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Low Consumer Confidence May Dampen Holidays for Retailers

A leading transportation economist predicts a U.S. holiday season that is “a little bit better off this year than last year” but remains concerned as to how the recovery is taking shape.

“Consumer spending is 70 percent of our economy, all of our previous recoveries have been consumer led; this one is not consumer led,” explained Rosalyn Wilson, a senior business analyst with Delcan Corporation. “There is still very high unemployment, tight credit and lower household net worth. Caution is the watch word – caution with inventories, consumers are being more cautious.

“Consumers are taking a save-and-wait approach,” she said. “It still feels like a recession, and currently the consumer confidence index is 50.2 percent. When it falls to 50 percent and below, that means confidence in the economy is flagging.”

Based on reports that Wilson has culled from the Department of Commerce, retail trade groups, consumer index polls, manufacturing shipment data, truck tonnage data, and through an extensive list of contacts, she is predicting a very small recovery this holiday season. “I did not see the traditional holiday rush of shipping activity in October,” generally regarded as a strong telltale sign. Wilson noted that ordering patterns for companies have been very lean as of late.

According to Wilson, retailers ring up the bulk of their annual sales during the last few weeks of the year. “Normally shoppers purchase their gifts a month out, but this year, consumers are waiting and shopping more online.”

She cautioned that consumers will find “good bargains” this shopping season, but in this case, the early bird does not necessarily get the worm. “Retailers want to protect their 2010 profit margins as much as they can, so don’t expect dramatic price drops until after the holiday season,” she said.

She predicted that delivery services are bracing for a big surge of shipping activity during the last week of the shopping season. “The transportation industry believes it’s on the cusp of recovery.”

What has Wilson’s research uncovered about the psyche of the American consumer? “People feel good about the long term,” she said. “They don’t feel good about the short term.”

Wilson is author of the Council of Supply Chain Management Professionals (CSCMP) State of Logistics report, sponsored by Penske Logistics. The 2011 SOL report will be unveiled next spring at the National Press Club in Washington, D.C.

By Alen Beljin