BIG Executive Briefing
Economic & Consumer Insights for Marketing Executives

 

October 2007 (Respondents surveyed 10/2 - 10/9/07)

Talking Points:

§     Confidence is up from September, but how does it compare to ’06?

§     Should retailers offer cashmere or cotton to practical consumers this year?

§     Increasing confidence contributes to brighter U.S. employment outlook

§     Thrifty consumers plan for financial conservatism

§     Are drivers anticipating being thankful for lower gas prices come Turkey Day?

§     Budgeting consumers don’t necessarily scrimp on their style

§     Kohl’s competes with “masstige” appeal

§     Consumer Migration: Children’s Clothing

§     Where might “Santas” head for gadgetry this year?

§     90 day outlook indicates a nesting pattern

§     What’s Hot?  Dark Chocolate v. Candy Corn

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

 

‘Tis the season for holiday shopping, but will consumers be buying with continued conflict overseas and gas prices draining their wallets?  It appears that shoppers will be proceeding to stores with caution…while consumer confidence rose in October to 44.7% (from 41.2% in September), it’s down from the almost half (49.8%) who said they were confident/very confident one year ago.

 

The war with Iraq, now coupled with unrest in Myanmar, continues to weigh on consumers’ minds…17.4% worry about political and national security issues, up more than a point from September (16.1%), though down from ’06 (21.2%).

 

So will retailers be successful in pushing cashmere over cotton this holiday season?  Though confidence increased, consumers are showing signs of hedging their spending…practicality in purchasing rises two points from September to 38.6% in October.  The bright side?  One year ago, more than two in five (43.3%) asserted they were adhering to the practical path.

 

Admit it -- while spreading holiday joy to others, you’ve also splurged a time or two yourself, and it looks like many may do the same this year…while 47.1% say they focus on needs over wants in spending (up from 43.2% last month), this figure is down from ’06 when the majority (52.3%) were focused on the essentials.

 

 

Increasing confidence paints a slightly brighter picture for the U.S. employment outlook…after spiking in September at 38.8%, fewer consumers (35.9%) now say there will be "more" layoffs in the next six months.  The majority (55.2%) contends that layoff levels will remain the "same" (up from 52.6%) last month, while about one in ten (9.0%) indicate "fewer" (up slightly from 8.6%).  However, with holiday bills imminent, consumers are a little more concerned about their own employment security…4.6% worry about becoming laid off, up from 4.0% in September.

 

Perhaps with the intent to save for upcoming holiday expenditures, consumers forecast a more conservative financial outlook in October.  More than a third (34.9%) plan to pay down debt over the next three months, up from 32.0% in September, though down from 36.6% in ’06.  One in four (28.4%) say they’ll decrease overall spending, compared to last month’s 25.8% and last year’s 33.6%.  Also on the rise from September (though lowering from October ’06) are plans to increase savings (26.4%) and paying with cash more (21.3%).

 

The rise in confidence puts investors in a more giving mood as far as the stock market is concerned…65.6% of investors say they would definitely/probably invest, up from 62.1% last month.  Those planning to buy stocks remain firm at 11.0%, while those planning to sell declines from 6.2% in September to 5.4%.

 

Although gas prices have risen $0.50/gal to $2.76 in the past 12 months (according to AAA), this doesn’t seem to have had too much impact on consumer spending habits…currently, 28.7% indicate that prices at the pump aren’t putting a dent in their spending, relatively flat from a year ago (29.3%).  Though among the more than 70% that are affected, more than a third (36.2%) are combating pump prices by simply driving less, 30.7% have reduced dining out, while 30.0% have decreased vacation/travel plans.

 

So are drivers anticipating being thankful for lower gas prices come Turkey Day?  Simply put: no.  More than three in five (62.6%) say that pump prices will rise by November 22, about a third (32.1%) predict the “same,” while a scant few (5.3%) contend they’ll be lower.  Drivers are predicting an average price of $3.04/gal at Thanksgiving, up from the $2.95 anticipated for Halloween.

  

 

Budgeting consumers don’t necessarily scrimp on their style…more than two in five (44.1%) indicate that familiar fashion labels are important when buying clothing, up about a point from a year ago, but more than a whopping 10 points from five years prior:

 

 

So, with “masstige” (mass market + prestige) offerings from fashion heavy-hitters like Vera Wang and Ralph Lauren, is it any wonder that Kohl’s continues to climb in the competitive Women’s Clothing category?  With the freestanding department store darling opening a record 95 stores this month, Kohl’s lands at a strong #2 with 8.2% shopping there most often (up from 7.0% in ’06)…Wal-Mart fewer than four points ahead with 11.9%.  The complete top five (’06 shares in parentheses): 1. Wal-Mart 11.9% (15.0%), 2. Kohl’s 8.2% (7.0%), 3. JC Penney 6.4% (6.2%), 4. Macy’s 5.6% (5.1%), 5. Target 2.5% (2.7%).

 

Of course, subscribers to BIGresearch’s Retail Ratings Reports already knew that Wal-Mart isn’t tops among lucrative $50,000+ income Women’s Clothing shoppers anymore…Kohl’s and Macy’s have the lead here: http://www.bigresearch.com/cast-members/big-cias-rrr-womens-sep07.pdf

 

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

 

Same story, new category…in the Men’s section, Kohl’s (with 8.1%) comes close to knocking JC Penney (8.2%) out of its once-comfortable #2 position, while Wal-Mart continues to lead (’06 shares in parentheses): 1. Wal-Mart 14.5% (17.6%), 2. JC Penney 8.2% (8.4%), 3. Kohl’s 8.1% (6.9%), 4. Macy’s 5.4% (4.1%), 5. Sears 3.6% (3.5%).

 

In the tykes department, though, Wal-Mart continues to hold a substantial lead.  With close to the majority (46.4%) citing price as the major factor for shopping a particular Children’s Clothing store most often, the big discounter leads with 13.8%...Kohl’s (5.1%), Target (4.7%), JC Penney (3.7%), and Old Navy (2.7%).  Selection (34.7%), quality (27.0%), location (24.4%), and size selection (20.9%) follow price as reasons to shop these stores.

 

Not surprisingly, nine out of ten (91.9%) Wal-Mart Children’s Clothing choose to shop the discounter based on price and it appears that EDLP is helping these consumers save on their monthly clothing budget…while the average consumer spends $28.21 on kid’s clothes each month, Wal-Mart shoppers spend a little less ($26.33), while specialty store shoppers (Old Navy, The Children’s Place) average more:

 

 

Though can Wal-Mart continue to count on its Children’s Clothing customers for the long-term?  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 net growth to a retailer, finds that Wal-Mart is facing a slight customer deficit, while discount competitor Target exhibits growth with -1.1 and +2.1 ratings, respectively:

 

 

High prices (14.7%) were cited as the top reason to stop shopping a particular Children’s store, followed by inconvenient location (7.8%), poor quality (6.1%), decline of store appearance (5.5%), and poor selection (5.4%).

 

While tied last month in Shoes, Wal-Mart’s got the edge over Payless once again…the big discounter (11.4%) has a one point lead over the big discount specialty (10.4%) in October.  Kohl’s (3.8%), Target (2.4%), and JC Penney (2.2%) follow.

 

With the elusive Nintendo Wii sure to be found on hopeful wish lists this year, where can we expect Santa to head for this gadgetry?  Best Buy is a best bet…the big box leads the Electronics category with more than one in four (26.6%) shopping there most often.  Wal-Mart (15.9%), Circuit City (6.7%), Target (2.5%), and Sears (2.1%) follow.

 

On the softer side, Wal-Mart continues as tops in Linens/Bedding/Draperies…15.9% shop the big discounter most often (down from 19.9% last year), followed by Bed Bath & Beyond with 9.5% (flat from ’06).  JC Penney (5.9%), Target (5.3%), and Linens ‘n Things (4.9%) follow.

 

With its national presence, Groceries continue to be Wal-Mart’s bread and butter…14.6% shop the Bentonville behemoth most often for this category, followed by Kroger (5.3%), Publix (2.9%), Safeway (2.8%), and Meijer (2.1%).

 

Wal-Mart also remains top choice in Health & Beauty Care with one in four (25.5%) shopping there most often…the rest of the top five pale in comparison: CVS (7.3%), Walgreens (6.8%), Target (5.7%), Rite Aid (2.3%).

 

Druggists, though, have the cure for those seeking Prescription Drugs…Walgreens (14.2%) and CVS (12.0%) continue to top Wal-Mart (8.7%), Rite Aid (4.2%), and Target (1.7%).

 

 

While many gift-giving categories improve from September, the 90 Day Outlook forecasts a less cheery yuletide compared to October ’06, according to the BIGresearch Diffusion Index (those who say they’ll spend less subtracted from those who will spend more).  Electronics and home categories see improvement from last year (can anyone spot a “nesting” phenomenon?), while most apparel categories decline:

Retail Merchandise Categories - 90 Day Outlook

(October 07 compared to September 07 and October 06)

Cautious consumers appear to be planning to watch their wallets this holiday season…six month purchase intentions for most high-dollar durables are down in October from one year ago, including furniture, home appliances, jewelry, DVD/VCR, digital camera, stereo equipment, and vacation travel…autos and housing are flat.  What’s the expected hot ticket this year?  More than one in ten (10.9%) plan to buy a new TV in the next 6 months, up from 9.6% in ’06.

  

 

 

Beggar’s night is almost here, and 71.4% of consumers say they want their bags filled with heart-healthy Dark Chocolate, which tops our list of what’s hot for October…video game Halo 3 and Candy Corn follow.  Perhaps with regrets of an unbridled youth, laser tattoo removal is favored by those over 35, while in fashion, women indicate that Mary Jane pumps are the hot accessory though men prefer red lipstick (though obviously not on themselves).  What’s Not?  Though popular among Midwesterners, the Cornhole game isn’t exactly scoring points with the rest of the nation.

 

 

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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