Tax Time: The Retail Opportunity

Discussion
Feb 23, 2012

It’s that time of year again when Americans all over the country sit down by themselves or with the assistance of a professional to see if they’ve got a tax refund coming their way. It’s become an annual rite for retailers — vying to grab a greater share of those checks from Uncle Sam. But according to the National Retail Federation, merchants may find it a tough go this year as more consumers plan to save rather than spend their refunds.

According to a survey conducted by BIGinsight for NRF, roughly two-thirds of taxpayers expect to get a refund this year. That’s the same number as last year. Of those, 43.8 percent plan to put some of their refund into savings. That percentage is the highest NRF has seen in the nine years it has been doing this particular survey.

Other findings include:

  • Just over 30 percent will use some of the money to pay down debt;
  • Nearly 29 percent will use refunds to pay for everyday expenses.

“After a rocky few years, consumers are now more vigilant about how they spend their money and the importance of preparing for future financial stability,” said Matthew Shay, president and CEO of NRF, in a statement. “Increased consumer savings proves extremely beneficial to shoppers and businesses in the long run, allowing future opportunities to invest in a large household item or even take advantage of a well-deserved family vacation.”

According to NRF, 12.3 percent of tax refund recipients plan to purchase a new television while 11.3 percent will use the money toward a vacation.

Consumers are looking to file early this year with nearly 65 percent planning to do so before the end of February. That’s the highest percentage since 2006. Only 14.3 percent plan to wait until the filing deadline in April.

“For some, tax season is a way to reward themselves, for others it is the perfect opportunity to get ahead on their bills or other expenses,” said Pam Goodfellow, consumer insights director, BIGinsight. “Whatever the decision, many consumers this year are looking forward to taking back some of their hard-earned money from Uncle Sam.”

Discussion Questions: What are the most effective ways for retailers to grab share of tax refunds this year? Are there any merchants that you think have done a particularly good job of this in past years?

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11 Comments on "Tax Time: The Retail Opportunity"


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Ryan Mathews
Guest
10 years 3 months ago

I think fewer Americans are likely to blow their refund checks at retail. The economy is getting better, but people still have a lot of debt. Oh … you could have a sale … that is if there are any more days left in the existing promotional calendar. The last thing anybody needs is another phony sale!

Success at retail isn’t about figuring out how to get your “fair share” of a refund check. It comes from being the kind of store the taxpayer trusts all year.

Anne Howe
Guest
10 years 3 months ago

If retailers were smart, they’d ask (and pay for) BigInsight to cut the consumer data findings by “shop most often at” (retailer A for category x) to get deeper information. Just imagine if Walmart, for example, learned that their loyal consumer electronics customers were indeed over-indexing to buy a TV instead of a vacation and that they were also prone to file early. That’s actionable insight. Or, what if they learned their shoppers were NOT planning a TV purchase, but a vacation instead. Also actionable, right?

Note: I have used BigInsight data in my career, but am not using it now. I am also not contracted in any way to promote their services or data. I am only providing an example of how I would think about the reported data in a way that may spark up a shopper opportunity.

Ben Ball
Guest
10 years 3 months ago
First, the very fact that so many Americans are looking forward to the return of their interest free loan to Uncle Sam is a statement on our understanding of basic economic principles as a nation in and of itself. No wonder we elect politicians who know even less, and reward them with reelection for even poorer economic decisions. From the retailers’ perspective, tax season represents “bonus cash” in the market. So the best presentation to consumers has been a Las Vegas style “come have fun with your fun money.” It sounds like the more successful retailers this year will be ones who appeal to consumers current focus on value. Demonstrating a true “buying opportunity” for goods consumers traditionally need like appliances, furniture and perhaps cars. Perhaps they could take a page out of the financial institutions recent ploy to attract value oriented boomers who are rolling over their retirement plans. Offer a “bonus” in additional cash (purchasing power) rather than traditional discounts. It may be easier to buy into “we’ll add $10 for every $100… Read more »
Gene Hoffman
Guest
Gene Hoffman
10 years 3 months ago

The best way for retailers to grab a share of tax refunds this year is to have something that consumers want that no other retailer has. Good luck!

Mark Heckman
Guest
10 years 3 months ago
Several years back when the Feds began the practice of “stimulating” the economy with special refund checks, I recall Kroger was very aggressive in offering very lucrative discounts if the consumer cashed the check at Kroger and converted the check to Kroger gift certificates. As a competitor of Kroger at the time, I did some quick math and came to the conclusion that if I tried to replicate the program at our chain, I could potentially spend my entire annual promotions budget in three weeks if I had reasonable customer engagement. You will have to ask Kroger if they thought that program worked for them, but I have not seen them repeat it. I chose a different course. I do think they were thinking in the right direction. Offering an incentive to convert refund checks to grocery gift certificates, knowing that all the dollars will be spent with you even at a 10% or 15% discount, could work, especially if the shoppers remained loyal after the promotion. But if I am a retailer with a… Read more »
Camille P. Schuster, Ph.D.
Guest
10 years 3 months ago

For many years the discussion was about the unhealthy consumer debt in the US because the savings rate was so low. Now when consumers are expected to save part of their refund checks the discussion is about how to get them to spend more. Saving some and spending some may be a healthy alternative. How to get consumers to spend the part they are spending at a specific retail store? Making products consumers want available at good prices and making the shopping experience enticing are still the important criteria. Now if you are trying to get consumers to come to a store they rarely or never visit, you have the same problem you have always had with these consumers.

Ed Rosenbaum
Guest
10 years 3 months ago

Is there a way for retailers to grab our interest free loan refund that is not so obvious and self serving? I doubt it. There is a sale every day in every store. So what can a retailer offer now that we have our money back, that has not already been offered?

James Tenser
Guest
10 years 3 months ago

My “good taste radar” tells me this is a year for retailers to quell the impulse to go after their customers’ refund checks. Yes, I know this goes against nature, but there may be a payoff for many months to come as working families get a bit more on top of their finances.

Retailers should continue to promote during April, of course, but I think the message of thrift, value and responsibility should prevail over the message of indulgence.

Why not design offers that help shoppers stick to their resolve to save a little more or pay down debt? Chains with frequent shopper cards could run their own “April Refund” programs, in which cardholders accrue a percentage credit on all spending for the month, redeemable in May. Chains without loyalty cards could deliver a similar benefit using checkout coupons or receipt printing.

Janet Dorenkott
Guest
Janet Dorenkott
10 years 3 months ago

Retailers can try to get the refund checks, but the fact is gas is $4/gallon in some areas. Many people think it will top $5-$6 this summer. Unfortunately, I think people will be forced to spend refunds this year on gas.

Ralph Jacobson
Guest
10 years 3 months ago

Although some costs are getting more volatile, like gasoline, the consumer spending trends show more of a propensity to buy regular-priced and high-ticket, discretionary items. I think there is plenty opportunity for retailers to target this “found money” and capitalize upon impulse opportunities to grab as much of the refunds as they can.

Christopher P. Ramey
Guest
10 years 3 months ago

The recalibration of value continues. No surprise that consumers continue to be worried about their personal debt and cost of living.

Regardless, tax refund season has evolved into a minor extended holiday season where the date (April 15) has little meaning.

The reminder is that it is incumbent upon retailers to create desire every day.

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