Despite increased optimism about the economy, the social media landscape indicates that we are in a similar place to where we were this time last year when it comes to spending; buzz about Christmas and holiday shopping is down 3% year-over-year. This activity is in line with other research at Nielsen relative to retail expectations and consumers’ personal finances that indicate modest spending from a cautious consumer base.

However, consumers are still buzzing about the gifts they’ve already purchased or are planning to buy in the coming weeks. Notably, online discussion focuses largely on offline shopping.

While online shopping has been rising over the last few years, we’re also finding that consumers are using the internet to find the best deals at retail outlets, toy stores and more. So what happens online, doesn’t always stay online in the new economy where deal hunting is driving buzz.

As consumers count down the days to the holiday season, we see two key trends emerging:

1. Parents are actively buzzing about the must-haves of the season within online communities
2. Buzz about gift cards is on the rise, largely in response to retailers’ use of gift cards as purchase incentives

Games that buzz
When analyzing the product categories shoppers most frequently discuss online, Nielsen found that kid-friendly video games generated more buzz than even the most buzzed-about toys, largely driven by highly engaged gamers. The November 15 release date for New Super Mario Bros is highly anticipated, catapulting this video game to the head of the pack in terms of buzz. Additional buzz in the gaming world has come from price drop and new model announcements for Playstation 3 and XBOX.

Zhu Zhu the next Tickle Me Elmo?
Buzz supports Toys “R” Us’ “Fabulous 15″ predictions for the 2009 holiday season, with Zhu Zhu Pets, Bakugan Brawlers and Transformers Revenge of the Fallen figurines topping the list of the most frequently buzzed about toys.

Shoppers deem Zhu Zhu Pets the hot toy of the season as parents swap stories of empty shelves and elevated prices at retailers. An emerging Zhu Zhu market has also sprung up on eBay. Strong buzz on LeapFrog’s educational toys are a holdover from the 2008 holiday season; parents are especially interested in the Leapster and Tag Reader product lines this season.

Gift Cards buzz is on the rise, buoyed by incentive programs
A growing proportion of online conversation focuses on gift cards—including gift cards awarded as purchase incentives (15% growth in buzz year-over-year, September 2008 vs. September 09). Amazon.com and Toys “R” Us have experienced the largest year-over-year growth in buzz about gift cards of the retailers and brands measured.

This increased interest in gift cards is largely driven by retailers bundling gift cards with purchase incentives. Gift card bundles essentially provide shoppers with two sets of gifts: the original purchase and the gift card which can either be given as a gift or used to buy more holiday presents. These incentives tend to generate a sizable amount of discussion online—especially when tied to the gaming category. For example, Amazon.com recently coupled a price break on Wii with a $25 gift card, generating a surge in online conversation about Amazon.

Retailers who do not currently use gift cards to encourage purchases may want to consider taking advantage of this growing opportunity during the holiday season.

Related: Watch Nielsen’s Ken Cassar Discuss Online Holiday Sales CNBC

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.

• First, change the focus from toys (their products) to families with young kids (their customers). I’ve often said that the best retailers define themselves not by the products they sell, but by the shoppers they sell to.
• Create a section reserved for birthday parties (who doesn’t enjoy a pit of colored balls?). We spend a fortune on these types of parties for our kids.
• Hire more moms willing to work from 9:30 am to 2:30 pm. Thousands of well-educated moms would sacrifice big salaries to work around their kids’ school schedules.
• Connect with Hispanic families. Nielsen’s Homescan panel consistently shows how Hispanic Americans index highest with baby-oriented products like baby food and diapers.
• Continue to expand food sections with private label supplied by supermarkets. Supermarkets bend over backward to attract young families. Why not introduce a grocer’s brand to shoppers in a completely separate retail channel?
• Offer in-store focus groups for marketers trying to reach kids and moms. Each store has the potential to become a laboratory for understanding how kids and their parents shop, play, and interact with products.
• Conduct midnight release events for DVDs, video games, books, (and new toys?) Toys “R” Us is a player in each of these categories. Book stores and electronics stores do a great job of creating excitement around midnight releases. This could also be a way to attract a new shopper demographic.
• How about… Movie Night at Toys “R” Us?
• Whole Foods has done a great job of developing their brand around healthy living. By co-branding with Toys “R” Us, they have the opportunity to reach new shoppers while Toys “R” Us can benefit from products (not just food) focused on healthy eating, exercise, and environmental sustainability.
• Get vendors to sponsor video game tournaments with gift cards as prizes for winners.
• Offer In-Store pediatrician clinics. Alright, this may be a stretch, but if Walgreens can be successful with their Take Care clinics, why not Toys “R” Us with a specialist focused on kids?
• Offer In-Store Seminar Events for parents on college savings, healthy babies, child-proofing, and have local supermarkets sponsor healthy eating demonstrations.
• Book Signings from children’s book authors.

Feedback? tom.pirovano@nielsen.com

The Xbox 360 garnered the largest share of online buzz between November 1 and December 9, with 41.6% of blog messages mentioning Xbox, Wii or Playstation.

In comparison, Nintendo’s Wii was mentioned in 29.8% of game console blog messages, while Sony’s Playstation ranked third with mentions in 28.6% of gaming-related blog posts.

Among gift-related online buzz, TV-related terms, mentioned in 52.5% of gift-related messages, dominated blogosphere chatter.

DVDs (24.4% share), toys (11.3% share), laptops (8.4% share), and GPS (3.4% share) rounded out the select five gift ideas.

View the press release.

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.

The results are based on a Nielsen Online survey, conducted November 6-11, intended to gauge online consumers’ holiday shopping plans for 2008.

Top 10 Reasons to Shop Online (U.S.)

Holiday Gift Dollars Shifting Online

Survey results indicate that holiday gift budgets are shifting online. Respondents said that they would spend an increased percent of their holiday shopping budget online, an average of 41 percent compared to 39 percent last year. And more respondents indicated that they would spend the majority of their holiday gift budgets online, up to 36 percent from 32 percent a year ago.

Prospects For Growth

More consumers plan to make purchases in the “Toys & Video Games” and “Books” categories this holiday season than last. The top three retailers when ranked by the year-over-year increase in respondents intending to shop there this season were: Amazon, Wal-Mart and Barnes & Noble.

“We believe holiday online sales will grow from 2007, but likely at a single-digit rate and representing the smallest increase we’ve seen since the online commerce market was born,” said Ken Cassar, vice president of industry insights, Nielsen Online. “If there is a silver lining, it is that consumers continue to view the online channel’s principal value proposition as convenience, more than price, allowing retailers the opportunity to differentiate on service and selection.”

Black Friday And Beyond

Throughout the upcoming holiday shopping season, which officially commences with Black Friday on Nov. 28, Nielsen Online will report weekly – and, in some cases, daily – online audience data for top online shopping destinations as well as for its annual Holiday eShopping Index.

Download Nielsen Online’s full press release.

The term “webkinz” topped the list of product searches in August, according to Nielsen Online. The web-linked stuffed animals were searched for more than 5.5 million times online. The Toys and Games categories dominated product searches for the month.

Below are the top 10 retailer and product Web searches for August 2008, according to Nielsen Online.