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Everybody's a Scrooge

Consumers are wearing their frugality as a badge of honor.

Boots on sale
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Boots on sale

Last year's financial crisis caught some consumers off guard. It's impact came swift and hard and since that time consumers have become battle-tested. They've learned a number of new lessons and they're applying then to the 2009 holiday shopping season.

"All of our indications suggest that consumers will shop but will be more cautious in their approach," saiys Marshal Cohen, chief industry analyst at market researcher the NPD Group. "The study's results show consumers will be doing their homework a bit more carefully this year."

According to a recent NPD survey, about 45 percent of consumers plan to comparison shop before they make a purchase.

That's a five-year high, according to Cohen. Although catalogs and television advertising are still tried-and-true methods for comparison shopping more and more consumers are going online to check prices. Some 61 percent of those surveyed by NPD are doing online research before making a purchase, according to the firm's holiday spending survey.

One beneficiary of this trend is PriceGrabber.com, an online price comparison website. Traffic to the site in the 40 days ended Nov. 9 is up 11 percent from the same period a year ago.

"It does seem like consumers are going to ecommerce sites and shopping online more and more, and getting more saavy when they shop," says Laura Conrad, president of PriceGrabber.com.

One tool consumers are using more is a price alert system that the company offers. Shoppers can select an item and name a price that they would like to pay. Once the item reaches that price, the shopper receives an alert. Use of this service is up 70 percent from a year ago, Conrad says.

It also appears consumers are waiting for the best deals before buying. That might account for some of the weakness retailers have seen in the first two weeks of November. After scooping up products on sale early in the season, shoppers are taking a break before hitting the mall for the big Black Friday sales.

A large number of consumers—about 37 percent—expect to buy all of their holiday gifts on sale, according to NPD.

A woman makes a shopping list in front of a department store's Christmas window display.
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A woman makes a shopping list in front of a department store's Christmas window display.

Though online retail may be benefiting, it is also paying a price for the increased business; consumers are demanding free shipping with their purchase.

"There has been an acceleration of this trend," says Andrew Lipsman, an analyst at ComScore. "A lot of consumers are not willing to make the purchase unless they are getting free shipping."

According to a recent ComScore survey, 73 percent of those polled said free shipping was either "somewhat" or "very important" in making their decision to buy products online.

Retailers are responding. In the first quarter of 2008, about 31 percent of retailers were offering free shipping on their sites. By the third quarter of 2009, that number rose to about 42 percent.

Budgets also are important. Britt Beemer, head of America's Research Group, says his research shows that consumers will be sticking closely to their shopping lists this year.

Those lists are also a good deal shorter than last year. According to an American Express survey, 22 percent of consumers are trimming the number of people for whom they plan to buy a gift in order to stay within their budget.

"Consumers have really changed their behavior," says Beemer.