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.

With the holiday shopping season about to begin, Nielsen offers U.S. retailers and marketers five key insights to aid in attracting and retaining the loyalty of increasingly value-conscious American consumers.

1. Stick To The Basics

Necessities — rather than novelties and luxuries — are expected to drive holiday sales this year.  Practical apparel, like socks and fleece jackets, and basic household products, such as diapers, household cleaners, pet care products, and food items, are all expected to see strong sales.

2. Staying In Is The New Going Out

Items that are well-suited for in-home consumption — food, beverages, DVDs, books, and games — are also expected to sell well during the holidays and into 2009, as consumers increasingly seek out less expensive entertainment at home.

3. Value Brands, Coupon Clipping Gain Mass Appeal

Consumers are increasingly “trading down” from higher-end retailers and brands to retailers and brands associated with greater value.  Some consumers may also replace more expensive fresh foods with canned and frozen varieties.  Look for coupon clipping to become a necessity for many families.

4. Where It’s At

Online retailers, dollar stores, grocery stores, supercenters, mass merchandisers, and club stores are expected to attract the lion’s share of holiday spending, as consumers seek to minimize the number of shopping trips they make — and find good values.  In contrast, department stores and retailers of electronics, toys, home improvement supplies, and office supplies are likely to feel the brunt of the economic slowdown as consumers shift their purchases to more value-oriented retailers.

5. Perceptive Marketing Is Essential

Marketing messages that acknowledge consumers’ financial challenges and clearly communicate a brand or retailer’s value proposition will build consumer loyalty now, in the short term, and for the longer term economic recovery.

Read Nielsen’s holiday sales forecast.

View in depth Nielsen data on consumer holiday spending projections.

Go behind the numbers: read NielsenWire’s Q&A with James Russo, co-author of Nielsen’s holiday retail forecast.

Submit questions about Nielsen’s holiday retail forecast co-authors, James Russo and Todd Hale, by commenting below.

Nielsen’s holiday retail forecast predicts a 4.7% gain in dollar sales over 2007.  Unit sales, however, are expected to be virtually flat (-0.8%) versus a year ago.

The forecast includes projected sales at food stores, drug stores, mass merchandisers, and convenience stores, across 125 product categories tracked by Nielsen.

With the economy in turmoil, the 2008 holiday season will be closely watched for indications of declining consumer spending.  Declines in consumer spending were last recorded in the fourth quarter of 1991, during the recession of the early 1990s.

Go behind the numbers: read NielsenWire’s Q&A with James Russo, co-author of Nielsen’s holiday retail forecast.

View in depth data on holiday retail sales projections and consumer spending expectations.

View the full press release.

Read coverage of Nielsen’s findings in Convenience Store News and Adweek.

Submit questions about the report to Nielsen forecast co-authors, James Russo and Todd Hale, by commenting below.