BIG Executive Briefing
Economic & Consumer Insights for Marketing Executives

 

January 2008 (Respondents surveyed 1/2 - 1/8/08)

Talking Points:

§     Consumer confidence continues to lower

§     The “holiday hangover” has set in…consumers become more practical

§     More fear becoming laid off

§     2008 heralds consumers resolute to control their budgets

§     Seven in ten predict increasing gas prices through Valentine’s Day

§     How are consumers coping with problems in the U.S. housing market?

§     Is Macy’s the next rising star in Women’s Clothing?

§     Shoe Wars:  Wal-Mart holds the top spot again

§     Why aren’t consumers purchasing Apple iPhones?

§     90 Day Outlook continues decline

§     What’s Hot?  THE hard-to-find holiday gift…

Notice: The video briefing is also now available on YouTube!  Please click here to view the December edition.

 

The New Year generally signifies a chance for a fresh start, but consumers aren’t willing to put present economic conditions behind them…with holiday bills rolling in, gas prices hiking up, and a housing market without a foundation, only about a third (33.6%) indicate that they are very confident/confident in chances for a strong economy, the lowest reading since 33.4% recorded in September ’05 (post-Hurricane Katrina).  This month’s reading is down more than three points from December’s already-weak 37.0%, and almost 17 points lower than one year ago (50.5%).

 

With the Presidential primaries underway – and an inevitable leadership change in the White House on the way - fewer than one in five (17.9%) continue to worry about political and national security issues, on par with December (18.0%), though up slightly from one year ago (17.2%).

 

It looks like the “holiday hangover” has begun to set in…now that it’s time to begin paying for all that holiday cheer consumers spread last month, it appears that more shoppers have plans to freeze their unnecessary spending…more than two in five (41.2%) indicate they’ve become more practical and realistic in their purchasing, up from December (40.3%) as well as January ’07 (39.6%).  The bright side?  Now that the gift card redemption season has begun, retailers can begin counting that revenue and consumers can splurge without breaking their budgets.

 

Perhaps it’s because consumers are still counting their blessings received under the tree this holiday season, but many don’t feel the need for wants in January…the majority (49.9%) indicate this month that they are focusing on needs over wants in purchasing, rising from December (47.4%) as well as January ’07 (48.5%).

 

 

Although the U.S. unemployment rate rose to 5% in December, fewer consumers feel conditions will worsen as we enter 2008…in January, 41.5% predict there will be “more” layoffs in the next six months, down more than a point from December (42.9%), the majority (50.4%) indicate that conditions will remain the “same” (up from 49.2% last month), while a slight 8.0% expect “fewer” layoffs, flat from 30 days ago (7.9%).  Perhaps it’s the pressure of getting all of those holiday bills paid on time, but an increasing number of consumers (5.2%) fear becoming laid off, up from 4.5% last month and the highest reading since February ’06 (5.1%).

 

The New Year heralds consumers resolute to control their budgets…close to two in five (37.1%) indicate in January they plan to pay down debt, up from 35.6% last month…decrease overall spending (33.7%) and increasing savings (28.3%) increase as well, from 29.2% and 26.4%, respectively, from December.  Paying with cash more often (23.0%) is also on the rise, indicating that consumers intend to lay off their credit cards.  Though with average pump prices more than $0.80/gal higher than one year ago (according to AAA), it appears that fewer consumers have the extra cash required to pay down debt and increase savings than they did at the beginning of ’07, as these financial plans have declined from last year:

 

 

With the Dow on a downward trend since late December, it appears that investors are prescribing to the “buy low” adage…in January, 61.2% of investors indicate that they would definitely/probably invest in the stock market, up from 59.9% in December.  Those planning to buy stocks rise to 11.5% (from 10.9% last month), while investors planning to sell decrease from 6.7% to 5.8%.

 

With the Energy Information Administration forecasting gas prices at over $3/gal in ’08 and well into ’09, already cash-strapped consumers aren’t going to get any relief at the pump anytime soon…so what are the three-quarters (74.5%) of consumers impacted by fluctuating gas prices doing in order to manage their budgets?  More than two in five are consolidating their shopping trips (41.5%), 40.6% are shopping closer to home, 35.4% are perusing aisles for sales, while 29.0% are clipping coupons.

 

There will be no love lost between consumers and gas prices as Valentine’s Day approaches…seven in ten (69.8%) predict prices at the pump will continue to rise through February 14^th, one in four (26.3%) contend they’ll remain the same, while a meager 3.8% optimistically call for a decrease.  Drivers predict an average pump price of $3.27 on Valentine’s Day, rising slightly from the $3.24 forecasted on New Year’s.

 

Gas prices, though, aren’t the only factor that today’s consumers are attempting to cope with…more than a third (34.1%) indicate that they are affected by the problems in the U.S. housing market…37.5% are “unsure,” while fewer than one in three (28.4%) say they aren’t impacted at all.  Of those trying to cope with this situation, close to half (45.5%) are dining out less, 42.0% are driving less, 37.8% are on the hunt for sales more often, 36.9% shop closer to home, while 35.8% are taking fewer shopping trips, and 35.7% are spending less on clothing.

  

 

After averaging below the 20% mark for the past two years, it appears that the importance of clothing sales is on the rise among budget-conscious consumers…this month, 20.3% say they “only buy clothing when it’s on sale,” continuing a 20%+ streak begun in October ’07 and rising from 18.5% in January ’07 and 19.2% two years ago.  The majority (65.1%) still indicate they “usually” buy clothing on sale, while the minority (14.7%) says clothing sales aren’t important.

 

Is Macy’s the next rising star in Women’s Clothing?  Those keeping up with the BIG Executive Briefing are already up-to-date on the Kohl’s success in this department, but the divine M (which boasted its big-name star power in holiday commercials) has a first-time edge this month over JC Penney.  Big discounter Wal-Mart, though, still has the lead in this category with 10.5% shopping there most often (lowering from 12.0% in January ’07)…Kohl’s follows with 7.7% (up from 7.1%), while Macy’s (5.8%), JC Penney (5.7%), and Target (2.4%) round out the Top 5. 

 

JC Penney’s hold is stronger in the Men’s section, but its share – along with Wal-Mart’s – has slipped over the past year, while Kohl’s and Macy’s have gained…the complete Top 5 (January ’07 shares in parenthesis): 1. Wal-Mart 13.5% (14.4%), 2. JC Penney 7.9% (8.3%), 3. Kohl’s 7.7% (7.1%), 4. Macy’s 4.9% (4.7%), 5. Sears 2.8% (3.3%).

 

Wal-Mart closed 2007 with a win over Payless in the Shoe Wars battle, and it appears that the discount behemoth intends to maintain its lead over the discount specialty into 2008…this month, more than one in ten (10.7%) contend they shop Wal-Mart most often for footwear, a one point lead over Payless (9.7%)…Kohl’s (4.3%), JC Penney (2.7%), and Macy’s (2.7%) complete the Top 5.

 

Big discounter Wal-Mart also maintains its lead over the big boxes in Linens/Bedding/Draperies…16.6% shop most often at the big W for sheets, towels, and other household softlines, down less than a point from last year (17.3%).  Bed Bath & Beyond follows with 10.8% (gaining from 10.3% one year ago)…JC Penney (6.6%), Linens ‘n Things (5.6%), and Target (5.0%) round out the Top 5.

 

Best Buy continues as the best bet for Electronics among almost a third (30.8%) of consumers…Wal-Mart follows with 16.1% shopping there most often, while Circuit City (7.5%), Sears (2.4%), and Target (1.9%) round out the Top 5.

 

Speaking of gadgetry…the Apple iPhone was one of the most anticipated electronics devices of 2007, so has the “need” for this cell phone picked up steam or cooled off since its introduction?  Even with the substantial $200 drop in price, only 7.0% of consumers are considering purchasing an iPhone within the next year (up marginally from the 6.5% planning this purchase when the iPhone debuted over the summer)…though this figure climbs to 21.6% among current cell phone users planning to buy a new phone.  Why not buy?  Most (62.8%) say they simply don’t need one, 48.1% concede they don’t want one, while more than one in three (36.2%) say the iPhone costs too much.

 

Home Depot may be in the midst of learning a hard lesson in the Home Improvement/Hardware category…although the big box still leads this category with 29.8% shopping there most often, its share has slipped from 32.8% on year ago, while competitor Lowe’s share has increased from 21.4% in January ’07 to a current 23.3%.  Wal-Mart (4.6%), Menard’s (3.5%), and ACE Hardware (2.4%) still follow not-so-closely behind.

 

With whom is Home Depot falling out of favor?  Those who subscribe to our monthly Retail Ratings Reports (available for 12 major retail categories) are in the know…the big box is losing big share among men and lucrative upper income shoppers…take a page from our December Retail Ratings Report for the details: http://www.bigresearch.com/cast-members/big-cias-rrr-hardware-dec07.pdf
 

Grocers (51.3%) are still favored over discounters (18.9%) as the store format shopped most often for Groceries, but that big discounter – with its national presence – continues to top this category…with 16.0% shopping there most often, Wal-Mart leads Kroger (6.0%), Publix (3.5%), Safeway (3.1%), and Meijer (2.2%).

 

With almost one in three (29.7%) shopping there most often, Wal-Mart also continues its strong lead in Health & Beauty Care…it’s a three-way tie between Walgreens, CVS, Target (with 6.4% each), while Rite Aid (2.3%) completes the Top 5.

 

Druggists, though, are still the top choices among Prescription Drug shoppers…Walgreens (16.1%) and CVS (13.0%) have the edge over Wal-Mart (9.2%), while Rite Aid (5.5%) and Target (1.8%) follow.  With drug stores available on many a street corner in cities, suburbs, and small towns, it should come as no surprise that location tops the list of reasons to shop a particular store for Prescriptions, with 57.6% indicating so…price (35.0%), insurance coverage (33.9%), phone-in availability (30.4%), and informative pharmacists (15.9%) follow.

 

But has Wal-Mart found the cure for gaining share in the Prescription Drug category?  According to this month’s Consumer Migration Index (CMI), which tracks those who have immigrated to a store (new customers within the past year) against those who have emigrated (left within the past year) and where a positive rating spells net growth to a retailer, finds that the big W may be poised to take #2 from CVS in 2008…Wal-Mart exhibits strong gains with a +10.7 rating, while CVS faces a customer deficit with -3.1.  Leader Walgreens also gains with a +1.3 rating:

 

 

Inconvenient locations (16.6%) topped the list of reasons of those who switched Prescription Drug stores in the past year, though high prices (15.7%) and the lack of a $4 generic drug program (14.2%) closely followed.  By the way, Wal-Mart – the pioneer in the $4 discount drug program – tops the list of stores shopped most often for Prescription Drugs by these customers of one year or less.

 

 

With declining confidence, mounting credit card debt, a shaky housing market, and holiday bills left to pay, it should come as no surprise that the 90 Day Outlook continues to decline from last month as well as last year.  Lawn & Garden is the lone category gaining from December:

Retail Merchandise Categories - 90 Day Outlook

(January 08 compared to December 07 and January 07)

We’ve got good news and bad news regarding six month purchase intentions for high-dollar durables…the Good: purchase intentions for several major categories – furniture, housing, major home improvements, stereo equipment, and vacation travel – are up from December…autos, computers, RV/boat, TV, and digital camera are flat.  The Bad: with the exception of RV/boat, all major categories are down from one year ago.

 

With gas prices on the rise, new auto buyers are showing increasing interest in hybrid vehicles…among those planning to buy or lease a new vehicle in the next six months, more than one in ten (12.5%) are considering this greener alternative…increasing interest in cars – generally also more fuel-efficient alternatives – is also evident, with the majority (62.2%) of potential car buyers considering this vehicle type, up from 54.0% in January ’07.  Gas guzzling SUVs are seemingly becoming more passé, while slightly declining interest is also seen in trucks and cross-over vehicles:

 

  
 

 

 

It was THE hard-to-find gift this holiday season, and its popularity seems secure for 2008…the Nintendo Wii is what’s hot this month (according to 69.0% of consumers)…charitable giving follows closely (66.1%).  Among the under 35 set, gym memberships and making/keeping New Year’s resolutions are particularly favored (perhaps there’s a connection there).  Those over 35 are likely to line up for the Jack Nicholson-Morgan Freeman vehicle, The Bucket List.  What’s not?  Although popular among younger women, most feel that tights are a current fashion trend that should've been left behind in elementary school.

 

 

Sincerely,


                                                                 

 

 

Editor

You've read the briefing, now read the book!  BIGresearch has teamed with T. Scott Gross to write When Customers Talk, a book is based on the insights of 100,000 retail customers presenting their valuable feedback on service, pricing, habits, and what they look for in a shopping experience.  When Customers Talk is available through your favorite bookstores, or you can check it out at on the web: www.whencustomerstalk.com.

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