Executive Briefing
Economic & Consumer Insights for Marketing Executives

BIGresearch's Consumer Intentions & Actions Survey monitors over 8,000 consumers each month
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August 2009 (Respondents surveyed 8/4 - 8/11/09)

Talking Points:

§  Confidence inches upward in August

§  Who’s buying the “Cash for Clunkers” program?

§  Nearly 1 in 2 maintaining practicality

§  One in three predict “more” layoffs…two year low

§  Drivers calling for $3/gal gas Labor Day Weekend

§  Kohl’s narrowing the gap in Women’s Clothing

§  Consumer Migration: Groceries

§  90 Day Outlook: Consumers still aren’t ready to spend

§  What’s Hot?  Honey-Do lists are getting longer…


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Economy


In August, consumer confidence rebounds slightly from early summer levels…this month, 31.1% say they are confident/very confident in chances for a strong economy, up from July's 27.2% and on par with the ’09 high reached in May (31.2%). While the current reading is more than seven points higher than a year ago (23.6%), it’s a sobering 12+ points below August ’07 (43.9%).

The slight rise in confidence may be attributable to the DJIA crossing 9K, tempering gas prices, encouraging signs from the housing market, but what about the much-talked-about “Cash for Clunkers” initiative? This month, two in five consumers (41.5%) indicated that the program is good for economic recovery…37.6% were certain it wouldn’t help the economy, while one-fifth (20.9%) was unsure. One in ten consumers (10.9%) says “Cash for Clunkers” will motivate a new car purchase…three in four (76.8%) won’t trade in on the initiative, while 12.3% don’t know yet.  Younger consumers - those perhaps most likely in possession of a "clunker" - are more likely to take advantage of the initiative than those 35+:

North Korea’s pardon of two U.S. journalists in early August may have helped allay worry about political and national security issues…this month, 22.6% continue to be concerned, down a point from July (23.6%) and nearly two points from a year ago (24.4%).

Increasing confidence in August appears to have influenced consumer’s penchant for practicality…48.2% currently say they’ve become more practical in purchasing, down from 51.0% who said the same a month ago. Interestingly, this month’s reading has declined just slightly from a year ago (48.6%), when consumers were less confident in the economy and filling their tanks at nearly $4/gal, signaling that consumers still aren’t ready to jump back into the spending pool.

Those focused on needs over wants also wanes in August…the majority (55.9%) still says they are focused on the necessities when shopping, down four points from last month (59.9%), but lowering just a point from a year ago (57.2%).
 

Personal/Financial


Although the U.S. unemployment rate is still clocking in at just under 10%, it seems that many consumers are anticipating that layoffs will cool off over the next six months…in August, 34.7% contend there will be “more” layoffs over the next six months, down seven points from last month (42.0%), nearly twenty points from a year ago (54.0%), and the lowest reading since August ’07 (33.3%). More than two in five (44.0%) predict layoff levels will remain the same, while one in five (21.3%) predicts fewer pick slips over the next six months.

While overall layoff predictions were more positive this month, consumers are still harboring fears about becoming laid off themselves, which will likely play into continued cautious personal spending…7.8% are currently concerned with job security, relatively flat from July (7.9%), and rising a point from a year ago (6.8%).

Paying down debt takes top priority in August among 34.0%, lowering slightly from a year ago (35.8%), though still higher than August ’07 (33.1%). Just under a third (32.2%) are concentrating on decreasing overall spending in the next three months, also off from ’08 (34.1%), but tracking ahead of ’07 (27.5%). Those planning to pay with cash more often (22.8%) also on the rise compared to two years ago, while increasing savings (25.7%) declines from ’07:

The DJIA crossing into 9K territory in late July has investors feeling more bullish…in August, 50.9% of investors say they would definitely/probably take a chance on Wall Street, up nearly five points from a month ago. Investor plans to buy/sell stocks over the next three months remain flat from July at 9.8% and 4.5%, respectively.

With prices tempering in the mid-$2/gal range, this month fewer drivers (71.3%) contend that fueling up is wreaking havoc with their wallets compared to a year ago (82.5%). However, drivers aren’t backing down too much from the savings strategies they adopted to offset record high pump prices last summer. While activities like shopping closer to home and taking fewer shopping trips have dramatically declined, shopping for sales, comparative shopping, and buying store brands have held their ground, relatively speaking. And, coupon clipping has even increased from 12 months ago:

Drivers are realistic about Labor Day costs to fuel up…not surprisingly, the majority (67.5%) expect pump prices to rise during first weekend of September…28.5% are calling for prices to stabilize, while a meager 3.9% anticipate a decline. Drivers are calling for an average price of $3.00/gal over the holiday weekend, on par with last month’s forecast for August 1 ($2.98).
 

Retail


While consumers are feeling a little more confident and a little less practical than they did one year ago, in August ’09, consumers are still striving to be smarter shoppers…this month, one-quarter (24.4%) insist they only buy clothing on sale, rising two points from a year ago (22.0%).  About one in ten (11.5%) still says sales aren’t important when purchasing apparel, while the majority (64.1%) usually buy clothing on sale.

Walmart’s still got the lead in Women’s Clothing, but Kohl’s is narrowing the gap…this month, 13.1% say they shop the discount giant most often, up from 12.0% a year ago. Nearly one in ten (9.6%) shops Kohl’s most often, rising more than a point from August ’08 (8.2%). JC Penney (6.6%), Macy’s (4.9%), and Target (2.9%) round out the Top 5.

With twice the share of its nearest competitors, Walmart’s lead is more secure in the Men’s section...in August, 17.2% report they shop the Bentonville behemoth most often, double the shares of Kohl’s and JC Penney (tied, with 8.6% share each). Macy’s (5.2%), Target (3.0%), and Sears (3.0%) follow.

Discounter dominance continues in Children’s Clothing, particularly with Walmart (15.0%), who maintains almost triple the share of fellow discounter Target (5.1%). Kohl’s (4.4%), JC Penney (3.6%), and Old Navy (1.7%) round out the Top 5.

Walmart trumps Payless in this month’s battle of the Shoe Wars…the big W is ahead in August with 12.5% shopping there most often for footwear, versus 11.4% for the discount specialty. Kohl’s (4.9%), DSW (3.1%), and JC Penney (3.0%) follow.

Guess who’s the top scorer in Sporting Goods? Yes, with 15.1% shopping there most often, big discounter Walmart tops this category as well, gaining from 13.5% a year ago. Dick’s Sporting Goods follows with 10.7%, declining almost a point from August ’08 (11.6%). Nearest competitors Sports Authority (4.8%), Big 5 (3.3%), and Academy (3.0%) are still in the minor leagues.

Although Bed Bath & Beyond gained customer share in the past year, the big box is still trailing the big discounter in Linens/Bedding/Draperies…here’s the complete Top 5: 1. Walmart (20.1%), 2. Bed Bath & Beyond (13.7%), 3. JC Penney (7.5%), 4. Target (6.5%), 5. Kohl’s (3.7%).

With consumers choosing price (74.7%) and location (74.0%) as the top reasons to shop a particular store for Groceries, it should come as no surprise that the store with an EDLP promise and a prolific nationwide presence tops this category as well…this month, Walmart (18.3%) leads Kroger (6.7%), Publix (4.1%), Safeway (3.5%), and Shoprite (2.6%). Other reasons to shop include selection (59.9%), quality (48.8%), fresh produce (33.0%), and one-stop shopping convenience (31.2%).

While Walmart has a lock on the Grocery category, are any of its grocery store competitors poised to gain future share? According to this month’s Consumer Migration Index (CMI), which tracks those who have immigrated to a store (new customers in the past year) against those who have emigrated (left within the past year), and where a positive rating spells net growth to a retailer, Kroger – in addition to Walmart – is gaining new customers, while Safeway and Publix are experiencing customer deficits:

Not surprisingly in this economy, high prices (30.4%) was the top reason to switch Grocery stores…inconvenient location (20.3%), long checkout lines (13.6%), poor customer service (9.7%), and poor selection (8.1%) followed.

Remember, even when a customer shops a particular store most often for Groceries, they’ll still shop around, paving the way for potential cross-shopping in varying product categories (which can be quite a coup for one-stop shops like Walmart)…in the past 90 days, more than half of consumers (55.5%) have perused Walmart’s grocery aisles. Sam’s Club (17.9%) is the second most “popular” spot…Kroger (16.1%), Costco (13.6%), and Safeway (11.3%) follow.

The majority of consumers (61.0%) maintain interest in the Organic movement…among those who regularly or occasionally purchase Organic Products, produce is top pick (56.9%)…breads (29.7%), dairy (28.8%), cereals (28.6%), and juices (26.0%) also prove popular among these shoppers. While Walmart leads among the organic-oriented (with 10.2%), Whole Foods (5.8%), Trader Joe’s (5.0%), and Kroger (4.9%) are also top shops.

One in three consumers (32.2%) shops Walmart most often in Health & Beauty Care, giving the discounter a 20+ point margin over druggists CVS (8.8%) and Walgreens (8.5%)…Target (6.3%) and Rite Aid (3.1%) complete the Top 5.

Consumers continue to choose traditional druggists most often to cure their Rx-medicated colds…Walgreens leads here with 16.8%, followed by CVS (15.6%), Walmart (11.6%), Rite Aid (6.0%), and Target (2.2%).

Future Purchases

Increasing confidence and an optimistic forecast for layoffs appear to be buoying consumers’ intent to spend compared to July, according to the BIGresearch Diffusion Index (those who say they’ll spend less subtracted from those who’ll spend more). While the 90 Day Outlook improved from a month ago, most categories decline from August ’08, as the struggling economy continues to affect consumer spending:

Retail Merchandise Categories - 90 Day Outlook
 (Aug-09 compared to Jul-09 and Aug-08)

Six month purchase intentions for most high dollar durables decline or remain flat compared to a year ago, another sign that consumers just aren’t ready to spend. Fewer plan to purchase computers, furniture, major home improvement/repair, stereo equipment, and TVs versus August '08…home appliances, jewelry/watch, DVD/VCR, digital camera are flat. Two categories improve from ‘08: vacation travel and autos (perhaps fueled by the Cash for Clunkers incentive).
 

What’s Hot…Not

It appears that Honey-Do lists might be getting a little longer, as Do-It-Yourself projects are what’s hot this month among the majority of consumers (65.3%)…back-to-school shopping (53.5%), vacations (51.9%), and staycations (51.7%) also rate highly among consumers. Young men are fans of G.I. Joe: The Rise of the Cobra as well as Lady Gaga, while their female counterparts include flat sandals and one-shouldered tops on their hit list. What’s not? While consumers remain supportive of Michael Jackson’s music, most agree that the news coverage regarding the King of Pop’s demise should just beat it.


 

Sincerely,

                                                                 

 Editor

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