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
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Comment from Kris Williams, CEO AFCS, Inc. on December 3, 2008 at 11:27AM EST
We are seeing more monthly installments by medical debtors wanting smaller installment payments.
Comment from Robert Thomas, COO TTW & Assoc.LLC on December 5, 2008 at 12:31PM EST
We have noticed since September a huge reduction on large settlements and short term large payment plans. Although keep in mind that with agencies taking smaller long term payments it will continue to build the equity within each portfolio for higher liquidation rates down the road. It may not be within the time frame we all wanted but it is important to stay positive in the current situation we are all in. December 2008 has looked promising so far the first week under our belt. With consumers spending increasing this Holiday season we have noticed a slight increase on larger payments and or settlements within the month of December. We are anxiously awaiting and optimistic for the New Year and how tax return season turns out for not only our business but for the collection industry.
Comment from R. Greenfield on December 11, 2008 at 11:36AM EST
As much as retail showed positive on "Black Friday", the retailers lost money. Customers purchased all the loss leaders that attracted them into the sores and purchased little or no more. By the end of the retail year, January 31, we will see store closings throughout the U.S. and unemployment climbing to a government reported 10%. That doesn't account for the millions not collecting unemployment and are no longer a statistic. So we are going to see a very depressed holiday shopping season.
Comment from JN on December 11, 2008 at 2:01PM EST
Black Friday was no reflection on recoveries whatsoever!! What it showed the industry is that NO ONE takes their credit status seriously and never will. Our economy may still be stuck in reverse, but all that means is people are going to start looking out for themselves and spending money on stuff they don't need. People can blame the government all they want, but what everyone fails to realize is consumers play a huge role in our economy. Not paying your debt back DOES have an impact on our economy. Our agency is operating under the "accept what they can afford" model. Slow but steady.