How are the rebate checks supposed to help the economy?
- Consumer spending accounts for 70 percent of the economy.
- Spending is psychological, not always rational. Even those with means will cut back when they perceive an unsafe future.
- Spending is meant to buoy optimism.
What will consumers do with their checks?
- Consumers are in a practical mood. Eighty percent of Americans say they have changed their shopping behaviors from making fewer trips to the store to purchasing fewer non-essential luxury items..
- Surveyed consumers say they will pay down debt or put the money in savings.
- This hasn't been the case in the past. Consumers tend to underestimate their spending in surveys and free money is always easier to spend than earned money.
- Though they'll spend, they'll be practical about it.
Which retailers are most likely to benefit?
- Discount stores
- Grocery stores
- Mother's Day, Father's Day, Vacations, Back-to-school purchases
What are retailers doing to try to get their share?
- kea, Safeway, Albertsons, Sears -- 10 percent bonus on rebate money
- Home Depot, Wal-Mart -- special advertising that promotes values and uses for the money
- Department stores -- earlier than usual spring sales and discounts
Retailers of practical goods that offer bonus money are particularly smart. They're not only more likely to get the immediate sale, but they're also seizing an opportunity to become aligned with the foremost consumer mindset of the day -- getting more for your money. Consumers will remember that. (Luxury retailers that offer the same bonus may get the immediate sale, but they won't get the afterglow. They'll look opportunistic -- RadioShack for example).
Basics:
- 130 million households will receive checks ranging from $600 to $1,200 for couples plus $300 per kid for eligible parents
- 110 Billion dollars will go to consumers between now and mid-July (date depends on the last 2 digits of your SS#)
- Down: brand name groceries (especially snacks and beer), women's clothing, furniture, luxury goods, airline tickets, alcohol in restaurants, coffee breaks, motor vehicles
- Up: fast food, discount stores, energy saving light bulbs and timers, video games and televisions
For more of Michael Finney's consumer stories and advice, visit 7 On Your Side.
