BIG Executive Briefing
Economic & Consumer Insights for Marketing Executives

 

June 2008 (Respondents surveyed 6/3 - 6/10/08)

Talking Points:

§         Have the economic stimulus checks boosted consumer confidence?

§         Practicality in purchasing continues to rise

§         To spend or save: how stimulus checks are being used

§         Anticipated layoffs reach new high

§         Financial Priority: Decreasing overall spending

§         July 4^th Pump Prediction: $4.39/gal

§         Online Apparel Retailing: eBay v. Wal-Mart

§         Consumer Migration: Men’s Clothing

§         Reasons for buying a new auto

§         What’s Hot?  The “green” commute…

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

 

Although 45.3% of Americans report that they’ve received their economic stimulus checks, it appears that this boost to wallets is failing to raise morale regarding our economy…in June, fewer than one in five (18.8%) indicate that they are confident/very confident in chances for a strong economy, lowering from May’s record low of 19.5% and less than half of June 2007’s 43.9%:

 

 

While we know now that we’re headed for a McCain v. Obama election battle, consumers' concerns for political and national security issues haven’t been abated…23.3% continue to worry, rising a point from last month (22.0%) and almost four points from one year ago (19.6%).

 

Rising gas and grocery prices have more consumers siding with practicality in their purchasing…close to half (45.9%) say they’ve become more practical in the last six months, up from 42.2% last month, 40.3% in June '07, and the highest reading since November '05 (46.2%).

 

And adding to retailer woes: most consumers are making a beeline for just the necessities when shopping…in June, 53.8% indicate they are focused on needs over wants, rising three points from May (50.7%) and up almost 7 points from one year ago (47.0%).

 

Economic stimulus checks were meant to jumpstart consumer spending, but it appears that consumers are stalling…of the almost half (45.3%) who’ve received their checks already, more than a quarter (26.9%) are saving them, 23.0% are paying down previous credit card debt, 16.3% are purchasing the necessities (i.e. groceries), 15.2% have put the checks toward gasoline expenditures, while 14.3% are paying down installment loans.  Only about one in twenty are putting their checks toward vacation travel (5.9%), apparel (5.1%), or electronics (5.0%).

 

 

Anticipated layoffs continue to tailspin following a jump in the U.S. unemployment rate and plant closings at GM…more than three in five (61.6%...a new high) contend that there will be “more” job losses in the next six months, up from 58.1% in May.  About a third (31.4%) expect layoff levels to remain the “same” (down from 34.3% last month), while the minority (7.0%) hopes for “fewer” (v. 7.6% in May).  Personal fears of the pink slips are also rising among workers…6.2% are concerned with becoming laid off, up from 5.7% in May and the highest reading since September '04.

 

With consumers increasingly shelling out at food stores and gas pumps, piggy banks appear to have been put on diets…only one in four consumers (26.1%) agrees they are saving enough to meet future needs.  On the flip side, almost half (45.7%) say they aren’t ready for future rainy days.

 

Look for many retailer revenues to continue to decline…decreasing overall spending is the top financial priority for a third of consumers (33.9%, rising from 29.7% one year ago)…paying down debt follows with 31.6% planning to do so in the next three months (down from 35.2% in June 2007).  Fewer (23.3%) consumers are also planning to increase savings (v. 26.9% last year), while paying with cash more often remains flat (20.4%).

 

With the Dow nearing 12K in June, more bears are siding with caution when it comes to future Wall Street investments…about half of investors (50.6%) indicate they would definitely/probably invest in the stock market, down 0.5 points from last month (51.1%).  Fewer investors (9.5%) plan to buy stocks in the next three months, compared to May (10.3%), while those planning to sell remains relatively flat (5.2%).

 

With gas prices crossing into $4 territory, an increasing number of drivers are rolling back on discretionary spending…among the now 86.0% who have been impacted by rising pump prices (a new high), the majority (54.7%) indicates that they will be curbing their cars and driving less…44.8% are reducing dining out, while – with the summer vacation season upon us – 44.1% are scaling back their travel plans:

 

 

Most drivers expect no relief from surging fuel costs…almost nine in ten (87.8%) expect gas prices to continue to climb through the July 4^th holiday, one in ten (10.3%) feels they’ll remain stable, while a minor few (1.9%) optimistically call for a price decrease.  Consumers are bracing for an average expected pump price of $4.39/gal come Independence Day, which may be right on target, given their prediction for $3.97/gal on Dad’s Day.

  

 

With drivers increasingly keeping their autos in “park,” it should come as no surprise that before heading off to stores, nine in ten (90.4%) hit the ‘net regularly or occasionally to research products they plan to buy…electronics is the top category searched (according to 39.2%), followed by apparel (20.8%), appliances (19.2%), home improvement items (18.5%), and shoes (16.2%).

 

When committing to an online purchase, cash-strapped apparel shoppers are most likely to buy up bargains on eBay.com (4.7%), followed closely by WalMart.com (4.2%), while Amazon.com (13.5%) and eBay.com (8.0%) are the top sites for non-apparel items.  BIG intelligence tells us that websites aiming to increase traffic should consider the most important online services to consumers: low prices, free shipping, and flexible return policies.

 

 

The appeal of apparel shopping on eBay.com appears to stem from consumers’ heightened bargain-hunting behavior…more than one in five (21.6%) contend they “only” buy clothing on sale, rising from 16.9% in June 2007 and the highest reading since post-Katrina’s 22.3% (October '05).  The majority (64.5%) still “usually” buys on sale (down slightly from 66.1% in ’07), while about one in ten (13.8%) feels that clothing sales aren’t important (v. 17.0% in ’07).

 

When specifically shopping for Women’s Apparel, big discounter Wal-Mart maintains a substantial lead over its competition…the roll-back specialist leads this category with 12.9% shopping there most often (up slightly from 12.6% one year ago), while Kohl’s (8.7%), JC Penney (6.0%), Macy’s (5.6%), and Target (2.9%) complete the top 5.

 

With price as the overwhelming reason to shop a particular store for Men’s Clothing most often (67.3% say so), Wal-Mart continues to be the front-runner in this category as well with 16.1% share (gaining a point over the last 12 months), while second place Kohl’s finishes with 9.2% (rising from 8.2% in ’07)…JC Penney (8.7%), Macy’s (5.0%), and Target (3.7%) follow.

 

With retailers increasingly searching for ways to expand their shares of consumers’ shrinking wallets, they’ll likely find insight within their word-of-mouth advertisers: customers.   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 Men’s Clothing on a scale of 0 (Not at All Likely) to 10 (Extremely Likely).  Among the top 10 stores for Men’s Clothing, it appears that most department stores as well as off-price retailer Ross garner highest recommendations, while discounters and that other department store – Sears – didn’t fare as favorably:

 

 

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

 

While Macy’s is currently enjoying a positive Net Promoter® Score among current customers, it appears that this department store may need to focus on customer retention in the long-run…according to June’s Consumer Migration Index (CMI), which tracks those who have immigrated to a store (new customers within 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, finds that Macy’s faces a customer deficit with a -2.4 rating…new customers are also failing to see the softer side of Sears, while Wal-Mart remains relatively flat:

 

 

High prices was cited by 18.7% of former customers as the reason to switch…inconvenient location (14.0%), poor selection (9.1%), unavailability of correct sizes (8.4%), and poor customer service (7.6%) followed.

 

It’s the big discounter with the big win in this month’s Shoe Wars…11.4% indicate they shop Wal-Mart most often for footwear (flat with ’07), trumping discount specialty Payless (10.0%, down from 10.9% one year ago)…Kohl’s (4.5%), JC Penney (2.7%), and DSW (2.7%) round out the top 5.

 

Best Buy continues as consumers’ best bet for Electronics…28.4% head to the big box most often (down slightly from 29.0% last year), while almost one in five (18.3%) choose Wal-Mart (up more than a point from 17.0% in June ’07)…Circuit City (6.2%), Target (2.4%), and Sears (2.0%) follow not-so-closely behind.

 

Wal-Mart’s gaining in Electronics…so who’s shopping there more often?  Those who subscribe to the Retail Ratings Reports (available for 12 major categories) know.  Check out a page from our May Retail Ratings report to see how men are helping Wal-Mart grow and may be hindering Best Buy: www.bigresearch.com/cast-members/big-cias-rrr-may08-electronics.pdf.

 

With household “to-do” lists likely growing longer as the weather becomes warmer, where can we expect do-it-yourselfers to head for fix-it supplies?  Almost one in three (29.1%) shop Home Depot most often, decreasing more than a point from last year (30.6%), while about one in four (23.4%) take their home improvement business to fellow big box Lowe’s (rising from 22.5% in ’07)…Wal-Mart (5.2%), Menards (3.5%), and ACE Hardware (2.4%) follow.

 

Though many are failing to appreciate Sears’ softer side (see Men’s Clothing), the purveyor of the powerhouse Kenmore brand is still on top when it comes to Appliances…about a quarter (22.6%) indicate they shop Sears first for Appliances, followed by big boxes Lowe’s (9.5%) and Best Buy (8.3%)…Wal-Mart (5.2%) and Home Depot (4.7%) round out the top 5.

 

The rising costs of food appear to have more shoppers gravitating to EDLP reliance…16.6% indicate they shop most often at discount king Wal-Mart, rising from 14.7% in June ’07 and almost triple the percentage of shoppers at second place competitor Kroger (5.7%).  Publix (3.7%), Safeway (2.7%), and Meijer (2.4%) follow.

 

Wal-Mart continues to have the lock on the lead in Health & Beauty Care as well…the discounter (27.9% shop there most often) leads Walgreens (7.9%), CVS (7.7%), Target (5.6%), and Rite Aid (2.6%).

 

However, the druggists still have the cure in Prescription Drugs (for now)…Walgreens (14.6%) and CVS (12.5%) are ahead of a growing Wal-Mart (10.4%, gaining from 8.0% in June ’07).  Rite Aid (5.3%) and Target (1.8%) complete the top 5.

 

 

Practical consumers, faced with rising gas and grocery prices, a crumbling housing market, increasing unemployment, forecast a continued dismal 90 day purchasing forecast, according to the BIGresearch Diffusion Index (those who say they’ll spend less subtracted from those who will spend more).  With most categories continuing to decline from May as well as June ’07, it appears that retailers will ring up a less-than-stellar summer selling season:

Retail Merchandise Categories - 90 Day Outlook

(June 08 compared to May 08 and June 07)

Six month purchase intentions for high-dollar durables aren’t expected to provide retailers with revenue relief, either…compared to one year ago, fewer plan to spend on autos, computers, furniture, home appliances, housing, jewelry, major home improvements, stereo equipment, DVD/VCR, digital cameras, and vacation travel.  The one anomaly continues to be TVs…9.2% intend to purchase, a slight uptick from 8.9% in June ’07.

 

While future plans to purchase an auto are down in June, one in ten indicates that they made this purchase in the last six months…the majority opted for a car (56.0%), followed by SUV (17.6%), truck (10.9%), cross-over (6.8%), mini-van (6.7%), and hybrid (2.0%).  Speculation that GM’s fuel-inefficient Hummer line may become history appears to be in line with consumers’ evolving motivation to purchase a new vehicle:

 

 

 

It’s not easy being green, but many consumers appear to be making an effort…more than three in four (76.1%) agree that carpooling is what’s hot this month, followed closely by bicycling (72.8%) and reading books (72.1%).  Younger consumers are also enjoying amusement parks and the Wii Fit, while women of all ages are lining up to see Sex and the City on the big screen.  What’s Not?  Long, flowy, figure obliterating maxi dresses may be a staple in stores this season, but look for this style to have the maximum discount on clearance racks soon.

 

 

 

Sincerely,


                                                                 

 

 

Editor

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