Housing Woes May Lead to Lower Holiday Spending

house This may not come as a surprise to anybody, but the economic slowdown driven by the housing market and sub-prime mortgage market may have a significant impact on how much money consumer are expected to spend this holiday season. In a recent study, consumers reported that they will probably spend only 2% more than last year on holiday shopping, compared to much higher number in years past. There is an ongoing debate as to how this slump in consumer spending will affect high-end versus low-end retail. While I don’t have an answer to this question, I do think that there will be a significant decrease in purchases driven by consumer loyalty in lieu of more price-sensitive shopping. money Loyalty marketers will face a tough time this holiday season. I think that consumer brand loyalty is a luxury that many consumers may not be able to afford this year. When economic times get tough, people who would spend more on their favorite consumer goods may look for cheaper options, indicating that brand loyalty may only play a significant role when consumers have money to spend. I think we will see a trend this season of consumers who are more price loyal than brand loyal . In good economic times, many people will spend up by buying more expensive gifts than they might buy throughout the year. Similarly, regular high-end shoppers go to their trusted brands (e.g. Coach, Tiffany’s etc.) for their gifts. This year, however, I believe both types of consumers are likely to spend down in order to buy gifts for loved ones on a reduced budget. We’ll have to see how that plays out in January.

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