BIG Executive Briefing
Economic & Consumer Insights for Marketing Executives

 

December 2007 (Respondents surveyed 12/4 - 12/11/07)

Talking Points:

§     Consumer confidence is weakest reading in last five years

§     Practicality among consumers is on the rise

§     Consumers’ faith in the employment market improves slightly

§     New Years Resolution #1: Save your pennies

§     How are today’s consumers to cope with rising home heating costs?

§     Kohl’s finishes a strong second in Women’s Clothing

§     Wal-Mart wins the Shoe Wars in December

§     Consumer Migration Index: Children’s Toys

§     90 Day Outlook doesn’t forecast the good tidings for retailers

§     What’s Hot?  We wish you a Merry Christmas!

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

 

A brisk Black Friday began the holiday shopping season a bang this year, but will retailers receive the gift of strong sales leading up to Christmas Day?  This month, only 37.0% of consumers are very confident/confident in chances for a strong economy, on par with November (37.2%), though down 10 points from one year ago (46.9%), making this the weakest confidence reading in the past five years (see chart).  For the economy’s sake, let’s hope that the gift card redemption season, beginning 12/26, brings good tidings to retailers.

 

 

All’s quiet on the home front, at least in consumers’ minds…though presidential hopefuls continue to spar on the airwaves and the Iraqi war wages on, 18.0% continue to worry about political and national security issues, flat from November (18.1%) and down from last year (18.9%).

 

Although confidence remains relatively steady from last month, practicality among consumers in on the rise…perhaps holiday bills are beginning to pile up in consumers’ minds, as two in five (40.3%) indicate they’ve become more practical in their purchasing, up from 38.8% in November, though down half a point from December ’06 (40.8%).

 

While many may have tried asking Santa for that 60” LCD TV, when it comes right down to it, most would probably concede that they don’t really need it… fewer than half (47.4%) say they are more focused on needs over wants, up from last month (46.5%), and another sign that consumers may be hedging their spending in the final holiday shopping weeks.  Though just in case Old St. Nick is listening…this month’s reading is still down from one year ago (50.2%).

 

 

Although confidence in the economy remains low in December, consumers’ faith in the employment market has improved slightly…this month, more than two in five (42.9%) predict “more” layoffs in the next six months, down almost a point from last month (43.7%).  Close to the majority (49.2%) say layoff levels will remain the “same” (v. 48.4% in November), while an optimistic few (7.9%) portend “fewer,” flat from 30 days ago.  Personal concerns about becoming laid off remain relatively unchanged from November…4.5% fear the pink slip v. 4.3% last month.

 

It appears that many consumers will be making the resolution to save a few pennies in the New Year, though fewer will be attempting to do so compared to ’06…more than one third (35.6%) say they’ll be paying down debt in the next three months, up from 33.4% in November, but lowering a point from last year (36.7%).  Likewise, while more intend to increase savings (26.4%), decrease overall spending (29.2%), and pay with cash more (21.2%) compared to last month, these figures also decline from ’06:

 

 

Amid rising energy prices and uncertain economic times, it should come as no surprise that more are having trouble stuffing those piggy banks…only about a quarter of consumers (27.6%) say they are currently saving enough for future needs, lowering from 31.0% last December.

 

With the Dow dipping below 13K toward the end of November, investor confidence has somewhat faltered…59.9% of investors indicate that they would definitely/probably invest in the stock market, down almost two points from last month (61.6%).  Investors planning to buy stocks lower slightly to 10.9% (v. 11.3% last month), while those planning to sell (6.7%) remain relatively flat from November (6.5%).

 

Ah, the joys of the winter holiday season - the celebrations, the gifts, the togetherness…and the COLD.  How can we expect today’s consumer to cope with rising home heating costs?  Many say they’re going green and using common sense to make their cents last longer…more than half (51.1%) simply say they’ll dial down their thermostats to reduce consumption, more than two in five (42.9%) will be bundling up more indoors, while 22.2% are installing energy efficient lighting.

 

Although average pump prices have declined $0.10/gal over the last month to a current $2.99/gal (source: AAA), these rates have more than three-quarters of consumers (76.7%) feeling drained, increasing from 70.6% in ’06…with two in five (40.0%) saying they’re simply driving less as a result, it may be the one-stop shopping destinations ringing up the most holiday sales this year.  Additionally, others are reducing dining out (33.2%), decreasing vacation/travel (29.8%), and spending less on clothing (26.8%).

 

With practicality on the rise and holiday shopping bills piling up, cautious consumers don’t expect relative pump price “relief” to last long…More than three in five (62.6%) expect gas prices to rise through New Years, fewer than a third (31.1%) predict that they’ll remain the same, while a meager 6.2% anticipate a continued price decrease.  Drivers are predicting an average pump price of $3.24/gal on January 1st, on par with the $3.25 expected at Christmas.

  

 

With growing numbers of consumers adding Cyber Monday shopping to their list of post-Thanksgiving traditions (see the NRF/BIGresearch release here), it should come as no surprise that the proportion of consumers researching products online before heading out to the stores is increasing as well…about nine in ten (89.4%) regularly or occasionally hit the ‘net for specs, pricing, and other product info, up from 87.8% in ’06.  The top categories researched are Electronics (44.2%), Clothing (21.4%), and Appliances (20.6%). 

 

Not only does Kohl’s have one of the top five websites shopped most often for Apparel items (following eBay.com, JCPenney.com, Walmart.com, and Amazon.com), the department store darling made big gains in ’07 in Women’s Clothing and may rival Wal-Mart in the New Year.  In December, Kohl’s – with its “masstige” appeal with lines from Vera Wang and Ralph Lauren - finished a strong second with 8.4% shopping there most often, trailing Wal-Mart (12.1%) by fewer than four points…one year ago, however, Wal-Mart (13.6%) led Kohl’s (7.1%) by more than six points.  The complete top 5: Wal-Mart (12.1%), Kohl’s (8.4%), JC Penney (6.7%), Macy’s (5.9%), and Target (2.6%).

 

It’s a little less catty in the Men’s section…although Kohl’s also continues to make gains in this category, it comes in third here (with 8.0%), following Wal-Mart’s strong lead (14.5%) as well as JC Penney (8.9%).  Macy’s (4.7%) and Sears (3.2%) follow.

 

When we last visited the Shoe Wars, Payless had the ever-so-slight edge over rival Wal-Mart as the top spot for footwear…the discount specialty (13.2%) also held the lead over the big discounter (11.8%) back in December ‘06.  This month, though, Wal-Mart finishes ’07 with the lead…the big W edges Payless 11.4% to 10.0%…Kohl’s (4.2%), JC Penney (3.1%), and Macy’s & DSW (tied, with 2.3% each) round out the top 5.

 

As children not-so-patiently wait for Christmas Day, Santa’s elves are busy heading out to the stores for Transformers, Barbies, and other “hot” toys…so where can we expect them to head?  Although pre-season doorbuster discounts had Wal-Mart and Toys R Us running a pretty tight race in October and November, the Bentonville behemoth extends its lead in December…here’s the top 5: Wal-Mart (20.6%), Toys R Us (14.6%), Target (6.4%), KB Toys (1.8%), and Kmart (1.2%).

 

With Barbie and her Dream House (or the latest video game, Matchbox cars, etc.) available at any major toy retailer, consumers take the budget approach when it comes to buying for their tots…price is the top influencing factor when it comes to shopping for Children’s Toys (46.7% say so), followed by selection (37.9%) and location (28.8%).

 

While the toy war between Wal-Mart and Toys R Us was fleeting this year, what can we expect in 2008?  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 another discount giant is hitting the bull’s-eye with shoppers…Wal-Mart and Toys R Us are both facing customer deficits, with -2.3 and -7.6 CMI ratings, respectively.  Target, on the other hand, gains with a +3.7 rating:

 

 

Why did customers leave a particular store for Toys?  More than one in ten (13.4%) of these shoppers cited high prices…inconvenient location (9.8%), long checkout lines (7.2%), and poor customer service (5.7%) follow.

 

Older boys and girls tend to enjoy finding toys from the Electronics department wrapped under their trees…more than one in four (26.6%) of consumers gifting from this category are most likely to be found at Best Buy, followed by Wal-Mart (17.6%), Circuit City (7.4%), Target (2.5%), and Sears (2.4%).

 

¯ Jolly old Saint Nicolas, Lean your ear this way ¯  Johnny wants a pair of skates (OK, rollerblades) and Susie wants a sled (or a snowboard), so where should we expect parents to head for these Sporting Goods?  One-stop-shop Wal-Mart is the ticket with more than one in ten (12.8%) shopping there most often for these items, though Dick’s is a close second with 10.0%.  Sports Authority (4.7%), Sears (2.4%), and Academy (2.3%) round out the top 5.

 

Those who subscribe to our Retail Ratings Reports (available for 12 major retail categories), though, know that men as well as upper income households tend to favor Dick’s over Wal-Mart for Sporting Goods, but Dick’s is also gaining favor with women and lower income households…take a page from our Retail Ratings to find out more; it’s our gift to you: http://www.bigresearch.com/cast-members/big-cias-rrr-sports-nov07.pdf

 

Whether you celebrate the holidays with ham, turkey, seafood, or maybe even that Chinese turkey from A Christmas Story, the grocery store is a hot spot for holiday shoppers…Wal-Mart’s still got a solid lead here with 15.8% shopping most often…traditional grocers Kroger (6.0%), Publix (3.3%), and Safeway (2.8%) follow, while Meijer (2.3%) rounds out the top 5.

 

Wal-Mart also continues its strong lead in Health & Beauty Care…more than one in four (27.1%) shop the big discounter most often for beautifiers.  CVS (8.1%), Walgreens (7.6%), Target (4.7%), and Rite Aid (3.0%) follow not-so-closely behind.

 

There’s a nip in the air that’s likely to lead to many colds this season…for those medicating with Prescriptions, consumers are most likely to head to Walgreens (14.6% shop there most often), followed by CVS (12.7%), Wal-Mart (8.9%), Rite Aid (5.1%), and Target (1.5%).

 

 

In December, the 90 Day Outlook doesn’t forecast the good tidings retailers are hoping for from consumers…with the exception of lawn & garden, all categories are down from last month as well as last year, according to the BIGresearch Diffusion Index (those who say they’ll spend less subtracted from those who’ll spend more).  Declining confidence, the credit crunch, and a housing market without a foundation factor together for this perfect storm of slowing spending:

Retail Merchandise Categories - 90 Day Outlook

(December 07 compared to November 07 and December 06)

It appears that TVs (perhaps of the HD variety) will be many retailers’ saving grace this holiday season…more than one in ten (10.6%) contend they’ll be buying a new TV in the next six months, up from 10.1% last month and flat from ’06 (10.7%).  Appliances and autos also up from November…furniture, housing, RV/boat, and stereo equipment flat, while purchase intentions for computers, jewelry, major home improvements, digital cameras, and vacation travel decline.

  

 

 

It’s many times difficult to find this labeling, but vast majority (84.9%) of consumers are on the lookout for items “Made in the U.S.A.”…additionally, wishing others a “Merry Christmas” is a welcomed sign of the season (according to 83.7%).  Going “green” and giving eco-friendly gifts is also a top thought among the majority and even more so among females, while those 35+ admit they still rock out to the Eagles.  The peace may be disrupted in households this season when picking out a Christmas tree, men are more prone to prefer live, while women opt for the artificial variety.  What’s Not?  He may have won Dancing with the Stars, but 80% say Helio Castroneves can two-step it straight back to the racetrack.

 

 

 

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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