BIGresearch July Executive Briefing

Executive Briefing
Economic & Consumer Insights for Marketing Executives

BIGresearch's Consumer Intentions & Actions Survey monitors over 8,000 consumers each month
providing unique insights & identifying opportunities in a fragmented and transitory marketplace

July 2009 (Respondents surveyed 6/30 - 7/07/09)

Talking Points:

§ Confidence among uncertain consumers continues to decline

§ Consumer outlook for future economy dwindles

§ Practicality rises from June, July ‘08

§ 88.9%: Economy will impact lifestyle over next five years

§ Holiday ’09 Preview: One in three will spend less

§ Kohl’s gains in Women’s Clothing

§ Consumer Migration for Shoes: Walmart v. Payless

§ Dismal 90 Day Outlook

§ What’s Hot? 4^th of July festivities, Johnny Depp

Notice: The video briefing is also now available on Blip.TV and YouTube!

Economy

With the DJIA flagging in recent weeks and the unemployment rate rising yet again, confidence among uncertain consumers continues to decline…27.1% contend they are confident/very confident in chances for a strong economy, down from 30.2% in the previous month, though still ahead of July ’08 (18.8%). However, the current reading remains well below the 47.8% reached two years ago.

With trying times marching on and the economic stimulus package yet to affect those on Main Street, consumer outlook for the future economy dwindles…this month, about two in five (44.6%) indicate they believe the post-recession economy will eventually rebound to previous levels, off from the nearly half (49.7%) who indicated the same back in March. One in four (26.0%) say the economy won’t rebound, up from the March reading (21.9%), while 29.4% still aren’t sure (v. 28.4%).

And, as to be expected, those in lower income brackets tend to be more pessimistic when discussing economic recovery…two in five of those earning under $50,000 are hopeful for recovery, compared to the more than half of consumers earning $75,000+:

While nuclear tension with North Korea remains and President Obama works to smooth U.S.-Russian relations, worry about political/national security issues rises more than two points from June (21.0%) to a current 23.6%, though still below last year's 24.4%.

Abating confidence in July fuels consumers’ proclivity for practicality…this month, 51.0% say they have become more practical in purchasing, up more than three points from June (47.8%). More significantly, this figure is on the rise from a year ago (50.0%), when consumers were less confident AND coping with $4+/gal gas prices…this again points to a hard road for recovery as well as long-term changes in consumer spending patterns.

Not surprisingly, those focused on needs over wants increases as well…in July, three in five (59.9%) maintain they zero in on the necessities when shopping, up nearly five points from June (55.0%) and on the rise from a year ago (58.1%) as well.

More evidence that consumer spending will endure long-term restructuring: about nine in ten (88.9%) believe the current economic crisis will impact their lifestyles over the next five years…the majority (52.1%) simply plans to consider each purchase more carefully, while almost as many (48.8%) intend to be more price-conscious when buying food and clothing. Additional plans include sticking to a budget (46.7%), dining out less (45.2%), and not racking up a large amount of credit card debt (42.4%):

Personal/Financial

With U.S. unemployment now at a 26 year high, consumers - naturally - remain braced for a rocky employment environment through the end of the year…more than two in five (42.0%) are still expecting “more” layoffs in the next six months (down a point from June’s 43.3%), while almost as many (41.4%) expect figures (i.e. the ugly 9.5% unemployment rate) to remain the “same,” up from 39.7% in the prior month. A relatively small 16.6% are hoping for fewer, down marginally from 17.0% in June. Personal fears about becoming laid off remain piqued in July with 7.9% fearing the pink slip, versus 7.6% in June and 6.0% a year ago.

With more than three in five (61.2%) feeling less wealthy than they did a year ago, consumers remain concerned with balancing their budgets…while decreasing overall spending (35.7%) and paying down debt (34.4%) remain the top financial plans in July, interestingly, they are on the decline from 39.2% and 35.3% last year, respectively…why? As you recall, consumers were witnessing record high gas prices a year ago, fueling a surge in desire to cut back on spending and debt accumulation. Though these plans have declined from ’08, two other important finance plans have continued to rise from a year ago: increase savings (27.6%) and paying with cash more often (25.3%), signaling consumers’ resolution to spend responsibly.

With the DJIA sloping downward in the past month, investor confidence declines as well…in July, 46.1% of investors say they would definitely/probably invest in the stock market, lowering two points from June (48.0%). However, investors who intend to buy stocks in the next 3 months remain firm at 9.7%, while those planning to sell (4.6%) increase only slightly from 4.3% last month.

With generally volatile summer gas prices tempering in the mid-$2/gal range, fewer consumers (“only” 74.1%) continue to feel the pinch at the pump compared to last year (84.9%). However, while some actions to offset pump prices are on the decline from a year ago (i.e. shopping closer to home and taking fewer shopping trips altogether), some “smart shopper” habits seemed to have stuck. Nearly two in five consumers (37.9%) continue to clip coupons (up from 36.1% in July ’08), while the number of those price comparing with ads and newspapers remains stable (31.8%).

Relatively affordable pump prices haven’t lured consumers into a false sense of security…three in five (59.0%) contend that gas prices will continue to rise through the beginning of August, while 31.7% anticipates they will remain the same…only one in ten (9.3%) is holding out for a decline. Drivers are estimating an average price of $2.98/gal come August 1, about a dime lower than the Independence Day forecast.

Retail

While the kiddies just begun their summer break, anxious retailers have their sights set on Holiday ’09 – and rightfully so, according to consumers…more than one in three (36.2%) contend that they will spend less this holiday season compared to last, while a paltry 2.7% anticipates spending more and one in four (26.1%) plans to spend the same. (29.1% say it’s too early to know and 5.8% don’t celebrate the season).

Among those planning to spend less for Holiday ’09, how can we expect these consumers to go about doing this? The majority (69.1%) they will just slash their budgets altogether, while other plans of action include only buying gifts on sale (48.3%), doing more comparison shopping (40.4%), buying for fewer relatives (32.4%), and gifting to fewer friends (30.7%):

When Kohl’s landed on the retail radar, it had a few people scratching their heads: Was this a department store or a discounter? Or, why aren’t they located in malls? Any way you classify this retailer, it seems to have cooked up a formula for success among consumers…in the competitive Women’s Clothing arena, Kohl’s continues in a strong second place position with 9.4% shopping there most often (up a point from last year), just behind big discounter Walmart with 11.9% share (off half a point from July ’08). The “old guard” department stores – JC Penney and Macy’s – follow, with 6.0% and 5.1% share, respectively, while Target (2.6%) rounds out the Top 5.

So which demographic segments are contributing to Kohl’s success in this category? According to the latest Retail Ratings Report for Women's Clothing, this retailer is benefitting from lucrative $50,000+ income households as well as females. For a peek at the BIG inside track, click here: www.bigresearch.com/big-cias-rrr-jun09-womens.pdf.

To learn more about the Retail Ratings Reports (available for 12 major categories), call 1-800-800-4462 or visit us on the web at www.BIGresearch.com.

Kohl’s gained half a point in Men’s Clothing over the past year, but the department store hybrid trails Walmart by a wider margin in this category…with 15.3% shopping there most often, the big discounter leads Kohl’s (9.2%), JC Penney (8.2%), Macy’s (5.4%), and Sears (3.0%).

Walmart holds a precarious perch in Shoes, thanks to Payless…the two footwear rivals call it a draw in July, each with 11.1% shopping most often, ending Walmart’s five month reign as the lone #1 in this category. Kohl’s (5.4%), DSW (3.5%), and JC Penney (3.3%) complete the Top 5. The majority (70.9%) of penny-pinching consumers name price the top reason to shop a particular retailer for Shoes most often…selection (54.1%), quality (39.3%), location (34.0%), and service (13.3%) also rank in importance.

So is Walmart or Payless better poised for future share growth? 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, shows that both retailers – particularly Payless – are facing customer deficits, with negative CMI ratings of -4.6 for the discount specialty and -1.1 for Walmart:

With more than a quarter (27.6%) of shoppers of one year or less citing “No Preference” for a Shoe store, it seems these consumers are abandoning loyalties to particular stores and shopping around more often (or they just haven't been shopping for Shoes as frequently, so they don't hold a preference for one particular store anymore...see 90 Day Outlook). These consumers cited high prices as the top reason to switch (25.5% said so), while poor selection (13.9%), unavailability of correct sizes (12.8%), and inconvenient location (11.5%) also played starring roles.

It appears that Best Buy is continuing to benefit from the demise of Circuit City and – perhaps – a recent ad campaign highlighting sales associate knowledge and a price match guarantee…the big box cleans up in Electronics with 35.3% stating they shop there most often in July, up nearly seven points from one year ago (28.5%). Walmart (20.5%) finishes a respectable second, also rising from July ‘08 (17.8%)…Target (2.6%), Sears (2.2%), and Amazon (2.0%) follow.

While year-over-year shares have risen for the top big boxes in Home Improvement, Lowe’s has still managed to narrow the gap between itself and #1 Home Depot…one year ago, the big orange led big blue by more than five share points (28.5% versus 22.9%, respectively). In the current standings, Home Depot (29.4%) leads Lowe’s (25.6%) by fewer than four points…stay tuned to this saga. The rest of the hardware competition is left in the single digits: Walmart (5.9%), Menards (3.9%), and ACE (2.6%).

Walmart maintains a healthy lead over traditional grocers in the foodstuffs aisle…the big discounter leads in July with 16.6% shopping its pantry aisles most often, compared to Kroger (6.9%), Publix (3.6%), Safeway (3.0%), and Meijer (2.3%).

Walmart leads by a whopping 20 percentage points in Health & Beauty Care…more than a quarter (28.5%), shop the big discounter most often for shampoos, soaps, and the like, followed by druggists CVS (8.7%) and Walgreens (8.3%). Target (6.5%) and Rite Aid (3.1%) complete the Top 5.

The “Big 3” in Prescription Drugs post year-over-year gains in July…Walgreens continues to lead with 15.5% (up from 13.2% a year ago). CVS is second with 14.1% (v. 12.5%), while Walmart follows in third with 11.4% (rising from 10.4%). Rite Aid (6.2%) and Target (2.2%) continue to trail.

Future Purchases

Lowering confidence, dismal employment figures, and the recent decline on Wall Street contribute to a gloomy 90 Day Outlook in July, according to the BIGresearch Diffusion Index (those who say they’ll spend less subtracted from those who’ll spend more). Results are mixed compared to a year ago, but all categories are down from June:

Retail Merchandise Categories - 90 Day Outlook

(Jul-09 compared to Jun-09 and Jul-08)

Perhaps the “Cash for Clunkers” incentive is generating interest in auto purchases this month…in July, one in ten (10.0%) contends they plan to purchase an auto in the next six months, rising more than half a point from a year ago (9.4%). Purchase intentions for computers, DVD/VCR, and vacation travel are up compared to last year, while most categories, including appliances, TV, stereo equipment, and digital camera, remain flat. Major home improvements and furniture decline from a year ago.

What’s Hot…Not

Independence Day festivities sparked interest in the majority of consumers, as they declared picnics, cookouts, and fireworks as what’s hot for July…Johnny Depp, Public Enemies, and Harry Potter & the Half-Blood Prince also rated highly among consumers overall. Ripped denim and maxi dresses are a hit among women, while men under 35 back Bruno. What’s Not? Consumers fail to see clearly with aviator sunglasses.

Sincerely,

Editor

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