There were a number of historic economic events that occurred in October 2008. For retailers, the consumer confidence index (CCI) dropping to its lowest level in the history of the index was a stark reminder of how ugly things have gotten. The CCI measures consumer’s fears about the economy looking forward. Not only did the index drop to its lowest level ever at 38, but it also suffered its largest single month decline between September 08 and October 08 with a 38.1% decline.
Clearly consumers are scared and they are showing it by changing their buying habits and planning for a worsening economy. Since the growth of the
Certainly the amount of bad news of October is carrying over to November as we approach the most critical time for retailers selling non-essential goods and services, which has traditionally been between Thanksgiving and the end of the year. With Thanksgiving a week later this year than last, it means that retailers either have to get shoppers into their stores earlier or have less time to generate the strong revenues that will take them into the slowest two months which are January and February.
ComScore, a leading online market research firm focused on studying Internet (online) buying patterns of consumers recently released a report that shows the top three concerns of consumers were rising prices, unemployment fears and the situation in the financial markets. When they broke down the importance of the issues between personal income levels they found people in the mid to lower income range were most worried about inflation, while people in the upper income range (>$100,000) were most worried about the financial markets.
The glimmer of hope that ComScore found in a survey conducted in April, July, and October was that in all three income segments, respondents indicated they were less likey to cut back in October than in either July or April. ComScore attributes this increase in optimism to gasoline prices which have dramatically dropped since July and continue to drop.
I can clearly relate as I drive a considerable number of miles a month. Several days ago I filled up my tank (2004 Mazda 6) for $35.00 whereas I remember spending nearly $60 a tank for gas during the middle of the summer.
Comscore’s analysis also concluded that the price of gas at the pump had not caught up with the nearly daily lowering of the cost of a barrel of oil. They believe when that happens, consumer’s optimism will improve even more. For those of you in retail, let’s hope that happens before Black Friday.
Sam Thacker is a partner in Austin Texas based Business Finance Solutions.
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