UST study shows Twin Cities holiday shoppers will spend a little more this year
The reindeer might need an extra carrot for breakfast before pulling their sleigh to the Twin Cities this year, according to the results of a study just concluded by two marketing professors at the University of St. Thomas Institute for Retailing Excellence.
The third annual survey found that 2004 holiday spending will total $796 per metro-area household, which is up $17 or 2.2 percent compared to a year ago.
Overall spending in the 13-county Minneapolis-St. Paul area will increase by an even larger percentage, according to data collected and analyzed by researchers Dr. Lorman Lundsten and Dr. Dave Brennan. Due to a slight boost in population, they predict metro-area holiday spending this year will hit $959 million, an increase of 3.3 percent from last year’s $928 million.
The survey, the only one of its kind in the Twin Cities, found that 56 percent of households expect to spend about the same this holiday season, which is identical to last year. However, the households expecting to spend less is down this year (32 percent this year compared to 35 percent last year) while the households expecting to spend more is up (12 percent this year compared to 9 percent last year).
The researchers once again looked at where Twin Cities residents like to shop, what’s on their gift lists, if they prefer malls or the Internet, and why they plan to spend more or less.
Because the professors are using the same yardstick to measure consumer spending plans, they are beginning to see or to confirm some holiday shopping trends. Among their findings:
- Retailing had three lackluster years from 2000 to 2002, with 2001 being especially slow. Things got better in 2003, and 2004 should continue this gradual but steady improvement.
- Shoppers probably won’t be going to the stores as often this year, but they will spend more per item or visit.
- This holiday season appears bright for upscale retailers like Talbot’s and Brooks Brothers, for department stores like Marshall-Field’s and Nordstrom, and for stores selling big-ticket items like Best Buy. The outlook isn’t as bright for discount stores like Kmart and Wal-Mart.
- While most shopping is still done in traditional stores, nonstore shopping via catalogs, television and especially the Internet continues to gain ground.
- Rosedale edged out the Mall of America as the most popular mall for Twin Cities shoppers.
- While it mirrors most national shopping trends, over the past three years the Twin Cities shopping scene has been both less euphoric and less pessimistic. In other words, retailing in the metro area tends to be fairly steady, with either moderate increases or moderate decreases.
In more detail, here are results from the 2004 survey:
The things we buy
What will Twin Cities-area shoppers buy with their $796 this year? Clothing and accessories top the list and were mentioned by 92 percent of the respondents. That was followed closely by books at 88 percent, gift certificates at 88 percent, toys and hobby items at 86 percent, and entertainment products like recorded music and movies at 82 percent.
Next in line were gifts of cash, 78 percent; sporting goods, 71 percent; jewelry, 70 percent; electronics, 68 percent; furniture, 66 percent; video games, 62 percent; and computers, 60 percent.
That mix of spending is fairly close to last year’s wish-list predictions. Clothing has been and continues to be the holiday front-runner. Both computers and video games dropped some this year. “That might indicate that computers are increasingly seen as necessary household items, rather than something you give as a gift,” Brennan said.
In terms of how often they were mentioned, cash gifts increased a couple of percent this year over last, and while gift certificates dropped a small percentage, they are the third-most-popular item on the list of planned purchases.
The survey also asked shoppers if they were planning to spend more or less within the various categories. The winners were, in order: furniture, video games, sporting goods, electronics, jewelry, clothing, toys and hobby items, entertainment products, gift certificates and books.
The only two categories where shoppers planned to spend less were gifts of cash and computers.
Why the planned cutbacks or increases
If households are cutting back on spending this year, the reasons included “money is tight” or a “decrease in income.” Another reason is that members of the household are getting older and don’t exchange as many gifts, or there is a change in gift-giving practices.
For families planning to spend more this year, respondents mentioned that they had an increase in pay or had gained new family members or relatives.
The researchers added a new question on the survey this year to see if holiday shopping was becoming more or less important in Twin Cities households. While there is no percentage to compare with last year, 10 percent said shopping was more important while 25 percent said it was less; two-thirds said it was the same.
A note about planned spending and actual spending
Lundsten and Brennan point out that their findings are based on what consumers predicted when they completed the surveys between Oct. 12 and Nov. 5. Actual spending might be higher, they said, because shoppers could spend more than they planned once they get into the stores.
National surveys are predicting a 3 percent to 6 percent increase in holiday spending this season.
“Our earlier studies in the Twin Cities have followed national trends,” Lundsten said. “But it is almost a universal trait to underestimate actual spending when you are answering survey questions in October. Shoppers often make unplanned purchases once they are in the stores.”
“We don’t tend to experience such big highs and big lows in Twin Cities retailing because of our diverse population, our stable economy and because the metro area continues to grow by about 1 percent annually,” Brennan said.
Where we shop
Where do Twin Cities shoppers spend their holiday dollars? According to survey results, the big, regional malls are holding their own as the most popular place for holiday shopping. Nonmall stores also remain popular, but they lost ground this year to nonstore shopping, including catalogs and the Internet.
For two years in a row, shoppers said they planned to spend 48 percent of their holiday budget in regional malls and downtown stores. Last year
, 35 percent of the budget was going to be spent in nonmall and nondowntown stores, but this year that percentage slipped to 30 percent.
Gaining ground this year was nonstore shopping, which increased from 17 percent of the holiday budget last year to 22 percent this year. Catalogs, television and phone shopping increased from 8 percent last year to 12 percent this year. Shopping via the Internet was 7 percent in 2002, 9 percent in 2003, and 10 percent this year.
Which of the regional malls are going to get the largest share of that $796 holiday budget? The researchers approached that question from two perspectives: first, which mall in the region would consumers visit at least once, and second, which mall would consumers shop at the most.
Those questions are similar but the results are not the same. However, for the first time this year Rosedale came out on top in both categories.
When asked which malls they planned to visit at least once this holiday season, Rosedale edged out the Mall of America, which had been No. 1 the two previous years. What hasn’t changed over the past three years is that Southdale, Ridgedale and Maplewood came in third, fourth and fifth.
This year’s top five malls, based on where respondents planned to shop the most, were Rosedale followed by Maplewood , Ridgedale, Mall of America and Southdale. Those were the top five last year; the only change is that Ridgedale moved up from fourth to third, while the Mall of America dropped from third to fourth.
Compared to the large regional malls, the downtowns of Minneapolis and St. Paul did not fare well as holiday shopping destinations. However, downtown Minneapolis did move up in the rankings of where respondents planned to shop at least once. Last year, downtown Minneapolis was ninth of 11; this year it was sixth.
By comparing the malls of choice and where the respondents live, the researchers found that shoppers clearly favored malls closest to home. Shoppers occasionally, but not routinely, will drive past one mall in order to visit another mall.
About the survey
The results of the study were based on a survey that was conducted from Oct. 12 to Nov. 5. The survey was mailed to 3,000 Twin Cities-area households in 13 counties, including two counties in western Wisconsin. The households were selected to match the demographic characteristics of Twin Cities residents, including age, income, education, religion and location.
The researchers received 308 completed and usable surveys. The demographic characteristics of those who returned the surveys matched the characteristics of the original sample, and in turn, the characteristics of a cross section of Twin Cities residents.
Sixty-four percent of the respondents were female and 65 percent were married. The average household had 2.27 members. Twenty percent of the respondents were from Minneapolis and St. Paul, with the balance from the rest of the 13-county metro area. Thirty-three percent were age 60 and over, 60 percent were between 30 and 59, and 8 percent were 29 or younger. About 22 percent had household incomes under $40,000, 43 percent were between $40,000 and $80,000, 12 percent were between $80,000 and $100,000, and 24 percent had household incomes of more than $100,000.
Lundsten and Brennan are both longtime members of the St. Thomas faculty.
Lundsten is a professor of marketing and chairs the university’s Marketing Department. He holds a doctorate from the University of Michigan.
Brennan, who holds his Ph.D. from Kent State University, is a professor of marketing and co-director of the university’s Institute for Retailing Excellence.
The Institute for Retailing Excellence, part of the St. Thomas College of Business, conducts research and offers educational programs for those who work in retailing.