Holiday Spending Slides as Wealthy Cinch the Purse

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Kena Betancur/Getty ImagesHoliday shoppers at Macy's in New York City.
By Steve Liesman

The CNBC All-America Economic Survey paints a contradictory portrait of consumers and of their finances, and willingness to spend ahead of the critical Christmas shopping season.

On the one hand, the survey shows expectations for home values and wages increasing, inflation concerns falling and optimism about the stock market rising.

On the other hand, the survey of 800 people nationwide (with a margin of error of 3.5 percent) predicts a sharp, 9.4 percent drop in holiday spending this year compared with actual outlays a year ago as measured by the National Retail Federation. Americans plan to spend just $681 this holiday season, about on par with 2009, when the nation was clawing its way out of a deep financial crisis.

Behind this drop is a sharp falloff in spending by the wealthy. Those with incomes above $100,000 plan to lay out $300 less than they did last year, undoing two years of strong gains. But more broadly, overall sentiment about the economy remains muted and incomes severely challenged. There's even evidence that the imbroglios in Washington had a depressing effect on holiday spending.

Just 15 percent of the public rate the economy as excellent or good, a substantial gain from 4 percent during the recession that began in 2008 but still well below the 26 percent who thought the economy was in good shape in 2007.

Meanwhile, 83 percent rate the economy fair or poor. A quarter of those who will spend less this year say it's because their income is lower; 22 percent report that it's because the economy is in bad shape.

But 13 percent say it's because of concerns about recent battles in Washington over the shutdown and the debt ceiling. %VIRTUAL-article-sponsoredlinks%A full 26 percent say that their spending plans for the year have been reduced in just the past month, a possible sign of Washington's impact on spending.

(The survey's record: In four of the past six years, the All-America forecast has been within $13 of the actual holiday spending number calculated from government data by the National Retail Federation. But it had big misses of about $100 in 2009 and 2010, the spending seasons following the recession.)

While people plan to spend less this holiday, other AAES indicators are up. For the first time since 2007, the percentage of Americans who expect their homes to decline in value is just 10 percent. The percent of respondents who see housing prices rising, at 34 percent, is double what it was in 2010.

Meanwhile, Americans expect some of the smallest gains in the prices of everyday goods registered in the seven years of the survey. And expected wage gains seem to have fallen into a post-recession range of 3 percent to 4 percent -- not as good as the 6 percent to 7 percent before the recession but better than the 1 percent to 2 percent of the past several years. That could all suggest better spending next year.

The financial elite, those with more than $50,000 in the stock market or incomes of at least $100,000, seem to finally believe in the stock market rally. By an overwhelming 7-to-2 margin, this group says it is a good time to invest in stocks.

Those with little in the market remain doubtful, about evenly split on the question.

And those with no money in the stock market by a 5-to-2 margin say this is a bad time to invest, unchanged from a year ago. This could, of course, be a contrarian signal. The last time the elite were this optimistic on stocks was October 2007.

But overall optimism on the economy remains subdued. Just 26 percent say the economy will get better next year. A year ago, attitudes were more buoyant, with 37 percent thinking the economy would improve.

But only 30 percent say it will get worse, down from 35 percent last Christmas. And about the best you can say is 40 percent of Americans expect the economy to stay the same in the next year.

More from CNBC:

Mobile Shopping Trends
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Holiday Spending Slides as Wealthy Cinch the Purse

Expect to see these gain popularity over the next 12 to 18 months. Augmented-reality apps offer consumers rich content -- be it on an item's features and benefits, or information that compares and contrasts various products to help shoppers make better on-the-spot, informed shopping decisions.

So in theory, a supermarket shopper with health issues debating between several cereal brands could tap an augmented-reality app to pull up product information and "compare this product versus three others," Fry says.

And AR apps will likely move beyond the supermarket aisle: There are whispers that Walmart (WMT) and Best Buy (BBY) will soon be launching augmented-reality apps.

These apps are one way retailers are fighting showrooming, when shoppers use brick-and-mortar stores as showrooms to check out potential purchases, only to buy later from online merchants at a lower price, Fry says.

"Information is value. Consumers aren't just buying on the basis of the lowest-possible price, he says. "Augmented reality apps will allow [retailers] to make a showroom that Amazon [for example,] will have difficulty duplicating."

Fry says augmented reality-apps offer a more sophisticated evolution what retailers have been attempting with QR codes, the black-and-white matrix bar codes that have been popping up on everything from product displays to store windows.

Lusting after a cool blouse or a sleek flatscreen TV but can't justify paying the steep price? Well, just as sites like alert travelers when airfares drop, clothing store Bebe (BEBE) and Best Buy now offer apps that will alert shoppers when an item goes on sale.

"Essentially, by using the retailer's app, a user can mark an item as a favorite and choose to be alerted when the product goes on sale, or reaches a price point specified by the user," Scott Gamble, vice president of digital solutions for AllianceData, which issues retail credit cards for stores like J. Crew and Pottery Barn, tells DailyFinance. "Specialty, electronic, and hard goods retailers would be most likely to implement this type of tool moving forward."

Alliance Data is now developing a "virtual gifting" mobile tool that it plans to launch as a pilot program later this year.

"The general idea behind this capability is that it would allow a cardholder of one [retail store] brand to send a virtual 'gift card' via a mobile device to another cardholder of the same brand," Gamble says. "The gift could be redeemed in-store via the recipient cardholder's mobile device. Women's specialty retailers will likely be among the first to launch this sort of tool."

While the jury is still out on how tablet computers will ultimately figure into the shopping experience, retailers are already starting to capitalize on tablets' advantage over smartphones, most notably, their larger screen size.

Retailers are now leveraging tablets to help consumers do more than simply make purchases; the goal now is to help people solve more complex shopping problems like how to redecorate a room or piece together a wardrobe. The right tool for those project-sized tasks: Magalogs, hybrid magazine/catalog mobile sites that offer how-to advice and rich content, Fry says. "It's about providing better context to make it easier for shoppers to purchase from these retailers," he says. The consumers can conceivably use retailers' mobile magalogs to walk them through a project in a store. They'll use their tablets to "give me ideas and tell me how to execute a project," Fry says.

Cosmetics chain Sephora, for one, announced this week the test roll out of iPads to 20 stores, where they will give shoppers another way to navigate the retailer's thousands of products and interact with the menu of services offered by its Beauty Studio.

Sephora just updated its online and mobile sites. Now, each product on is tagged and indexed with 25 different characteristics, from data like target age group, to specific ingredients, formulations, fragrance, price and more, in a bid to offer shoppers a targeted, personalized shopping experience.

Some women's apparel chains are strategically placing QR codes in their stores -- in fitting rooms, for example -- so that shoppers can sign up for store credit cards on the spot, assuming that the shopper has both a camera and a QR-code reader on their smartphone.

A shopper can scan the QR code, which connects them to the retailer's mobile-optimized website, where they're asked a few questions to apply for the store card, Gamble says. If qualified, "they would receive approval within a minute or less."

"The QR code makes the application process very quick and convenient for the customer and, upon approval, almost immediately specifies their buying power -- their credit limit -- so they can immediately take advantage of the benefits of instant discounts and rewards that typically come with the initial card purchase," he says.

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