Amid uncertainty, consumers remain cautious

Allison Linn Senior writer • Profile • E-mail

Over Labor Day weekend a few weeks ago, retailing researcher C. Britt Beemer decided to see how the recent drop in gas prices around the country was changing Americans’ shopping habits.

The answer was likely unsettling for U.S. retailers: Even as the price of gas fell sharply in some areas, Beemer’s poll of 1,000 consumers revealed scant evidence that it was enough to make people to feel better about their financial situation, let alone free to do a little shopping.

“The problem with $4 gasoline is consumers weren’t even used to $3 gasoline,” said Beemer, founder of America’s Research Group and co-author of the forthcoming book “The Consumer Rules.”

The crisis on Wall Street that came to a head this week is just the latest psychological blow to already rattled American consumers, who are still reeling from a dizzying rise in food and gas prices, a weak housing market and a tightening job market.

That is likely to spell more bad news for retailers as they head into the all-important holiday shopping season later this year, and that could in turn further pinch the economy as a whole since consumer spending is a key driver.

A huge swath of retailers already are struggling as consumers have become more tightfisted, either because they are worried about the economy or because the higher cost of necessities has wiped out their discretionary spending. The news this week that a credit crisis had rattled Wall Street to its very core, prompting massive government intervention to stave off further problems, hurt many people's investment portfolios and also left them wary of opening their pocketbooks.

The situation also could get even worse if job losses become more widespread. The unemployment rate stood at 6.1 percent in August, up from 5.7 percent in July and 4.7 percent a year ago. Industries related to construction and automobiles continue to report some of the biggest losses.

Consumers were generally cautious about back-to-school spending in August, with retailers ranging from JCPenney to Nordstrom reporting weak results as shoppers seemed to make do without big splurges. The International Council of Shopping Centers reported that same-store sales, or sales for stores open at least one year, rose an anemic 1.7 percent. The shopping mall trade group isn’t expecting results to be much better when chain stores report September sales figures early next month.

The figures reflect a trend that has been going on for some months, with discounters providing the only real bright spot. Wal-Mart Stores Inc., which has made low prices its key selling point, has benefited as more consumers have flocked to its stores seeking bargains. Warehouse club stores, including BJ’s Wholesale Club and Costco Wholesale Corp., also appear to be holding up well as even higher-income consumers look for bulk bargains.

Indeed, the current consumer pullback doesn’t appear to be limited just to those with lower incomes. Beemer did a separate survey last month of 2,000 consumers making $50,000 or more, and found that they, too, were finding their discretionary income wiped out by more mundane expenses like gas and food.

MORE FROM RETAIL

Retail Section Front

NYT: Credit card issuers share pain with users Banks’ struggle may mean end of free checking Scared retailers create shortages of hot toys Cadbury rejects hostile bid from Kraft Foods Wal-Mart, Amazon, Target in DVD price war Who’s your patty? Not McDonald’s October sales offer some relief to retailers Borders to close 200 Waldenbooks, cut jobs ConsumerMan: Chinese drywall a big threat 7-Eleven is getting into the value wine business Retail Section Front   Add Retail headlines to your news reader: