The Shutdown Is Over But Could Still Ruin Holiday Shopping

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The lingering effects of the federal shutdown, combined with a general lack of confidence in both the economy and the ability of our nation’s political leaders to avoid gridlock, means that retailers are looking at a less-than-jolly holiday shopping season.

According to ShopperTrak, the 16-day federal shutdown caused plenty of shoppers to think twice about heading to the malls and running up a bill on the credit card. During the two weeks when the shutdown was in effect, foot traffic at stores was down 7.1% to 7.5% compared to the same weeks the year before. In the heart of the storm in Washington, D.C., traffic was down year over year as much as 11.4%.

Even though the shutdown has been put to a close and the government has gotten back to business, however, it hasn’t been business as usual for retailers. The effects of the shutdown may linger for weeks, perhaps even months. “We expect that it will take some time and revised strategies for retailers to recover from the impact the government shutdown had on sales and store traffic,” said ShopperTrak founder Bill Martin.

Survey data released by the National Retail Federation indicated that the average consumer will spend 2% less on holiday purchases this year compared to 2012, and both political gridlock and the state of the economy—which are closely related, of course—are affecting consumer behavior at the mall. Slightly more than half of consumers said the economy would impact their holiday spending; of those affected, four out of five said they’d be spending less.

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Perhaps the most telling data point is one about “self-gifting,” the annual tradition among more shoppers to go holiday shopping—for themselves. The trend has been on the rise for years, but this year “only” 57% of consumers said they’d be self-gifting, compared to 59% in 2012, and the average self-gifter will treat themselves to the tune of $129.62, down from a high of $140.43 in 2012.

The shift isn’t taking place because consumers are suddenly growing less selfish. It appears to be the result of general uncertainty about the economy, due partly thanks to the federal shutdown, and partly thanks to fears that gridlock (and perhaps even another shutdown) could resurface in January, when the current budget expires.

According to a new survey, 72% of Americans are holding back on spending, and the most popular reasons they are doing so are stagnant income, the need to save more, and concerns about the economy. All of which bodes poorly for the 2013 holiday shopping season.

The New York Times recently focused on how the shutdown and general worries about the economy are likely to wreak havoc on online retailers’ business in particular. “The shutdown eroded two years of gains in consumer confidence,” Colin Gillis, a BCG Partners analyst told the Times. “But that doesn’t really mean they’re not going to go out and spend as much over the holidays. That’s one thing I’ve learned about Americans: they love to buy.”

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Still, if consumers had more confidence in the economy, if they believed their jobs were secure, and if they had faith that the politicians in Washington would not make a mess of things, retailers would be in for a far more robust holiday season. Some insist that malls and e-retailers will take a hit in the months ahead.

“To move the economy forward, we need a strong consumer. If a consumer can’t rely on his or her job … they aren’t going to spend,” Bradley Turner, a Moody’s Analytics associate economist, explained to the Baltimore Sun, in a story discussing the longer-term effects of the federal shutdown. “It’s going to be a pretty weak holiday season.”