BIG Executive Briefing
Economic & Consumer Insights for Marketing Executives

 

April 2008 (Respondents surveyed 4/1 - 4/8/08)

Talking Points:

§     Consumers increasingly pessimistic about economy

§     The practical consumer re-emerges

§     Layoff predictions increase from March’s record high

§     Record number of drivers feeling pump price drain

§     Shoppers placing higher value on clothing sales

§     Consumer Migration: Women’s Clothing

§     Shoe Wars: Payless with a slight lead

§     90 Day Outlook worsens for all categories

§     Purchasing bright spot: TVs

§     What’s Hot...What’s cookin’ in your kitchen?

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

 

Consumers become increasingly pessimistic about chances for a strong economy as confidence continues to sink in April…23.0% are confident/very confident this month, besting the record low set last month (24.8%) and less than half of April 2007’s reading (46.5%).  Who are the optimists…the pessimists?  Check out the table below…those who see a brighter future for the economy tend to be male, younger, and/or Republican, while those who are seeing darker days ahead are more likely to be female, a little older, and/or Democrats.

 

 

 

With the Clinton v. Obama fight for the democratic ticket left unresolved, worry about political and national security issues has remained stable from March at 22.3%, however still heightened from 17.5% one year ago.

 

With spring and summer merchandise beginning to fill retailers’ shelves, it appears that consumers will continue to wait for “sale” and “clearance” signs…frugality continues to rise among shoppers, with 45.4% indicating that they’ve become more practical and realistic in purchasing, rising almost two points from March (43.6%), more than six points from April 2007 (39.1%), and the highest reading since 45.5% in December 2005 (post-Katrina era).

 

Adding to retailers’ woes are consumers focusing on needs over wants in purchasing…more than half (53.6%) narrow in on necessities when shopping, rising from March (51.0%), one year ago (46.0%), and the highest reading since December 2005 (55.2%).

 

 

Given the dismal outlook for the U.S. economy, it should come as no surprise that consumers portend similar pitfalls on the employment front…almost three in five (57.8%, a new high) contend there will be “more” layoffs in the next six months, rising from 55.5% in March.  About a third (34.6%) predict layoff levels will remain the “same” (v. 37.6% in March), while a minor 7.6% optimistically call for “fewer” (v. 7.0%).  Personal concerns with becoming laid off elevates slightly to 5.5% from 5.1% last month.

 

Cash-strapped consumers may not have the $$ to aggressively pay down their debts, but they are trying not to add to existing IOUs in April…for the first time, paying down debt (34.7%, down from 36.8% in March) and decreasing overall spending (34.7%, up from 31.4%) tie for the top financial plans over the next three months.  Slightly fewer plan to increase savings (26.3% v. 27.2% in March), while 23.2% plan to pay with cash more often, flat from March.

While the Dow has picked up since falling below 12K in March, bearish investors seem cautious concerning Wall Street…52.1% of investors indicate they would definitely/probably invest in the stock market, down more than half a point from last month (52.8%).  One in ten investors (10.1%) say they plan to buy stocks in the next three months, down slightly from 10.5% last month…5.5% reveal they plan to sell, edging down slightly from 5.8% in March.

 

As prices at the pumps reach new highs, a record number of drivers are feeling the drain on their wallets…82.2% indicate in April that pump prices are affecting their spending in other areas, namely by reducing dining out (37.9%), decreasing vacation/travel (35.2%), and spending less on clothing (33.8%).  To help offset rising fuel expenditures, drivers are taking fewer shopping trips (44.7%), shopping closer to home (41.0%), as well as bargain hunting more often (39.5%).

 

Currently facing a record high of $3.35/gal (source: AAA), it should come as no surprise that consumers pessimistically call for prices to continue to climb…79.4% expect fuel costs to rise through Mother’s Day (May 11), one five (18.5%) contend they’ll remain the “same,” while only 2.1% hope for a decline.  Consumers predict an average pump price of $3.63/gal on Mom’s special day, increasing from the $3.49 estimated at tax time (April 15). 

  

 

If apparel retailers want to drive traffic into their stores, couponing, sales, and promotions appear to be key in this dismal down market…in April, practical consumers are placing higher value on sales when purchasing clothing…almost one in five (19.5%) indicates that they only buy clothing on sale, up from last month (18.6%), last year (16.8%), and the highest reading since December 2005 (19.7%).  The majority (65.1%) still indicates that they usually buy clothing on sale, while 15.4% contend that sales aren’t important.

 

When it comes to specifically purchasing Women’s Clothing, more than one in 10 shoppers (10.9%) say they browse Wal-Mart’s aisles most often, flat with April 2007 (10.8%).  Kohl’s follows with 7.8%, while Macy’s (6.5%) has the edge over JC Penney (6.3%)…Target (2.4%) rounds out the Top 5.  Shares for these top contenders remain relatively flat from April 2007.  Price is the top factor behind a women’s apparel purchase for the majority (55.3%) in this downturn, penny-pinching market…selection (48.4%), quality (37.3%), location (35.7%), and newest styles (15.4%) follow.

 

Do designer brands at bargain prices = Women’s Clothing shoppers who would recommend their store to peers?  It appears that this formula may be working for the likes of Kohl’s, Ross, Macy’s, and JC Penney…Using the Net Promoter® Score* (NPS), respondents were asked to rate the likelihood that they would recommend the store they currently shop most often for Women’s Clothing on a scale from 0 (Not at All Likely) to 10 (Extremely Likely).  Among the top 8 stores for Women’s Clothing, Kohl’s (home to Vera Wang designs) and Ross received the top ratings…discounters as well as Sears weren’t as likely to fare so well:

 

 

* Net Promoter, NPS, and Net Promoter Score are trademarks of Satmetrix Systems, Inc., Bain & Company, and Fred Reichheld.

 

But is positive word of mouth enough to keep Macy’s shoppers in the stores?  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 in the past year) and where a positive rating spells net growth to a retailer, finds that Macy’s is facing a customer deficit with a -2.5 rating, while #1 Wal-Mart has experienced slight growth (+0.2) in new customers:

 

 

Why leave?  15.3% of Women’s Clothing shoppers of one year or less cited high prices, followed by inconvenient location (12.8%), lack of available sizes (9.5%), poor selection (8.0%), and decline of store appearance (7.8%).

 

In the Men’s section, Wal-Mart strengthens its lead with 13.8% shopping there most often, compared to 13.0% one year ago.  JC Penney (7.1%) has a razor-thin edge over Kohl’s (7.0%) this month, while Macy’s (4.9%) and Sears (3.1%) complete the top 5.

 

It’s nearly a draw in this month’s Shoe Wars…Payless (10.0%) continues to have the slight lead over Wal-Mart (9.8%) as the store shopped most often for footwear, though Payless’ share has declined over the past year (from 10.8%), while the big W has remained relatively even.  Kohl’s (4.1%), Macy’s (2.4%), and DSW (2.3%) follow not-so-closely behind.

 

Best Buy continues as tops in Electronics…with 27.7% (down from 28.6% one year ago) shopping there most often, the big box retailer leads big discounter Wal-Mart (16.0%, up from 15.0% in April 2007).  Circuit City (6.5%), Sears (2.2%), and Target (2.0%) round out the top 5.

 

Wal-Mart courts top favor in Sporting Goods…the big discounter leads this group with 11.4% shopping there most often, while Dick’s Sporting Goods is a close second with 9.1%.  Sports Authority (3.5%), Big 5 (2.4%), and Academy (2.1%) follow.

 

Those who subscribe to our monthly Retail Ratings Reports (available for 12 major categories) know that among Male shoppers for Sporting Goods, Dick’s and Wal-Mart frequently tangle for the top position.  Check out a page from our March Retail Ratings Report to see who is currently in the lead: www.bigresearch.com/cast-members/big-cias-rrr-sports-mar08.pdf

 

Two big boxes continue to hammer the competition in Home Improvement/Hardware…Home Depot leads this category with 27.6% shopping there most often, while Lowe’s is second with 21.4%.  Wal-Mart (4.9%), Menards (3.2%), and ACE Hardware (2.4%) round out the top 5.

 

Individual grocers aren’t any match for one big national discounter in the food aisle…Wal-Mart leads this category with 15.3% shopping there most often, ahead of Kroger (5.3%), Publix (2.9%), Safeway (2.6%), and Meijer (2.1%).  However, when it comes to shopping across different sections of the country, grocers tend to flex their regional might:

 

 

More than a quarter (26.3%) continue to shop Wal-Mart for Health & Beauty Care, strengthening from 25.4% in April 2007…druggists CVS (7.9%) and Walgreens (7.3%) follow, while Target (5.1%) and Rite Aid (2.8%) round out the top 5.

 

While Walgreens (14.0%) and CVS (12.3%) continue to top the list of stores shopped most often for Prescription Drugs, #3 Wal-Mart continues to gain with 9.4% share (up from 7.5% one year ago)…Rite Aid (5.2%) and Target (1.7%) follow. 

 

 

With a dismal economic outlook, the credit card crunch, gas pumps draining wallets, and a housing market without a foundation, consumers have caught the spring fever, and they’ll be staying indoors instead of heading to stores, according to the BIGresearch Diffusion Index (those who say they’ll spend less subtracted from those who’ll spend more).  The 90 Day Outlook declines from March as well as April 2007 for all categories:

Retail Merchandise Categories - 90 Day Outlook

(April 08 compared to March 08 and April 07)

Six month purchase intentions for high-dollar durables are similarly dreary…While purchase intentions for computers and jewelry are flat from a year ago, furniture, home appliances, house, major home improvement, stereo equipment, DVD/VCR, digital camera, and vacation travel are down from April 2007.  The bright spot continues to be TVs…one in ten (10.6%) plan to buy in the next six months (perhaps with those rebate check to begin arriving next month), up from 8.3% a year ago.

 

One in ten (10.9%) also intend to buy an auto in the next six months, down almost a point from a year ago (11.6%).  And it appears that recent auto buyers have been more amenable to buying used and/or buying for less…among those who purchased in the last six months, 55.7% purchased a new auto (v. 44.3% who purchased used), down from 60.3% last year…drivers paid an average of $21,391, also down from April 2007 ($21,759).

 

ON THE LIGHTER SIDE...What's Hot and What's Not 

 

When buying a home, they say that kitchens sell themselves…perhaps because cooking at home and “Energy Star” appliances are hot this month!  Bike riding and gardening also rated particularly high among consumers.  The younger (under 35) set still enjoys dining out…women 35+ make Harrison Ford their action hero, while older men are on par with The Masters Tournament.  What’s Not?  80%+ say they wouldn’t be spotted in polka dots.

 

 

 

Sincerely,


                                                                 

 

 

Editor

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