BIG Executive Briefing
Economic & Consumer Insights for Marketing Executives

 

March 2008 (Respondents surveyed 3/4 - 3/11/08)

Talking Points:

§     Consumer Confidence continues to sink

§     Practicality plays a bigger role in consumer spending

§     Employment: Record high predict “more” layoffs

§     Drivers predicts $3.49/gal gas at tax time

§     Shoe Wars: Payless wins this battle

§     Consumer Migration: Linens/Bedding/Draperies

§     90 Day Outlook mixed for seasonal categories

§     Could consumers’ need for HD save our economy?

§     What’s Hot?  We’re all waiting for the postman…

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

 

Soaring pump prices, a sinking housing market, and the slumping Dow have fewer consumers holding high hopes for the future of the economy…one-quarter (24.8%) contend they are confident/very confident in chances for a strong economy in March, lowering more than a point from February’s record low reading (26.2%) and more than 22 points from one year ago (46.9%).

 

McCain’s been confirmed as the Republican candidate, Obama and Clinton are still battling it out for the Democratic ticket, and the war in Iraq continues…these factors are likely contributing to consumers’ heightened security concerns as 22.3% contend they’ve been worrying more about political and national security issues, up from last month (20.6%) as well as last year (16.6%) and the highest reading since October 2005 (23.6%).

 

Practicality is on the rise as concerned consumers attempt to reign in their spending…more than two in five (43.6%) say they’ve become more practical in purchasing, up from 40.2% in February and 38.5% one year ago.  And it appears that retailers will continue to struggle for a share of consumers’ wallets…this month’s reading is the highest in more than two years (January 2006, 44.6%).

 

Causing additional concerns for retailers hoping that consumers will spring for the newest merchandise this season…more than half (51.0%) are focused on needs over wants in spending, up three points from February (48.0%) as well as March ‘07 (47.8%).

 

 

 

Given the continued decline in confidence, it should come as no surprise that consumers foresee similar setbacks for the employment environment…this month, the majority (55.5%) contend there will be “more” layoffs over the next six months, up from 50.4% last month and a new high.  Just over a third (37.6%) feel layoff levels will remain the “same” (down from 43.1% in February), while the vast minority (7.0%) optimistically call for “fewer,” relatively flat from last month (6.6%).  Those with personal concerns about becoming laid off is downslightly at 5.1%, compared to 5.5% in February.

 

While consumers aren’t as likely to work on resolving their issues at the bank this month, they’ve become more determined not to contribute to furthering the problem…Paying down debt remains the top financial plan as 36.8% plan to do so, down half a point from February (37.3%)…fewer (27.2%) also plan to increase savings, lowering from 28.7% last month.  Financial conservatism is evident, though…almost a third (31.4%) plan to decrease overall spending (up from 29.3% in February), while more also plan to pay with cash more often (23.0% v. 20.2% last month).

 

With the Dow on a downturn from last month, bearish investors continue to hibernate…52.8% say they would definitely/probably invest in the stock market this month, down slightly from February’s 53.1%.  One in ten (10.5%) investors plan to buy stocks in the next three months (lowering from 11.1% in February), while 5.8% contend they will sell (v. 4.9%).  While the Dow recently rallied following the Fed’s announcement of additional liquidity to be pumped into the credit markets, stay tuned in April for the impact on investor sentiment.

 

Drivers continue to feel the pinch at the pump…a whopping 81.2% of consumers say their spending has been affected by rising fuel costs, up from 76.3% in February and 72.6% one year ago.  Naturally, more are now delaying major purchases (25.7%), reducing dining out (37.1%), decreasing travel (34.8%), and spending less on apparel (31.8%) and groceries (19.8%).  And, with gas prices reaching new highs in mid-March, expect drivers to pull back spending further in coming months.

 

Little optimism lies with drivers concerning the future direction of pump prices…the majority (81.7%) contend that gas prices will continue to rise through tax time (April 15), 16.1% assert they’ll remain the same, while a scant 2.2% hope for a decrease.  Consumers predict an average pump price of $3.49/gal come April 15, climbing from the $3.11 forecasted for St. Patrick’s Day.

  

 

With gas prices on the rise, retailers might be wise to make investments in their websites…with drivers curbing their cars more often at home, it should come as no surprise that 90.3% of consumers admit that they regularly or occasionally research products online before heading off to the stores to buy them.  Most frequently searched products include Electronics (43.5%), Appliances (21.9%), Apparel (20.9%), Home Improvement Items (17.9%), Medicines (16.6%), and Shoes (16.5%).

 

When committing to an online purchase, consumers are most likely to buy apparel items from – where else? – WalMart.com, while Amazon.com tops the list for non-apparel items (see table).  When shopping online, frugal consumers place the highest importance on low prices, followed by free shipping and flexible return policies.

 

 

When it comes to shopping for Women’s Clothing in particular, Wal-Mart continues its lead with 11.8% shopping the discounter most often (slipping from 12.5% in ’07)…Kohl’s is second with 7.5% (strengthening from 7.1% one year ago), while JC Penney (5.9%), Macy’s (5.4%), and Target (2.7%) round out the top 5.

 

Wal-Mart’s lead is more substantial in the Men’s department…14.0% shop the discounter most often (also down from last year’s 14.6%).  Kohl’s (7.8%) has a slight edge over JC Penney (7.7%), while Macy’s (5.4%) and Sears (3.0%) complete the top 5.

 

Wal-Mart completes the trifecta of clothing departments with the lead in Children’s as well…when it comes to shopping for little Johnny or Susie, more than one in ten (13.4%) head to the big discounter, followed by Target and Kohl’s (tied, with 4.5% each).  JC Penney (3.3%) and Old Navy (2.0%) follow.

 

But is Wal-Mart losing the battle of the Shoe Wars?  This month, discount specialty Payless (11.1%) has a half point lead over the big W (10.6%), though both retailers have lost share since March ’07.  Contender-in-training Kohl’s is third with 4.6% (gaining from 3.6% last year), while JC Penney (2.9%), DSW (2.7%), and Macy’s (2.7%) follow.

 

Those who subscribe to our monthly Retail Ratings Reports (available for 12 major categories) know that Payless holds a stronger lead over Wal-Mart among finicky female shoppers, though the Consumer Equity Index™ indicates decline over the past year.  Check out a page from our February Retail Ratings Report for all the details: http://www.bigresearch.com/cast-members/big-cias-rrr-shoes-feb08.pdf

 

In Electronics, big box Best Buy continues to beat the competition…almost a third (31.0%) shop the superstore most often, followed by Wal-Mart (17.6%), Circuit City (7.5%), Sears (2.6%), and Target (2.2%).

 

As the snow melts and temperatures rise, where can we expect consumers to head to purchase new spring sports gear?  13.4% of shoppers say they are most likely to head to Wal-Mart (lowering from 14.1% in ’07), while one in ten (10.0%) shop most often at Dick's (up from 9.5% last year).  Sports Authority (4.3%), Sears (2.8%), and Big 5 (2.5%) round out the top 5.

 

Spring cleaning may inspire some to spruce up their home décor…when it comes to shopping for Linens/Bedding/Draperies (L/B/D), shoppers are most likely to purchase these softlines at Wal-Mart (18.1% indicate so), followed by Bed Bath & Beyond (11.9%), JC Penney (7.5%), Target (6.0%), and Linens ‘n Things (5.8%).  Budget-conscious consumers opt for price as the top driver to purchase L/B/D at a particular store (64.5% say so)…selection (46.0%), quality (39.1%), location (34.5%), and in-store experience (11.7%) follow.

 

But would you recommend your L/B/D store to a friend?  Word of Mouth advertising is beyond the control of marketers and as the wedding season approaches (with L/B/D topping the wish lists for many couples), retailers should take heed.  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 L/B/D on a scale from 0 (Not at All Likely) to 10 (Extremely Likely).  Among the top ten stores for L/B/D, Anna’s Linens received the highest ratings, followed by big boxes Bed Bath & Beyond and Linens ‘n Things…discounters as well as Sears are among the least likely to be recommended:

 

 

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

 

It appears that positive word of mouth may have benefited Bed Bath & Beyond over the past year…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 in the past year) and where a positive rating spells net growth to a retailer, finds that in the coming months, Bed Bath & Beyond (with a +3.3 rating) may become tougher competition for current #1 Wal-Mart (-5.4 rating):

 

 

One-quarter (24.3%) of L/B/D shoppers of one year or less cited high prices as the reason for leaving a particular store, followed by inconvenient location (16.5%), poor selection (9.0%), decline of store appearance (8.4%), and in-store experience (8.2%).

 

Wal-Mart fares better in the Grocery aisle…with 16.1% shopping there most often (growing from 13.8% in ’07), the big discounter leads grocers Kroger (5.6%), Publix (3.2%), and Safeway (2.9%).  Meijer (2.1%) completes the top 5.

 

Wal-Mart extends its lead in Health & Beauty Care as well…about one in three (28.5%) shop the big W most often for soaps and shampoos (rising a point from 27.4% in ’07).  CVS (7.9%), Walgreens (7.8%), Target (5.8%), and Rite Aid (2.6%) follow not-so-closely behind.

 

Cold & flu season is hopefully behind us, but spring blooms may have sneezing shoppers headed out for additional Prescription Drugs…here, druggists Walgreens and CVS lead the way with 16.5% and 13.6% shopping most often, respectively.  Wal-Mart follows with 9.3% (gaining from 8.2% in ’07), while Rite Aid (5.4%) and Target (1.6%) complete the top 5.

 

 

With an early Easter this year, the 90 Day Outlook for seasonal categories such as apparel and shoes is mixed compared to last month, according to the BIGresearch Diffusion Index (those who say they’ll spend less subtracted from those who’ll spend more).  Dismal economic readings prevent the Outlook from lifting from March 2007:

Retail Merchandise Categories - 90 Day Outlook

(March 08 compared to February 08 and March 07)

Could consumers’ need for HD save our economy?  Consumers weren't the bearers of good news in this month’s BIG briefing, but a silver lining may have been found…perhaps earmarked for purchase when government rebate checks arrive, more than one in ten (11.4%) contend they’ll buy a new TV in the next six months, up from last month (10.6%) and last year (9.0%) and our highest reading to date. 

 

Six month purchase intentions were also on the rise from February for computer, furniture, home appliances, DVD/VCR, digital camera, vacation travel, and house (slightly).  Autos, RV/boat, stereo equipment flat…jewelry and major home improvement down.

 

ON THE LIGHTER SIDE...What's Hot and What's Not 

 

Please Mr. Postman…three-quarters of consumers are waiting for government rebate checks to hit their mailboxes this spring, making the Stimulus Package what’s hot this month.  Additionally, consumers find downloading music (69.6%) trendier than buying CDs (37.4%).  March Madness is sporting for the majority of men, while women agree that yellow is IN for this season’s clothing and accessories.  What’s Not?  When it comes to TV shows about career women in NYC, viewers would prefer to put a hit out on Cashmere Mafia and brave the Lipstick Jungle.

 

 

 

Sincerely,


                                                                 

 

 

Editor

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