Consumers planning to spend more than last year on holiday gift giving are in the minority, but those that are planning to increase spending are concentrated in the Asia Pacific and Middle East regions. Europe dominates the top 10 list of countries with the largest percentage of consumers planning to spend less this year.

Books, Technology and Clothing Top Gift-Giving List
The product categories likely to get a sales boost this holiday season include books, clothing and technology, where more than half of global online consumers expect to spend more or about the same as last year.

Regionally, holiday shopping preferences vary for the top five gifts where consumers plan to increase spending compared to last year. Technology products are at the top of the list in Asia Pacific and Middle East, toys in North America, books in Europe and clothing in Latin America.

While holiday traditions and celebrations differ across the globe, celebrating within a holiday budget is universal. Many consumers still grappling with a sense of economic uncertainty are in a recessionary mindset. As a result, continued spending restraint in many parts of the world will likely have an impact on consumers’ holiday gift-giving budgets.

While more consumers are expected to head into the holiday season with the intent to buy compared to last year, expect the shopping to be subdued and value-focused. The Nielsen Company predicts consumer holiday spending to closely reflect 2009 spending with flat dollar sales at approximately $89 billion, and flat to declining unit sales, down 0.15 percent. This year’s holiday forecast follows two previous seasons where Nielsen’s predictions on unit and dollar sales fell within 1.5% of actual results.

Consumers are concerned about the jobless recovery and managing their personal finances. As a result, they are closely planning their spending and continue to reduce their shopping trips while placing more emphasis on value. Fewer shopping trips make every retail interaction critical this holiday season and retailers need to turn this increased, but restrained, optimism into sales.

Taking into account more than 500 category-level forecasts of core items sold across the food, drug and mass channels, including Walmart, coupled with Nielsen’s September 2010 survey of close to 25,000 demographically representative U.S. households, below is a list of what retailers and manufacturers can likely expect this holiday season:

Making a List . . . and Buying
More consumers plan to buy this holiday season, with 36 percent telling Nielsen they will spend less, compared to 42 percent in 2009.

Holiday Winners and Losers
Value retailers will attract shoppers, but online retailers will see the biggest surge. Unlike 2009, consumers express moderate interest in spending more across a broad spectrum of retail channels, such as consumer electronic, pet, liquor, department, convenience/gas and home improvement stores. Consumers plan to spend less this year in mass merchandiser stores, while plans for spending in supercenters, club, grocery, toy, book and office supply stores remain flat.

Who Shops Where?
Consumers earning $70K, as well as those earning $100K or more, will drive online store visits. Dollar store visits will be driven by consumers with incomes $50K and less, which is an increasingly higher income shopper than previous years. All income segments will be attracted to mass merchandisers, supercenters and club stores.

Earn Less, Plan to Spend More
Increases in consumers’ holiday spending is driven by lower income consumers, with six percent of those households earning less than $20K planning to spend more, compared to four percent of higher income households ($100k+) planning to do so.

What’s Hot
Nielsen predicts a strong season for technology products and gift cards, with some possible upside surprises in discretionary items such as apparel, toys, videogames, books and even vacations, especially among upper income households ($100K+).

What’s Warm
Discretionary items such as jewelry and DVDs are forecasted to see a slight uptick, as consumers express a desire to spend more on these items. What’s not? Consumer spending on sporting goods, CDs, cookware, and bed and bath items will be flat.

Consumers Buying and Watching
Consumers are spending a considerable amount of time in front of the TV during  the weeks surrounding the holidays, with the week between Christmas and New Year’s ranked as the top week for overall live television viewing, using a DVD player and playing video games. The week of and the two weeks following Thanksgiving rank among the top ten weeks for men’s TV viewing, a consideration for retailers to take into account when planning their media buys.

Consumers’ desire for value continues into this year’s holiday season. In this new normal however, consumers have redefined value. Value is not about price, it’s about the balance between price and benefits. Retail channels offering a clear value proposition and those that focus on consumers’ desire to plan as they manage personal finances, such as online stores, will do well. More and more, it’s about capitalizing on the interactions with an increasingly savvy—and at times disloyal—consumer. Those value propositions tailored around benefits beyond price will resonate with consumers.

SUMMARY: When retailers compete on price and rollbacks are market-wide, retail traffic trends rarely change. More importantly, Nielsen research shows that price rollbacks can actually reduce category dollars, making an effective pricing strategy a necessity.

Rob Schram, Vice President Analytic Consulting, The Nielsen Company

When commodity costs for foods rose dramatically in 2008, most manufacturers were forced to raise prices to protect margins—some more than once. Once commodity prices dropped, retailers put pressure on manufacturers to lower prices. But as the Great Recession took hold and consumers cut back on spending, manufacturers wanted higher prices to stick to compensate for the flat unit growth experienced in most categories.

And so the price wars began. And true to life, in war there are no winners. When retailers compete on price and rollbacks are market-wide, there are no inherent traffic gains. In fact, Nielsen research shows that price rollbacks can actually reduce category dollars.

Profitable Pricing
Retailers intending to fight on price better know which categories to target or they will be fighting a losing battle. Price elasticity is a measure of consumers’ likelihood to purchase in relation to a change in price. If you raise prices on categories with a price elasticity of less than one, or take a price rollback, you can actually decrease category sales. It’s a delicate balancing act. A price rollback may slightly increase category volume, but not as much as price goes down—so dollar sales actually go down. And vice versa on price increases—sales go up, but not as much as volume goes down.

Pinpointing best-bet categories requires knowing how elastic they are to price changes. High-elasticity categories are more sensitive to price changes because they are considered less of a necessity. When the opportunity cost of buying these products become too high, consumers opt out. These categories are typically commoditized products with low differentiation. Examples include:

• Paper towels
• Canned vegetables
• Canned pet food
• Canned fruit
• Incontinence care

Conversely, low-elasticity categories are more insensitive to price changes because they are typically the “must have” items that consumers will continue to buy no matter the price. These categories are typically perishable, convenient and are less commoditized. Examples include:

• Sliced cheese
• Dry pet food
• Macaroni & cheese
• Frozen side dishes
• Deli meat
• Bath tissue
• Microwaveable meals

Six Keys to Successful Price Planning

1. Plan pricing from two starting points – supply side / demand side. Define profit goals by forecasting the cost of goods, labor and transportation costs and plant capacity. And understand consumers’ price sensitivity to both your price and your competitor’s.
2. Establish a cyclical price management process. From planning and implementing to tracking, maintaining on-going control of the process will ensure that profit requirements are met and promotion response is achieved.
3. Take a portfolio approach. Understanding the price elasticity of each item in the portfolio in relation to the profit impact of a price increase provides a path to meeting corporate profit goals in a unified approach.
4. Focus on hard metrics at the center. Hard metrics with common definitions like shelf prices, list prices shipments and financials across brand groups must be the focus of any price planning approach.
5. Establish KPI’s and milestones. Determine scorecards for all key brands and track results and the execution. Be prepared to adjust the plan to react to marketplace changes and competitive initiatives.
6. Endorse and enforce. A portfolio approach means that some brands will take price changes and other will not. All parties in the process must follow the process and understand the broader goals.

Price wars are a long-term proposition, where over-reacting often leads to failure. Long-term winners innovate and differentiate and know that while price is important, value is more important. Careful planning, research and ongoing management are the steps it takes to win the war on price.

Universal Appeal
Virtually all online survey respondents in Latin America (96%) and Asia Pacific (92%) said they purchased H&B products, along with 90% of people around the world who made up the global average. But what prompts consumers to stock their cabinets with make-up, fragrances and personal care items?

For 44% of global respondents, it was the lure of the product’s promise. A pragmatic 69% of respondents said they were influenced by price, while 58% said they bought as a result of a personal recommendation. Magazine articles, Internet buzz and traditional ads all factored into the purchase equation as well.

Product samples helped about half of consumers along the buying path, as did the suggestion of a partner. But aside from price, the reason most consumers (65%) offered up for buying health and beauty products was the influence of their preferred brand.

Half of Asia Pacific respondents indicated that the Internet was a purchasing influence—the highest percent of any region. These consumers were also swayed by magazine articles (45%) and advertising campaigns (44%) more than other region. Conversely, European and North American beauty product choices were the least influenced by print and television ads, magazine editorial or the Internet and were most influenced by price; 82% of North Americans and 70% of Europeans agreed that price was a key determining factor.

Latin Americans said they were most persuaded by their preferred brand (72%) and free samples (60%). Middle Eastern survey takers reported the most balanced responses, giving fairly equal weight across all influencers. They were, however, least influenced by the product’s promise (36%) and most by their preferred brand (63%).

Channel Choices
Far and away, supermarkets were the format of choice for 60% of global respondents, with the drugstore/chemist/pharmacy a distant second destination at 39%, specialty stores in third place at 33% and the Internet trailing at 22%.

Asia Pacific shoppers scored the highest of any region (33%) to say they shop the Internet for health and beauty products—more than double Europeans (15%), Latin Americans (14%), North Americans (11%) and Middle Easterners (9%). Specialty stores were the destination of choice for 40% of Latin American and Asia Pacific shoppers and 95% of Middle Eastern shoppers say they buy health and beauty products from just two channels—supermarkets (56%) and drugstores (39%).

Mass vs. Premium: Looking Good Enough
A question for the ages: can mass market cosmetics successfully sell against more expensive, premium brands in such an image-intensive category tied to personal vanity and ego? Yes, although the degree of success varies by product type. Global results for hair products showed that 81% of online respondents think mass market hair products are a viable alternative, while 75% find mass market skincare products acceptable, and 72% believed mass market cosmetics were suitable.

North American respondents were the most positive about mass-market health and beauty products, viewing them as good substitutes, while Middle Eastern and Asia Pacific survey takers were the least enamored with the off-market products.

Region Round-Up
In almost all Latin American countries included in this survey, sales for personal care products reported volume increases during the latest rolling year ending June 2010 versus year ago: Chile +7.2%, Argentina +4.7%, Brazil +3.4%, Mexico +3.4% and Colombia +3.3%. Only Venezuela showed a negative trend, declining 2.5%.

In the U.S., dollar growth for the health and beauty department for the year ending July 2010 is flat (0.3%) and units have declined 2% as the economy is driving consumers to make tradeoffs and buy less. However, sales in the June and July 2010 period are improving as retailers are raising prices to enhance margins. In Canada, rising prices have fueled an increase in health and beauty (excluding baby and OTC) dollar sales of 3.2%, which outpaced the total market (+2.6%) while units were flat.

In Asia, consumers started to switch back into purchasing personal care, healthy and more premium products in the second half of 2009. This trend is expected to continue with the improving consumer confidence in the region.

The never-ending quest for beauty and perfection bodes well for the H&B sector. In countries that have emerged from the recession with vigor, the sector is likely to thrive. Meanwhile, in those regions where the recovery is still shaky—or in doubt altogether—health and beauty product manufacturers and retailers need to know exactly what’s important to those consumers: value for money and high quality products that enable them to look good, despite life’s pressures.

Note about online survey methodology
While online survey methodology allows for tremendous scale and global reach, it provides the perspectives on the habits of existing Internet users, not total populations. Where noted, the Nielsen Global Online Survey data is supplemented with consumption data by market.

(Click to Enlarge)

Overall, consumers worldwide remained cautious regarding pace and sustainability of the recovery as dollar and unit volume remain near neutral levels (in the -1% to 1% range). A summary of spending trends in 15 key countries is outlined below. The full report, State of the Global Consumer is available for download.

Longer term, with 30 of 31 countries showing positive ad spending in the in the 2nd quarter of 2010, global consumer spending may receive a boost in the back end of 2010 and 2011 as consumers remain focused on promotional activity.

Country-by-Country Consumer Scorecard

United States
Low U.S. consumer confidence is reflected in continued spending restraint as consumers continue to reduce overall shopping trips and spending even with better prices and increased promotion support. Detailed North American Review.

Canada
Consumers are still focused on value, shopping more at discount retailers and buying more on promotion. National brands are a key driver of promotions, which are currently outperforming private label. Detailed North American Review.

France & Spain
Volume and value shares are growing in the 1-4% range. In France, consumers are spending more per trip, but they are not shopping more frequently. The opposite is true in Spain where consumers are shopping more frequently (despite high unemployment rates), but not spending more per trip.

Germany & Italy
Volume and value shares are declining as shoppers are not shopping more frequently and are not spending more per trip.

United Kingdom
Volume shares are neutral, but value shares are up. Shoppers are shifting to value channels to save money.

Austria & Switzerland
Volume and value share show no significant change from three months ago. Store brands and value channels are on the decline, but retail promotions are up.

Brazil
Volume growth continues as items sold grew 4.1% in volume, with an emphasis on beverages, which grew 7.3%, followed by perishables at 6.5%.

Taiwan
Taiwan’s fast-moving consumer goods market remains positive, mainly driven by personal care categories where cosmetics are a leading department with close to 20% growth. In food and beverages, nutritional supplements outperformed the total market.

Hong Kong
Value growth is ahead of volume trends with growth being driven by non-food vs. food categories such as baby products, which continue strong sales.

India
Fast-moving consumer goods growth was revived in Q2 2010, fueled by double digit growth of food categories. Innovations in terms of smaller trial packs coupled with heavy promotions and new application products dominated the market scene. Modern trade channels dominate, which is driven by the market leaders.

China
Consumer confidence in China has now reached a high point (index=109). As such, fast-moving consumer goods sales continue to grow and accelerated consumer spending is reflected across both food and non-food categories.

• Download State of the Global Consumer.

It was the rare household that didn’t change spending habits over the last 18 months. Faced with unemployment (or even the prospect of it), higher expenses and crushing debts, consumers around the globe used a number of tactics to stretch their money further to get the most bang for the buck.

The Nielsen Company conducted an online survey in March 2010 of more than 27,000 consumers in 55 markets from Asia Pacific, Europe, Latin America, North America and the Middle East/Africa (consisting of countries from Saudi Arabia, Pakistan, United Arab Emirates, Egypt and South Africa) to get a better sense of the steps being taken to save money in view of uncertain economic conditions.

What’s more, while recovery has taken hold in some regions (Asia Pacific and Latin America in particular), in other regions it has been tentative. Regardless, one thing remains clear: habits picked up during the recession are likely to survive even after economic recovery is in full-swing.

Value Strategies Help Savvy Consumers Save
In addition to a shift toward private label products, global online survey respondents saved money on household expenses in a number of ways, including:

• Buying items on sale (a 57% global average)
• Using coupons (40%)
• Shopping at value retailers (37%), such as supercenters and dollar stores
• Purchasing value packs (35%)
• Shopping close to home/work (25%)
• Stocking up (22%)
• Switching to cheaper health and beauty products (18%)
• Purchasing smaller packs with a lower unit price (17%)

One in 10 consumers in the online study reported no belt-tightening practices in their household.

North Americans led the world in cost-cutting strategies and adopted a host of budget-shrinking tactics. Seven in ten respondents said they bought items on sale, which is 13% more than the global average. Both Asia Pacific (46%) and North American (59%) consumers indicated they presented coupons at a checkout, outstripping the 40% global average.

In the U.S. in particular, manufacturer coupon redemption hit record highs in 2009 after years of no growth or declining growth. Meanwhile, Canadians continued to shift spending to discount or value retailers—now accounting for over one-third of total grocery sales—as their neighbors to the south have done so over the past several years.  Whether prompted by high gas prices or environmental sensitivity, North American respondents were also the most likely to say they shop in stores close to home or the office.

Value packs and stock-up shopping trips were a popular option across regions, with consumers in Middle East/Africa/Pakistan and Europeans lagging slightly behind the global benchmark. Middle East/Africa/Pakistan consumers also had the lowest incidence of using coupons (11%), shopping on promotion (42%), patronizing value retailers (21%) or stocking up to save (12%). The use of coupons as a promotion tool is not a popular marketing method in the region. Additionally, the dearth of established retailers in the Middle East and Pakistan explains the low incidence of patronage.

Roughly one-quarter of Latin (23%) and North Americans (24%) said they sacrificed beauty at the budget altar by switching to cheaper health and beauty products. Asia Pacific and Middle East/Africa/Pakistan respondents were less likely than average to say they made such a switch to save money (15%).

Cash is King; Dining In Trend Heats Up
Consumers found other ways to cope with the cash crunch as well. While 19% of the regions admitted to using credit cards more often, North America at 10% and Europe at 11% were well off that global average pace. Further supporting the belt-tightening approach, 31% of North Americans and 30% of Latin Americans said they recorded less credit card utilization versus the prior year, while only 20% of Europeans did, despite a precarious economic picture.

Foregoing credit was just one consumer coping mechanism. Based on survey findings, restaurants in some countries must be hungry for clients, as more than half of survey respondents said they ate out of the home less often than the year before. The dine-in trend was particularly strong in Latin America, North America, Europe and the Middle East.

Roughly one-fourth of residents of Indonesia, China, the Philippines, Hong Kong and India indicated that they were eating out more often than usual. Asia Pacific as a whole showed a 5% higher rate for eating out than the global average.

Dining out cutbacks appear to correlate with private label purchase patterns, with five of the top 10 “dining out less often” countries also landing on the top 10 “purchased more private label” list: Greece, Ireland, Spain, Turkey and Portugal—countries that continue to face significant economic challenges even as other parts of the world resume growth.

Note about online survey methodology
While online survey methodology allows for tremendous scale and global reach, it provides the perspectives on the habits of existing Internet users, not total populations. Where noted, the Nielsen Global Online Survey data is supplemented with consumption data by market.

The Nielsen Global Consumer Confidence Survey was conducted between 8 March – March 26, 2010 among more than 27,000 consumers in 55 markets from Europe, Asia Pacific, North America, Latin America and the Middle East.

Major Concerns

While the economy is still the major concern in Denmark, Finland and Sweden, Norwegians are more concerned about other issues such as work/life balance and childrens education and/or welfare.

On a European average, the major concerns are the economy (23%) followed by job security (21%) and health (20%).

Spending Intentions

When it comes to utilizing spare cash, financial security is still a priority. Norwegians and Swedes are the top two countries in Europe, preferring to put their spare cash into savings.

When it comes to spending, holidays/vacations is still the top category together with home improvements.

Changing Spending Habits

To save on household expenses, the following said that they have changed their spending habits: Finland: 40% (- 3% compared to October 2009 Survey) Sweden: 41% (+3%), Norway: 36% (- 1%), Denmark: 36% (flat).

Consumers in the Nordics have not changed their spending habits to the same extent as the rest of Europe. On a European average, 63% said that they have changed their spending habits compared to one year ago.

Read the full Nordic report on consumer confidence, concerns and spending intentions.

“The Nielsen survey shows that in the past six months, consumers have become more optimistic about their countries emerging from recession with better job prospects and personal finances. This is another sign that global recovery is heading in the right direction,” said James Russo, Vice President, Global Consumer Insights, The Nielsen Company. “However, while purse strings may be loosening in some markets, there is clearly a big difference in the pace of expected recovery between the emerging and developed markets, and consumers’ increased confidence is not yet translating into a widespread readiness to start spending.”

While eight of the top 10 most confident markets in the fourth quarter of 2009 came from Asia Pacific, including emerging markets Indonesia (ranked 1st) and India (ranked 2nd), consumers in two of Asia’s most developed markets, South Korea and Japan, were the least confident. Brazil (ranked 3rd) and Canada (ranked 10th) were the only countries outside of Asia to make the top 10. Hong Kong recorded the highest consumer confidence increase for the second consecutive quarter in Q4 – up seven index points from 93 in Q3 2009 to 100 (on a scale of 0 to 200 Index points) in Q4. Confidence in Hong Kong rose a total of 21 points since June 2009.

Globally, between June and December last year, the Nielsen Global Consumer Confidence Index rose five points from 82 to 87.

For more data and commentary, download the complete Nielsen Consumer Confidence Index press release.

About the Nielsen Global Consumer Confidence Survey
The Nielsen Global Consumer Confidence Survey was conducted between December 4 -18, 2009 and polled over 17,500 consumers in Asia Pacific, Europe, Latin America, the Middle East and North America about their confidence levels and economic outlook. The Nielsen Consumer Confidence Index is developed based on consumers’ confidence in the job market, status of their personal finances and readiness to spend. The sample has quotas based on age and sex for each country based on their Internet users, and is weighted to be representative of Internet consumers and has a maximum margin of error of ±0.6%.

Overall, Canadians were more confident than their neighbors to the south, with more positive outlooks regarding job prospects, the state of their personal finances and their willingness to spend.  With respect to jobs, 46 percent of Canadians say that local prospects will be “good” or “excellent” over the next 12 months, compared to just 28 percent in the U.S.  More than half (55%) feel that the state of their personal finances will be “good” or “excellent,” up three points since July and compared to 51 percent of Americans who said the same.  More than two-fifths of Canadians feel it is a good time to buy the things they want and need, compared to 33 percent of Americans. All of that said, a strong majority (82%) of Canadians feel that the country is still in a recession, despite the fact that the Bank of Canada announced that the recession was over.  Nine in ten Americans said that they felt their country was still in a recession.

In a sign that the consumer’s obsession with all things economic and recession is starting to recede, Canadians are once again showing concern with other issues such as work-life balance and health.  But despite these positive signs, Canadians remain cautious about spending.  Paying off debt is the top use for spare cash (with 39% saying that is their priority) followed by socking away money into savings (26%).  When they are spending, holidays and vacations is the top category (26%) with out-of-home entertainment (23%) and home improvements (20%) rounding out the top three.  Canadian men indicated that they are more likely to spend on outside entertainment and new technology, while responsible Canadian women are focused on paying off debt.

Read the full report.

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.