Image: Shoppers walk inside a large mall
Paul Sakuma  /  AP file
Shoppers walk inside a large mall in San Jose, Calif., Tuesday, Aug. 12, 2008. Consumers appear to be cautious as economic uncertainty continues.
Alison
By Allison Linn Senior writer
msnbc.com
updated 9/19/2008 2:22:54 PM ET 2008-09-19T18:22:54

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.

Even those consumers who are ending the month with money in their pockets appeared to be spooked. Beemer said one woman noted that she and her husband have seen their investment portfolio drop from $10 million to $8 million. For them, that was enough of a concern to cut back on shopping trips.

For Americans with more typical investment portfolios, analyst Marshal Cohen with NPD Group said any repercussions on spending from the weak stock market are usually only limited to a few weeks — just time enough for people to check their 401(k) balance and be assured that it has not dropped to zero.

Still, he thinks the recent Wall Street problems will have repercussions for retailers, because many of them depend on credit to buy merchandise for their stores ahead of the holiday season. The recent crisis on Wall Street has made it harder for everyone to get credit, and Cohen said that means many retailers may have to stock their shelves with fewer items or sizes.

For shoppers, that means that  instead of the instant gratification of finding a sweater in the size or color they want, the retailer is forced to order it for delivery a week or so later. Cohen notes that many shoppers may be uninclined to wait, and just walk out of the store empty-handed.

Still, Cohen is more optimistic than some about Americans' ability to pull out their charge cards even in tough economic times. He is expecting that consumers will still head for the stores this holiday season, albeit with an eye out for bargains and discounts, resulting in an overall retail sales increase of 1 to 2 percent over the previous year.

He said retailers that are selling fashion at a good price, such as H&M, could benefit in the current environment. By contrast, those retailers that are weighed down by lots of real estate, especially in the exurbs that are now at the center of the housing meltdown, are in his mind among the most vulnerable.

Market research firm TNS Retail Forward is expecting retail sales growth of about 1.5 percent for the fourth quarter that includes the holiday season, which would be the weakest showing in 17 years. The group also is expecting supercenters and warehouse clubs to be the strongest players, while stores that sell clothing, accessories and home furnishing are expected to suffer.

Beemer expects that families will still find room in their budgets to buy holiday gifts for their kids, although for penny-pinched shoppers that may come at the expense of buying gifts for adults in the family.

But as the economic uncertainty continues, Beemer is keeping a close eye on a less traditional economic indicator: grocery lists.

In normal times, Beemer said about 33 percent of shoppers report compiling a grocery list, often touted as a way to curb impulse spending and help shoppers plan more cost-effective meals. Recently, however, Beemer conducted a poll showing that 61 percent of shoppers are entering the store armed with a shopping list.

Beemer wasn’t around during the Great Depression, but he says research from that time found that about 70 percent of shoppers made shopping lists. That has him worried about where the country, weighed down by so much economic doom and gloom, is headed now.

“There’s no economic downturn in my lifetime like this one,” he said.

© 2013 msnbc.com Reprints

Discuss:

Discussion comments

,

Most active discussions

  1. votes comments
  2. votes comments
  3. votes comments
  4. votes comments

Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 4.36%
$30K home equity loan FICO 5.08%
$75K home equity loan FICO 4.51%
Credit card rates View more rates
Card type Today +/- Last Week
Low Interest Cards 10.96%
10.86%
Cash Back Cards 16.48%
16.41%
Rewards Cards 15.99%
15.95%
Source: Bankrate.com