SOURCE: The Boston Consulting Group

November 13, 2008 16:10 ET

Survey by The Boston Consulting Group Outlines How Americans Plan to Curb Spending for Holidays and 2009

Most Americans Say They'll Spend Less This Holiday and Next Year, as Feelings of Financial Insecurity, Worries About Jobs and Anticipation of Dwindling Credit Soar

The Art of 'Trading Down': Consumers Will Be Hunting for Bargains in All 108 Consumer Categories; Big-Ticket Purchases Will Be Nixed or Postponed, and Restaurants, Travel and Home Furnishing Will Suffer Most

CHICAGO, IL--(Marketwire - November 13, 2008) - Confirming retailers' and producers' worries, most Americans say they'll spend less this year during the holidays, and an even larger majority say they plan to cut spending overall in 2009, according to a survey of 2,175 adults with household incomes over $35,000 commissioned in late October by The Boston Consulting Group (BCG) and conducted by Harris Interactive.

The cutbacks coincide with increasing feelings of anxiety about the economy, a slow recovery, jobs, home values and lack of consumer credit, the survey shows. Accordingly, Americans say they'll "trade down" -- hunt for high-quality bargains as a coping and saving mechanism -- in greater numbers, in all categories.

"Consumers are battening down the hatches and bracing for a tough year ahead, with the holiday season being one of many casualties. Many people are bracing for a slow recovery and spending more time 'trading down' and bargain hunting to bolster their buying power in tough times," said Michael J. Silverstein, a BCG senior partner and author of the bestselling books "Treasure Hunt: Inside the Mind of the New Consumer and Trading Up: The New American Luxury." "But even with all the anxiety and cutting back, Americans continue to express optimism about the future; the majority told us they believe they'll be 'better off' in five years."

Only One in 10 Consumers Will Spend More This Holiday Season

-- Most Americans -- 52 percent -- say holiday spending will decrease at their households; fewer than 10 percent will spend more this year than last.

"Consumers are anxious about the coming year. They are eating at home, planning less expensive vacations, deferring capital expenses," Silverstein said. "They are willing to spend their time shopping to extract better prices. It's not so much that they personally have experienced the pain of the current economy. It's that they anticipate pain. Trading up is not dead but it is limited to a few categories. The news they hear every day hammers home the message, 'worry, conserve cash, plan for a rainy day.'"

Even More Plan to Cut Spending for 2009 Overall

-- Nearly three out of five Americans -- 58 percent -- say they'll spend less next year overall. (In the 2007 survey, only 44 percent said they'd cut spending this year.)

-- The average decrease in spending for 2009 will be 13 percent, according to the survey results.

Mounting Concern over Finances, Jobs, and the Economic Environment

-- 30 percent of Americans say they feel financially insecure, up from 28 percent in 2007. Five percent say they're now in financial distress.

-- 45 percent say they feel squeezed by the credit crunch.

-- 39 percent say they feel they lack job security for the next year, up from 31 percent a year ago.

-- More than a quarter -- 26 percent -- say they've already cut spending due to declining home values (compared with only 17 percent who said that a year ago).

-- Nearly half -- 48 percent -- say they believe we haven't hit bottom and that the economy will get "even worse in the next six months."

-- 31 percent say they believe the economy will take several years to improve. (That's up from 27 percent who said that just a few months ago, in April 2008.)

Americans Turning to the Art of 'Trading Down' to Handle the Squeeze and Maximize Their Funds

-- According to the survey, Americans are trading down -- looking for high- quality bargains in order to save money or spend more on something else -- in all categories, at an accelerated rate.

-- Large numbers of Americans say they'll cut spending most on restaurants and fast food (49 percent); vacation travel (42 percent); consumer electronics (30 percent); home furnishing and décor (22 percent); and clothing (20 percent).

-- Half of Americans say they'll spend more time in stores to find the best possible prices, and 65 percent say they'll pay more attention to, and buy more, products on promotion.

-- 63 percent of Americans say they'll defer major expenses that can wait.

-- Because of rising energy and food prices, 69 percent of Americans say they'll reduce home energy consumption; 43 percent will opt for more store brands and "value" products; and 38 percent will avoid non-necessary items like sweets and confectionaries.

-- In 2007, 46 percent of Americans agreed that "every year, there are more things I want to buy"; this year only 35 percent agree.

Despite the Squeeze, American Consumers Retain an Optimistic Streak -- and Feel Canny and Savvy About How They Spend

-- The vast majority of Americans -- 72 percent -- say trading down makes them feel practical, and 62 percent say it makes them feel smart (as opposed to "cheap" or "upset").

-- 62 percent of Americans say they trade down "so I can spend it elsewhere," and 61 percent say they do it because they "enjoy the feeling I get when I am able to save a little money." Only 27 percent say they do it because they cannot afford to buy the more expensive products.

-- 45 percent of the Americans who will be spending less next year say they'll be doing so because they expect to save more.

-- Importantly, 70 percent of Americans say they're still willing to "trade up" -- spend a bit more for added technical and emotional benefits -- in five or more categories. (81 percent said they were willing to do so last year.)

To arrange a conversation with Michael J. Silverstein of The Boston Consulting Group, please contact Alexandra Corriveau at The Boston Consulting Group at (212) 446-3261 or corriveau.alexandra@bcg.com.

Survey Methodology

This Household Spending survey was conducted online within the United States by Harris Interactive on behalf of BCG between October 8 and October 22, 2008 among 2,175 US adults ages 18+ who have annual household incomes of $35,000 or more, of whom 1,738 have annual household incomes of $50,000 or more. Results were weighted as needed for age, sex, race/ethnicity, education, region, and household income. Propensity score weighting was also used to adjust for respondents' propensity to be online.

All sample surveys and polls, whether or not they use probability sampling, are subject to multiple sources of error which are most often not possible to quantify or estimate, including sampling error, coverage error, error associated with nonresponse, error associated with question wording and response options, and post-survey weighting and adjustments. Therefore, Harris Interactive avoids the words "margin of error" as they are misleading. All that can be calculated are different possible sampling errors with different probabilities for pure, unweighted, random samples with 100 percent response rates. These are only theoretical because no published polls come close to this ideal.

Respondents for this survey were selected from among those who have agreed to participate in Harris Interactive surveys. The data have been weighted to reflect the composition of the U.S. adult population. Because the sample is based on those who agreed to be invited to participate in the Harris Interactive online research panel, no estimates of theoretical sampling error can be calculated.

Note: All questions reflect U.S. adults aged 18 and over with annual household incomes of $50,000 or more unless otherwise noted.

About The Boston Consulting Group

The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients in all sectors and regions to identify their highest-value opportunities, address their most critical challenges, and transform their businesses. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 66 offices in 38 countries. For more information, please visit www.bcg.com.

About Harris Interactive®

Harris Interactive is a global leader in custom market research. With a long and rich history in multimodal research that is powered by our science and technology, we assist clients in achieving business results. Harris Interactive serves clients globally through our North American, European and Asian offices and a network of independent market research firms. For more information, please visit www.harrisinteractive.com.

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