores such as Target, received 40.5 percent of the online spending. “Internet Only” sites, such as Amazon, were close behind at 38.5 percent. “Deals” sites, such as Groupon, registered 5.3 percent, and “Broker-Facilitator” sites, such as eBay, registered 3.5 percent.Again this year, respondents were asked to list two stores and two websites where they planned to shop.In the store category: Target and Macy’s were clear winners and tied for first, followed by Best Buy, Herberger’s and Kohl’s. Last year, Target had been mentioned twice as often as second-place Macy’s; they were followed by JC Penney, Kohl’s and Best Buy.In the online category: Amazon was mentioned five times more often than second-place Target. Rounding out the top five were eBay, Best Buy and Barnes & Noble. Last year, Amazon was mentioned seven times more often than second-place eBay; they were followed by Target, Barnes & Noble and Craigslist.Most-popular malls and shopping areasWhich of the malls and shopping areas (including the two downtowns) are going to attract the most shoppers?The researchers approached that question from two perspectives: first, which mall in the region are metro-area consumers planning to visit at least once for holiday shopping; second, which mall are they planning to shop at most for the holidays. The results are not the same.Some changes were made to the list in 2011. Brookdale was dropped after much of the mall was closed and demolished. Four shopping areas – Albertville Outlet Center, Arbor Lakes Area, Riverdale Area and Woodbury Lakes Area – were added to the mix. The same 14 shopping areas on the 2011 survey were used in the 2012 survey.When asked which malls or downtowns they planned to visit at least once for their holiday shopping this year, survey respondents listed, from most-popular to least-popular: Mall of America, Rosedale, Southdale, Ridgedale, Albertville, downtown Minneapolis, Eden Prairie, Burnsville, Arbor Lakes Area, Maplewood, Woodbury Lakes and, in a three-way tie for last place: Northtown, Riverdale Area and downtown St. Paul.The Mall of America, Rosedale and Southdale have held these one-two-three rankings for the past three years, as well as 11 years ago when the survey began. The Mall of America has been the top, shop-at-least-once-for-the-holidays mall for all 11 years of the survey with the exception of 2004-2006 when Rosedale was No. 1.With four exceptions, the list did not change significantly from last year. Albertville moved up six spots, from 11th to fifth; Burnsville dropped four, from fourth to eighth; Maplewood dropped six, from fourth to 10th; and Northtown dropped six, from eighth to its three-way tie for last place.(The 2011 shop at least once list: Mall of America, Rosedale, Southdale, Maplewood and Burnsville (tie for fourth), Ridgedale, downtown Minneapolis, Arbor Lakes Area, Northtown, Eden Prairie, Riverdale Area, Albertville, Woodbury Lakes and downtown St. Paul.)When asked where they planned to do most of their holiday shopping this year, respondents listed, in order: Mall of America, Rosedale, Ridgedale, Burnsville, Eden Prairie, Arbor Lakes, Woodbury Lakes, Riverdale, Southdale, Maplewood, downtown Minneapolis, Albertville, Northtown and downtown St. Paul.This is only the second time Rosedale didn’t finish No. 1 in the most-shopped list and only the second time Mall of America held the top spot. Again with four exceptions, the list did not change significantly from last year. Eden Prairie moved up four spots, from ninth to fifth; Woodbury Lakes moved up seven, from 13th to sixth; Southdale moved down three, from sixth to ninth; and Maplewood moved down five, from fifth to 1oth. Downtown St. Paul has been at the bottom since the survey began.(The 2011 most-shopped list: Rosedale, Mall of America, Burnsville, Ridgedale, Maplewood, Southdale, Arbor Lakes, Riverdale, Eden Prairie, downtown Minneapolis, Northtown, Albertville, Woodbury Lakes, and downtown St. Paul.)What the research data tells us“When you look at 11 years of survey data, you can trace the mood of Twin Cities shoppers before, during and after the recession,” Lundsten said. “A sense of optimism this year comes through not only in the numbers, but also in the respondents’ written replies.“At the height of the recession, these responses reflected considerable fear and caution. This year’s respondents are a more cheerful group and they have a more optimistic outlook.”One survey question asked: “Will your household be better off financially, or worse off, in the coming year?” Ninety-two percent said their household would be the same or better off, and only 8 percent said worse.And unlike recent years, the respondents did not bring up the price of gas in their open-ended responses.“In terms of consumer sentiment, I think we might be seeing the new normal,” Seltzer said. “Our data indicate that shoppers are adjusting to fears brought on by the recession.”“There is no doubt that many people in this region suffered from the recession, and continue to suffer,” Seltzer added. “There are home mortgages that are under water and households with large credit-card debt. But compared to some regions of the country that were hit especially hard, the worst fears were not realized here in the Twin Cities.”Lundsten noted that the St. Thomas study shows a nearly 10 percent increase in spending this year compared to last, while national studies show an increase of 3 or 4 percent. “Our survey indicates that the shopping mood here has returned to pre-recession levels,” he said.What about big holiday sales this year? Don’t expect the kind of discounts shoppers fondly recall from several years ago. Seltzer said retailers learned a painful lesson in 2008 and are much better at managing their inventories. “They either got good at it, or they are gone,” he said.Respondents completed the surveys in late October, and at that point indicated they already had completed 16.5 percent of their shopping. They predicted they will have completed 55 percent of their shopping by Dec. 1. In both cases, those numbers mirror 2011 data.“December is going to be a busy month in the stores,” Lundsten said.Possibly because the surveys were conducted shortly before the November elections, one respondent offered a comment the professors had not seen before: “I don’t shop in St. Paul … it’s so liberal there.”The three professors who conducted the study emphasize that actual spending might be different because shoppers could spend more or less than they planned once they get into the stores.The researchersLundsten, Sailors and Seltzer are members of the Opus College of Business faculty.Lundsten is a professor of marketing who teaches retailing and marketing research. He holds a doctorate from the University of Michigan.Sailors is a specialist in consumer behavior, marketing research, and brand equity and loyalty; his doctorate is from Northwestern University.Seltzer teaches international marketing and distribution channels. A former vice president of industry and government relations at Supervalu Inc., he holds an M.B.A. from the University of Chicago.The Institute for Retailing Excellence, part of the Opus College of Business, conducts research and offers educational programs for those who work in retailing.Survey methodThis year’s holiday spending survey included 304 responses from households in the 13-county Minneapolis-St. Paul Metropolitan Statistical Area, which includes two counties in western Wisconsin. The respondents reflect the demographics of the area as well as those who responded to previous holiday spending surveys.Dr. David Brennan, a member of St. Thomas marketing faculty, worked on the annual holiday spending survey for its first 10 years. He is teaching this semester in London, but wrote this overview of the survey’s first decade in the November issue of B. Magazine, published by the Opus College of Business.