BIGresearch® July Executive Briefing

And, look for a practicality-based mantra to continue…over the next five years, consumers say the current economic crisis will lead them toward a more frugal path: considering purchases more carefully (49.3%), being more price conscious when buying food/clothing (47.5%), trying to stick to a budget (46.7%), and spending less dining out (44.0%). Only 12.5% of consumers say they current economic crisis won’t impact their lifestyle.

Personal/Financial

While the U.S. unemployment rate did lower to 9.5% in June, this less-than-impressive “improvement” didn’t do much to quell consumers’ concerns for long-term stability in the labor market…this month, one in three consumers (30.8%) portend there will be “more” layoffs over the next six months, rising from 28.6% in June. Half (52.2%) contend that layoff levels will remain the same, flat from 30 days ago…fewer than one in five (17.0%) are optimistic for a decline, lowering from 19.2% in June.

The good news, though, is that those concerned with becoming laid off haven’t become greater in number…3.9% of those currently employed say they fear the pink slip, on par with last month and half of the Jul-09 reading (7.9%).

Declining confidence has practical consumers zeroing in on their piggy banks this month…over the next three months, more than a third (35.1%) plan to decrease overall spending, increasing from 28.7% in June and this month’s top financial plan. Almost as many (34.5%) intend to pay down debt (up from 32.5% last month)…plans to increase savings (27.7%) and pay with cash more often (24.4%) also rise compared to June.

With U.S. stocks recently clocking their worst quarter since Dec-08, investors are feeling a bit less bullish in July…this month, 45.0% of investors say they would definitely or probably gamble on Wall Street, lowering a point from June (45.9%) as well as Jul-09 (46.1%).

Nationally, average gas prices are remaining below the $3/gal mark (source: AAA), but drivers are still wary that the cost of topping off may continue to pump up over the summer…consumers are anticipating fuel to reach an average $3.06/gal by August 1, on par with what was expected on Independence Day ($3.08). Expect smart shopping strategies, such as shopping for sales more often (40.0%), taking fewer shopping trips (38.7%), using coupons more often (36.3%), and buying generics (32.3%), to prevail as drivers continue to look for ways to offset this expected rise at the pump.

Retail

SPECIAL Holiday ’10 Preview: While much of the U.S. is currently enjoying a sweltering summer, retailers are already thinking ahead to the holidays. It appears, though, that retailers may be met with a frosty reception…only 3.8% of shoppers indicate they’ll spend more for gifts compared to last year, while about one in four (28.3%) intend to spend the same. One in three (32.8%) are planning to spend less…popular budget-trimming plans include spending less overall, concentrating on “sale” items, doing more comparison shopping, and purchasing for fewer relatives (sorry, Aunt Mary):

It’s a little premature to make a wish list, but Women’s Clothing tends to be a popular and practical present to purchase…expect early bird shoppers to flock to these stores shopped most often: Walmart (12.1%), Kohl’s (10.0%), JC Penney (7.1%), Macy’s (5.8%), Target (3.0%).

Over in Men’s Apparel, Walmart remains the top store shopped (among 16.2%)…one in ten (10.1%) shops Kohl’s, while JC Penney (8.3%), Macy’s (5.4%), and Sears (3.0%) follow.

For that other big holiday – Back-to-School – expect Children’s Clothing shoppers to soon head to Walmart (13.5%), Kohl’s (5.0%), Target (4.7%), JC Penney (3.3%), and Old Navy (2.1%) for looks that will be a homerun in homeroom.

Shoes are also typically on the Back-to-School shopping list…look for the top two shops in this category, Walmart (12.0%) and Payless (11.1%), to make the grade with consumers. Kohl’s (5.5%), DSW (3.7%), and JC Penney (3.4%) round out the top five in this department. Not surprisingly, practical-minded consumers are most likely to trek to a particular Shoe store based on price (71.9% say so)…selection (53.3%), quality (39.9%), location (33.4%), and trustworthy retailer (14.3%) follow.

With Walmart wearing the footwear crown for 8 consecutive months now, is Payless likely to ever reign again? 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 are facing current customer deficits (Walmart = -3.9 CMI, Payless = -4.9 CMI), risking their long-term customer bases. The retailer to watch? #3 Kohl’s…the department store darling boasts a +2.1 CMI in this category:

Shoe shoppers of one year or less were most likely to cite high prices (26.7%) as reason to switch stores…poor selection (18.6%), unavailability of correct sizes (14.0%), poor quality (8.2%), and lack of newest fashions (8.1%) were also top culprits.

Switching gears to Electronics, Best Buy continues as the top big box on this block with 34.5% shopping there most often. One in five (21.6%) shops Walmart, while Amazon.com (3.3%), Target (2.9%), and Sears (2.3%) complete the top five.

When it comes to Sporting Goods, big discounter Walmart scores with 15.1% of shoppers…sports specialty shops follow: Dick’s Sporting Goods (12.1%), Sports Authority (4.9%), Big 5 (3.8%), and Academy (3.5%).

In the Grocery aisle, Walmart maintains its appeal with food shoppers…with 18.6% shopping there most often, the big discounter leads traditional grocers Kroger (6.7%), Publix (3.9%), Safeway (2.7%), and Shoprite (2.4%).

With nearly one in three (30.9%) shopping there most often for shampoos, soaps, and the like, Walmart continues to best competitors in Health & Beauty Care…druggists CVS and Walgreens follow (each with 9.4%), while Target (6.5%) and Rite Aid (3.2%) round out the top five.

With allergies prolific this summer, expect consumers to head most often to Walgreens and CVS for Prescription-medicated relief…16.1% and 15.6%, respectively, shop the druggists most often, while Walmart (11.9%), Rite Aid (5.1%), and Target (2.3%) follow.

Future Purchases

Dimming confidence and tighter budgets make way for a downtrodden 90 Day Outlook compared to June, according to the BIGresearch® Diffusion Index (those who say they’ll spend less subtracted from those who’ll spend more). While categories remain improved from Jul-09 and Jul-08 (shown in the table below), all remain depressed compared to a pre-recession Jul-07:

Retail Merchandise Categories - 90 Day Outlook
(Jul-10 compared to Jun-10, Jul-09, and Jul-08)

Despite the decline in confidence this month, six month purchase intentions for BIG ticket items improve from June and Jul-09 for many categories: autos, computers, furniture, home appliances, jewelry/watch, major home improvements, DVD/VCR, vacation travel, and TVs. Let’s hope this pick-me-up in planned spending lasts through the holiday season:

What’s Hot…Not

Sparks are flying – literally – with Fourth of July Celebrations, which top our list of what’s hot this month...the Apple iPhone 4 and Twilight: Eclipse prove popular among consumers overall. Men tune in for the MLB All-Star Game, while women are stocking jean shorts in their closets once again. What’s Not? While perfectly popular among the grade school sets, Silly Bandz just seem – well, silly – to your average consumer.

Sincerely,

Editor