The sharp paring of consumer spending is already cutting into its next victim: back-to-school sales.
Consumers beaten down by prices at grocery stores and gas stations are taking their newfound money-saving ways to the shopping centers and school-supplies stores in what promises to be one of the most challenging back-to-school seasons in many years.
"This year's back-to-school season, without question, is continued belt-tightening as the consumer tries to stretch the dollar as far as possible," said Thom Blischok, president of IRI Consulting and Innovating.
A series of surveys asking consumers about their spending intentions for the back-to-school season - second only behind Christmas in terms of consumer spending - underscores that projection.
n America's Research Group sees back-to-school spending falling as much as 2 percent. A mere 1.5 percent of consumers said they will buy products at full price. Last year, 11 percent said they would.
n The National Retail Federation said spending in most categories will be flat, with the exception of electronics. College students will learn a hard lesson in tough economic times as even their spending on electronic must-haves and gadgets will fall some 22 percent though it will remain their No. 1 buy.
n The International Council of Shopping Centers found that 90 percent of households said they will pick up everything from T-shirts to T-squares at discount stores. That's up 16 percentage points over last year and 34 percentage points over 2006.
n Deloitte found that 90 percent of households say they will change their back-to-school shopping habits to include more sale items, to purchase only what's needed, to shop for more lower-priced goods and to use more coupons, among other things. Nearly nine in 10 people said they will shop at discount and bargain stores.
This across-the-board shift in consumer spending patterns isn't limited to back to school either.
"There's some element of this that is permanent," said Stacy Janiak, Deloitte's U.S. retail leader. "We don't know how big of an element that is yet but I don't think our gas prices and food prices are going to go back to where they were."
As with most consumer surveys, there is the traditional caveat that consumers don't always do what they say they're going to do. Most times, they spend more than they say they will or pick up just as many items for themselves as for those for whom they're buying.
Not this year, according to industry experts. Since mid-October, consumers have pretty much done what they said they would do: Hold down spending.
"Since October consumers have been telling us that's what they were going to do and so far consumers have basically done what they said they would," Britt Beemer, president of America's Research Group, said. "This year there will be a lot of people who will not be spending at all."
The job picture isn't helping either, particularly as it relates to teens.
By Beemer's reckoning, this has been the worst summer employment season for high school and college students in more than 30 years.
"Over the years summer jobs have provided about 19 percent of the dollars teenagers and college students spend of their own money on back-to-school apparel," Beemer said. "That's a huge shift out there that can't be replaced."
That could translate into an implosion in sales of pricey jeans or fashionable shirts and pants.
"Fads may not be in much play this year," said IRI's Blischok, who calls this shift Shoponomics 2.0. "It's about affordability, not availability."
According to BIGresearch's findings, college students will be those who rein in purchases the most with a better than 12 percent drop in spending. On a year-over-year basis, they said they will spend roughly $564, less than the nearly $642 they forked over last year - though they did say they would be willing to cough up another $35 on collegiate-branded gear and supplies, a growing category for mainstream retailers.
Besides that, they won't be spending much on other apparel and shoes, though how much they pay for certain items and where they shop will change, and, for some, drastically. Living accessories and dorm-room furniture, which in recent years has become its own category, will get be the groups that get hit the hardest.
Of the $78 difference in spending between the two years, a big chunk of that - or $34 - was directly attributed to the discretionary dorm-furniture category.
"When gas prices are $4 a gallon, the lava lamp gets crossed off the list," said Phil Rist, executive vice president of strategy for BIGresearch, which tracks consumer behavior.
Noteworthy too is that 54.1 percent of those surveyed said they will be living at home this year compared with 49.7 percent who said so last year. And in another sign of the times, 48.1 percent of those asked said they are moving on to advanced studies such as graduate school, law school or medical school. Last year, only 34.5 percent were headed that way.
From a consumer point of view, the spending slowdown carries mixed signals. On one hand, it means that retailers are forced to reach out to consumers with innovative and downright eye-catching methods to lure them in the doors through direct marketing, loyalty programs and private-label credit-card events. Promotions aplenty will rule the season that's already begun in full force in many states.
"We'll inevitably see a lot of sales," Deloitte's Janiak said.
But for others, the die may already be cast. If the economic woes already have the family budget at rope's end, no cut-throat sale is going to change that.
Courtesy of Marketwatch Got a question or a comment? Send us an email.
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