Scroogier holiday spending means blue Christmas for communities

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As 2009 draws to a close, higher unemployment and lower incomes are translating into a Christmas that will be even leaner than last year's. According to a recent CNN poll, 49% of consumers plan to spend less this holiday than they did in 2008. Another 39% say their spending will remain the same as last year. Only 12% of respondents plan to spend more.

The CNN poll, which surveyed over 1,000 consumers, showed that increasing frugality will also influence the types of gifts that people give. Some 68% of respondents plan to give presents that recipients need, while 27% say their gifts will be playful.

The move toward practical gifts suggests further cutbacks in the "holiday excess" that typically boosts the economy. If socks and other sensible items that people typically buy throughout the year are purchased as Christmas gifts, then much of the seasonal boost will actually cannibalize later retail sales.

Another big change this year lies in how people spend their holiday money. Online holiday shopping has grown by 3% over last year, according to Internet marketing research company ComScore. In fact, Internet sales for the week of Nov. 30 to Dec. 6 were $4.6 billion, which made it the biggest single online sales week since 2007. Thanksgiving day spending jumped by 10%, and Black Friday spending went up by 11%.

In other words, American consumers are spending less money on locally bought holiday gifts -- and are spending more online. Ultimately, the biggest victims of this shift will be brick-and-mortar stores and the communities they serve. According to retail consultant Cinda Baxter, 68% of the money spent in independent stores and 43% of the money spent in brick-and-mortar chain stores stays in the community, either through payroll, sales tax, property tax or other expenditures. Online sales, on the other hand, don't contribute any money to the purchaser's community.

As people spend more money online, it seems likely that an increasing number of physical stores will cut staff or close entirely, resulting in greater unemployment, reduced salaries, reduced payroll taxes and lowered property taxes. Or, as Baxter puts it, "Every storefront that goes dark drills another hole in the community piggy bank."


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