Strong Start to the Holiday Shopping Season. A Good Sign for Recoveries?

From all accounts that I have read, the holiday shopping season got off to a rip-roaring start on Black Friday, as consumers flocked to the malls and outlets to take advantage of massive discounts on just about anything they could purchase. The National Retail Federation estimated that shoppers spent an average of 7.2 percent more than last year. ShopperTrak RCT found Friday sales up 3 percent over last year. I find this remarkable considering the economic conditions. It appears that consumers are still spending.

I read that layaway plans are back at K-Mart and their sister company, Sears. Remember layaway plans? This means that some consumers are hesitant about extending themselves further and instead are paying for their holiday purchases in full before taking them home. Most of these layaway plans have a short lifecycle of a month or two, so the consumer can take the item home in time for the holiday gift giving. The interesting aside to the layaway strategy this time around is that some of the same consumers that are trying to be disciplined buyers are utilizing credit to pay for the items on layaway. Amazing!

Most collection agency executives we have spoken with have shared with us that they are experiencing substantial increases in placement volumes, as clients are turning over accounts at unprecedented levels in virtually all sectors. According to our latest accounts receivable management confidence survey, more than 60 percent of agency respondents said that account placements were “moderately” or “significantly” higher in the third quarter of 2008. Just 14.9 percent of survey respondents reported any type of decrease in current placements.

In our recent discussions with agency executives about recovery levels, most collection agencies that are servicing local accounts in sectors such as healthcare and government are not experiencing a significant drop off in amounts collected. Some are actually seeing improvements. However, collections for bankcard/credit card and other national clients are generally down anywhere from 10-30 percent, although this varies greatly depending upon account age, size, asset class and location.

Here’s my current thinking: If consumers are out spending during the holiday season, that is a good sign that consumer confidence is improving. Hopefully, this will also bode well for collectors during the holiday season and into the first quarter of 2009. What are you experiencing? Comment and let us know