BIG Executive Briefing
Economic & Consumer Insights for Marketing Executives

 

November 2007 (Respondents surveyed 10/31 - 11/07/07)

Talking Points:

§     Consumer confidence falls approaching the holiday season

§     Practicality remains relatively stable

§     U.S. Employment Outlook: Consumers predict downturn

§     Half feels there is “too much month” at end of paychecks

§     Drivers expect pump prices to climb higher

§     Women’s Clothing shoppers by income

§     Who’s tops in Toys?

§     CMI: Health & Beauty Care

§     90 Day Outlook falters in November

§     What’s Hot?  Try asking Santa for a HDTV…

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

 

This year’s frigid economic climate may have Santa’s sleigh on the skids come December…with soaring crude oil prices, a dismal housing market, and the credit crunch, only 37.3% say they are very confident/confident in chances for a strong economy, down more than seven points from October’s 44.8% and a whopping 13 points from ’06 (50.3%).  Thankful thoughts and the jolly holiday spirit generally lift consumer sentiment in Q4, but this is the first time in recent years this figure has declined from October to November:

 

 

The ongoing war in Iraq and presidential candidates debating on the home front are likely contributing to consumers’ peace of mind…in November, 18.1% continue to worry about political and national security issues, up almost a point from last month (17.4%), but down two points from ’06 (20.2%).

 

Although consumer confidence has taken a nose-dive in the past month, practicality among consumers has remained relatively stable…fewer than two in five (38.8%) say they’ve become more practical with their purchasing compared to October (38.6%).  But why should retailers be thankful?  Amid a disappointing confidence reading, consumers aren’t going to neglect their holiday shopping lists altogether…practicality is still on the decline from one year ago (41.6%).

 

Perhaps it’s because they can just “charge it” or maybe it’s growing apathy toward prices at the pump, consumers are feeling less needy these days…heading into Holiday ’07, fewer than half (46.5%) say they focus on needs over wants when spending, down marginally from October (47.1%) and almost five points from ’06 (51.3%).

 

 

In November, it appears that many consumers will give thanks for being able to hold onto their jobs...more than two in five (43.7%) anticipate that there will be “more” layoffs in the U.S. over the next six months, an increase from 35.9% in October and the highest reading since October ’05 (44.5%).  About half (48.4%) feel that layoff levels will remain the same (v. 55.2% last month), while an optimistic 7.9% predict “fewer” (v. 9.0% in October).  Personal concerns with becoming laid off remain on par with last month and the previous year at 4.3%.

 

With half of consumers – yes, 50.0% - feeling that there is “too much month” at the end of their paychecks, many will be looking for ways to stave off holiday bills while being able to keep the twinkle lights on in their homes…while paying down debt remains top priority among 33.4% of consumers, fewer plan to do so compared to last month (34.9%) and ’06 (36.9%).  Increasing savings (25.3%), decreasing overall spending (28.0%), and paying with cash more often (20.3%) also take a backseat to holiday spending plans, declining as well.

 

As the Dow continues to descend from the 14,000+ reached in October, investor confidence falters…61.6% say they would definitely/probably invest in the stock market in November, down four points from last month (65.6%).  Those planning to buy stocks (11.3%) up slightly from October (11.0%), while those planning to sell rises a point to 6.5%.

 

You’re not alone if the chiming sound of the fuel gauge in your car makes you shutter…this month, 26.1% say that pump prices are having no effect on their spending, down from about a third (29.5%) who indicated so one year ago.  Watch out for the holiday traffic on the World Wide Web…among the 73.9% who are affected by pump prices, more indicated that they will be driving less (39.8%) compared to last year (35.6%).  Additionally, those planning to spend less on groceries and clothing have increased over the past year:

 

 

Drivers display realism, not optimism, about future pump prices…with gas prices soaring $0.25/gal from October to a current $3.06/gal average (source: AAA), four in five (79.8%) are bracing for an additional increase by Christmas, likely factoring into many holiday budgets this year.  Fewer than one in five (17.5%) predict prices will remain the same, while a dwindling few (2.6%) are holding out for a decrease.  Consumers are predicting an average pump price of $3.25/gal at Christmas, up from the $3.04 anticipated for Thanksgiving.
 

Some people may say their thanks over a slice of pumpkin pie this year, and for others, it may be pizza pie…the average connoisseur consumes this food favorite almost twice a month, spending about $16.88 on each order.  Diners are likely to head to Pizza Hut most often (16.0% indicate so), while Domino’s (7.8%), Papa John’s (7.2%), Little Caesars (2.9%), and Papa Murphy’s (1.9%) round out the top five.

  

 

Apparel is always a hot holiday gift, but this year may have many shoppers hunting for bargains on the sale rack…this month, more than one in five (21.4%) say they only buy clothing when it’s on sale, up more than a point from October (20.1%) and three points from '06 (18.3%).  The majority (64.4%), though, say they usually buy clothing on sale (down from 66.5% in ’06), while just over one in ten (14.2%) say sales aren’t important, down a point from last year (15.2%).

 

Kohl’s continues to make gains in Women’s Clothing, but it’s still a Wal-Mart world…the big W leads this month with 12.0% (down a point from last year’s 13.1%), while Kohl’s follows with 7.8% (up from 7.2% in ’06).  JC Penney (6.4%), Macy’s (6.1%), and Target (2.4%) follow.  Though store preferences vary among income groups...households earning under $50K a year are still most likely to head to Wal-Mart (19.2% say so), while those with incomes between $50K and $100K prefer Kohl’s (12.6%).  Macy’s is the top shop among $100K+ wage earners with 13.3%:

 

 

Wal-Mart’s standing is more stable in the Men’s section…the discount king is tops in menswear with 14.5%, compared to last year's 14.9%.  JC Penney follows with 8.4%, while Kohl’s (7.2%), Macy’s (5.0%), and Sears (3.5%) round out the top five.

 

In our latest installment of the Shoes Wars, Payless reclaims the lead and manages a slight edge over Wal-Mart, 10.9% share to 10.6%, though both retailers continue to stomp out the rest of the competition...Kohl’s (4.2%), JC Penney (2.9%), and DSW (2.9%) trail the duo.

 

With Wal-Mart and Toys ‘R Us already offering pre-season sales and doorbuster discounts, the battle of who’s going to be doing the biggest toy business this holiday season is brewing…according to consumers, almost one in five (19.2%) shop at Wal-Mart most often, giving the big discounter the edge over #2 Toys ‘R Us (15.5%).  Target (5.9%), KB Toys (1.4%), and Kmart (1.2%) follow not-so-closely behind. And, by the bye, about three in five (57.5%) will be avoiding “Made in China” labels on toys this holiday season.

 

Though Wal-Mart and Toys ‘R Us are the biggest players in the toy box, they may get tougher competition from Target in holidays yet to come…according to our monthly Retail Ratings Reports (available for 12 major categories), Target is the only toy retailer to hit the bulls-eye among shoppers, particularly with the lucrative $50K+ income segment.  Take a look at how Target’s share has grown among these shoppers, while shares of other stores have declined: www.bigresearch.com/cast-members/big-cia-rrr-toys-oct07.pdf.

 

Best Buy just announced plans to court its big-spending customers this holiday season, though focusing on these customers may cost the big box its dwindling edge over Wal-Mart among under $50K consumers, who may be less able to afford those budget-busting TVs or gaming systems…those earning less than $50K are currently more likely to shop Best Buy (25.9%) than Wal-Mart (24.3%) for Electronics, but the big box’s lead has dropped from 27.8% in ’06, while Wal-Mart’s share has remained relatively stable (24.7% in ’06).  Among those earning over $50K, Best Buy is dominant, with two in five (38.6%) shopping there most often, compared to Wal-Mart (11.1%) and Circuit City (9.9%).

 

Thinking of sprucing up your guest bedrooms before the out-of-town holiday guests begin to overstay their welcome?  For Linens, Bedding, and Draperies, shoppers head to Wal-Mart most often (16.8% say so) followed by big box Bed Bath & Beyond (10.8%).  JC Penney (6.8%), Linens ‘N Things (5.2%), and Target (5.1%) round out the top five.

 

Where can we expect hungry consumers to head to fill their fridges with turkey and the rest of the Thanksgiving fixings?  Big discounter Wal-Mart leads traditional grocers with 15.0% shopping its stores most often for Groceries.  Kroger (5.9%), Publix (3.4%), Safeway (2.9%), and Stop ‘n Shop (2.2%) round out the top five.

 

With the majority choosing price (65.2%) and location (52.2%) as the top reasons to shop a store for Health & Beauty Care, is it any wonder that the ubiquitous discount behemoth remains tops in this category as well?  With 29.4% shopping there most often, Wal-Mart leads CVS (8.7%), Walgreens (8.2%), Target (6.0%), and Rite Aid (2.2%).  Selection (47.3%), quality (25.2%), and 24-hour convenience (17.6%) follow price and location as top reasons to shop.

 

But has Wal-Mart gained or lost new customers in 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 within the past year) and where a positive rating spells new growth to a retailer, finds that Wal-Mart is still sitting pretty with consumers in the Health & Beauty Care aisle…the big discounter has gained new customers in the past year with a +3.0 rating, as has competitor CVS (with a +6.3 rating).  Walgreens and Target remain fairly even, while Rite Aid faces a customer deficit:

 

 

Pay attention, Rite Aid…why did customers choose to leave a particular Health & Beauty Care store?  More than one in five (22.0%) cited high prices, followed by inconvenient location (20.6%), poor customer service (8.7%), poor selection (8.1%), and competitor advertising (7.1%).

 

Druggists continue to have the cure for prescription-medicated colds…Walgreens (14.9%) and CVS (14.1%) continue as the top stops for Prescription Drugs.  Wal-Mart (9.1%), Rite Aid (4.9%), and Target (1.8%) follow.

 

 

With declining consumer confidence and a pessimistic outlook for employment, the 90 Day Outlook echoes similar sentiment…according to the BIGresearch Diffusion Index (those who say they’ll spend less subtracted from those who will spend more), most categories are down from October as well as last year…Sporting Goods provides the one bright spot:

Retail Merchandise Categories - 90 Day Outlook

(November 07 compared to October 07 and November 06)

It doesn’t appear those eight tiny reindeer will be pulling a sleigh full of computers, digital cameras, or high-wattage bling…six month purchase intentions for high dollar durables are down from last year: autos, computers, furniture, home appliances, house, jewelry/watch, major home improvement, stereo equipment, TV, DVD/VCR, digital camera, and vacation travel.  Our BIG advice: ask for a gift card to use toward those items on your wish list.

  

 

 

Stumped about what to get that special someone, but have a large wad of cash in your pocket?  Check out your local electronics department, as more than three in four (77.3%) contend that HDTVs are what’s hot this month…online holiday shopping (favored among 71.7%) follows.  Black Friday Shopping and MySpace are preferred among the younger set, while those 35+ are more likely root for the Boston Red Sox.  What’s Not?  More than 80% indicate that they won’t take a walk on the wild side with leopard print.

 

 

 

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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