Marketing Forecast from Ad-ology

Despite showing no signs of spending less in recent months, a new Deloitte survey found that nearly three-quarters (74%) of Americans believe higher prices could slow their spending in the months ahead. More than seven out of 10 (71%) respondents cite concerns about higher energy prices, up from 54% at this time last year, and nearly one-half (47%) point to higher medical costs. To help make savvier buying decisions in the wake of the recession, many consumers are turning to mobile and social connections. Four out of 10 (40%) consumers surveyed interact with retailers through social networking sites to find out about promotions, browse products, or review recommendations. “With day-to-day expenses on the rise, retailers must be innovative and offer more than just low prices to attract customers,” said Alison Paul, vice chairman and U.S. retail sector leader, Deloitte LLP.

Despite signs that the economy is turning around, consumers are still acting cautiously. For example, almost two-thirds of U.S. adults (63%) say they have purchased more generic brands in the past six months to save money while an additional 12% say they have considered doing so. According to Harris Interactive, Americans are doing other things to save money such as brown-bagging lunch, cutting back on visits to a stylist, cancelling magazines or newspaper subscriptions, etc. There are also some generational differences in what people are doing to save money. For example, Gen Xers (those aged 34-45) are more likely to brown bag lunch (56%) and cut back on hair styling (43%), while Matures (those aged 65 and older) are more likely to cancel a magazine subscription (45%).

The National Retail Federation released its 2010 economic forecast recently, projecting retail industry sales (which exclude automobiles, gas stations, and restaurants) will increase 2.5% from 2009. According to its bi-monthly Retail Sales Outlook, influential economic indicators such as the housing market and employment are beginning to show positive signs, which will bolster consumer confidence throughout the year. Analysts still expect shoppers to continue to be frugal with their discretionary spending, but say retailers will soon be able to reap the benefits of leaner, smarter inventories and a year and a half of pent up consumer demand.

While traditional retailers remain the favorites, more registered couples are considering home improvement retailers for their registries. Kitchen, bed and bath remain the most popular categories on a couple’s wedding registry, with kitchen appliances/electrics topping the list at 91%. Less traditional gift items like power tools (18%), outdoor gear (20%), lawn care/patio items (19%), and grilling/outdoor entertainment (39%) are also being registered for at a variety of stores. As expected, the Internet is playing an increasing role in registry setup and management and the economy is also affecting more couples’ registry choices.

A new Harris Poll finds that more than half of all adults are saving money by purchasing more generic brands, while over 40% are brown bagging more often and cutting back on visits to hairdressers and barbers. Over 30% have switched to tap water and canceled one or more magazine subscriptions. Smaller percentages, but many millions of people, have also cut down on dry cleaning, cut back or canceled cable television service, canceled a newspaper subscription, stopped buying their morning coffee, changed or canceled their cell phone service, increased their use of carpooling or mass transit and canceled their telephone landline service.

With an understanding that many of today’s shoppers use Facebook and Twitter regularly, and because these tools are more cost-effective than traditional advertising, 47.1% of retailers surveyed will be increasing their use of social media this holiday season, according to a recent Shop.org study. In addition, to provide consumers with an extra incentive to start shopping, one-third of retailers (34.3%) say they will offer holiday deals earlier this year. Online retailer are also compensating for the economy by offering incentives such as free shipping. Four out of five online retailers (79.4%) will offer free shipping with conditions (such as minimum purchase) at some point during the holiday season, while more than half (57.4%) also plan to offer free shipping without conditions.