With the nation seemingly emerging from recession, American consumers remain skittish about spending their money during this upcoming holiday season according to new research from The Nielsen Company.  Households continue to focus on “essential gift giving” such as staple consumables, candy, beverage/alcohol and entertaining at home, and 86 percent said that they expect to spend the same or less this year than last — with a 7 percent increase in those indicating they would spend less.  Overall, Nielsen is projecting that holiday sales will rise 0.03 percent this year, accounting for $90 billion in dollar sales.

“Given everything the consumer has absorbed over the past 12 to 18 months, the fact that we expect this coming holiday season to be flat in dollars can be viewed as a modest positive,” said James Russo, Vice President, Global Consumer Insights at The Nielsen Company. “Americans have undergone a fundamental change in how they spend their money, and the days of stretching finances to make purchases not deemed as necessary are over, at least for the time being.  That said, our research has shown that consumers are looking forward to loosening their purse strings a bit, but only once they feel more confident about the state of the economy and their personal financial situation.”

Update: James Russo Discusses Holiday Spending on CNBC

Other key findings from the research include:

• Traditional items such as apparel, toys and technology will be most popular categories, albeit at restrained levels and primarily sold in “value” channels.
• Products aligned with at-home entertainment such as cookware, kitchen items, bed and bath accessories and alcoholic beverages will do well.
• Gift cards are one category where consumers plan to spend more this holiday season, followed by toys and apparel.
• Value retailers such as dollar stores, online, discounters and club stores will attract the lion’s share of holiday spending as consumers minimize trips and search for the best values, while office supply, pet stores, home improvement and drug retailers are likely to feel the brunt of the economic slowdown.
• Some 20 percent of households said that they had no plans whatsoever to entertain at home or away from home during the holidays.
• Spending cut-backs are being driven by all income groups.

So how can retailers make the most of this season? They need to recognize that U.S. consumers are, first and foremost, seeking value and will start their holiday shopping well before Thanksgiving.  They should also reach out to their best customers and make them feel special and give them a reason to shop at their outlet during the season and into 2010.   Successful retailing has always been about delivering the right product at the right price and in the right place.  The difference now is effectively mining and communicating to the right consumer as an active participant in driving growth.

I was very interested to hear the news yesterday that Amazon had acquired Zappos for $847 million in cash and stock. Since Zappos founder Tony Hsieh asked and answered some of his own questions about the deal in a letter to employees so I thought it’d be useful to engage in a Q&A with myself about the deal.

1. Why did Amazon buy Zappos?
A: Two numbers answer that succinctly: About 5 percent of Amazon’s sales are apparel/footwear sales, compared with 97 percent of Zappos’ sales (according to June 2009 data from our retail tracking service). Simply put, Amazon has not dominated apparel sales as it has most other categories online. While Zappos isn’t biggest seller of apparel/footwear on the Web, it is the largest of Internet pure play retailers. More importantly, Zappos has developed a reputation for customer service (Amazon’s priority one according to founder Jeff Bezos) that will only improve Amazon’s already strong standing amongst online shoppers. More than 1 million people follow Zappos on Twitter (a cornerstone of their customer service), far beyond any Twitter account managed by Amazon.

2: Did Amazon pay too much?
A: I’m not a financial analyst, but the online apparel category is the largest online merchandise category, expected to grow to $41.8 by 2012. For Amazon not be a formidable player in this space is nearly unthinkable for the company that sees itself as the World’s Biggest Store. Amazon has tried to answer Zappos with the launch of shoe and handbag site Endless.com, but was never able to materially chip away at Zappos’ dominant position. Endless.com registered about one fourth the traffic that Zappos did in June 2009.

3: Why didn’t a company like Wal-Mart or Target buy Zappos?
A: Wow, another great question, Ken! I’m sure that this notion was entertained by the big brick-and-mortar retailers, but the reality is that companies like Wal-Mart and Target have their best online opportunities run through their stores. The fact that they have thousands of stores throughout the country is a huge asset to their online businesses that a big pure play purchase such as Zappos might be distracting to their longer term success. I do wonder, though, if Amazon’s decision to buy Zappos could have been at least partly driven by a fear that this might happen.

4: Beyond merchandise sales, how do Amazon and Zappos fit together?
A: Amazon and Zappos have relatively similar customer bases, although Amazons’ is substantially larger (60M uniques per month vs. 4.1M uniques for Zappos in June 2009). Zappos’ customer base does skew a bit more female (69% compared with Amazon’s 55%) and a little younger, largely a function of the merchandise offered by Zappos. The most telling statistic is that in June of 2009, 77 percent of Zappos shoppers also shopped at Amazon.

5: Amazon has said that it will run Zappos as a separate brand. Is this smart? What do you think that Amazon should do in the longer term?
A: Zappos elicits more passion from its customers than any other brand that I can think of, online or offline, something my colleague Pete Blackshaw has documented for some time. Amazon would have been insane to scuttle the brand. In the long run, it becomes more interesting. I think that Amazon will benefit from the Zappos halo, and vice versa. Amazon can learn from Zappos’ innovation around customer service and marketing. Zappos can learn from Amazon’s technology and database marketing. In five years, I’d say that it’s even money that Amazon looks more like Zappos than the other way around. As to how they brand it, I’m not willing to lay odds either way.

But it was Bath & Body Works’ website – ranked ninth, with 3.56 million unique visitors – that showed the most impressive year-over-year growth: 39%. 

American Eagle (+25%) and Gap (+23%) also logged impressive gains over November 2007.

The top 10 apparel and beauty online shopping destinations, ranked unique visitors in November, are below.

Read the full article on InternetRetailer.com.

Unique visitors to the sites included in the Index reached 35.9 million, a 13% increase over this year’s Black Friday Web traffic.

Many of the top online retail destinations on Cyber Monday were the same as those on Black Friday. eBay drew the largest unique audience (10.6 million), while Amazon and Wal-Mart claimed second and third places, with 9 million and 5.2 million unique visitors, respectively.

Among the top 10 online retailers, Sears’ site saw the fastest growth (+58%, year over year).

Beauty was the fastest growing product category on Monday, increasing 151% over the previous Monday, November 24, 2008.

Toys/Videogames ranked second, growing 112% Monday over Monday, while Apparel rounded out the top three with an increase of 58%.

“The growth in traffic to online retail sites on Cyber Monday was better than many people expected, making retailers hopeful that this growth will carry through the holiday shopping season and drive sales,” Ken Cassar, vice president, industry insights, Nielsen Online, noted.  “It remains to be seen if people have done the majority of their shopping on these two big shopping days to save time, or if they are holding out for additional sales and promotions. If history is any indication, we expect that Monday, Dec. 15th will be the peak day for online shopping traffic.”

View the full press release.

Read coverage of Nielsen’s findings by the Associated Press and Bloomberg, as well as in The Wall Street Journal, the Financial Times, Investor’s Business Daily, Ad Age, PC World, the Orlando Sentinel, ClickZ.com, and InternetRetailer.com.

In the same story, Richard Basil-Jones, Nielsen’s managing director of Asia Pacific media, noted a recent Nielsen survey, which suggests that Adidas faces significant challenges from both Nike and Li Ning, a Chinese sporting-goods maker.  Nike has hit $1 billion in sales in China for the fiscal year 2008, and the country became Nike’s second-largest market in 2007.