BIG Executive Briefing
Economic & Consumer Insights for Marketing Executives

 

September 2007 (Respondents surveyed 9/4 - 9/11/07)

Talking Points:

§     Iraq, et al. contribute to declining consumer confidence

§     On the eve of the Holiday season, consumer practicality declines

§     Downturn in confidence breeds pessimism for employment outlook

§     Consumers continue to starve their piggy banks while favoring plastic over paper

§     What pump price do consumers predict for Halloween?

T  SPECIAL: Advanced Holiday ’07 Outlook

§     Which websites may fill the most holiday orders for Apparel?

§     Wal-Mart continues to court favor with consumers in Sporting Goods

§     90 Day Outlook brightens from 2006 for many categories

§     Consumers likely scaling back big ticket purchases

§     What’s Hot?  ‘Tis the season…for College Football, that is.

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

 

Battle on Capitol Hill regarding the status of troops in Iraq, the still-slumping housing market, fluctuating pump prices, and apathy toward consumer savings combine to form the perfect storm for negatively impacting consumer confidence.  In September, 41.2% contend they are confident/very confident in chances for a strong economy, down from last month (43.9%) as well as last year (43.4%).  However, confidence remains up significantly from ’05 (33.4%), when Hurricane Katrina devastated the Gulf Coast region.

 

Thankfully, although Bin Laden made recent televised appearances, the sixth anniversary of the September 11^th tragedy passed without incident on the U.S. home front.  As such, consumers are feeling more secure…only 16.1% worry about political and national security issues, down almost two points from last month (17.9%), and dropping almost 30 points since the first 9/11 anniversary in 2002 (45.2%):

 

 

With China still under fire regarding the safety of its exports, more than one in five (21.9%) continue to be concerned with the foods they ingest, up slightly from 21.3% in August and more than eight points from ’06 (13.8%).

 

With the Holidays on the horizon (see “Retail” for the advanced holiday spending outlook), will consumers be givers or Grinches?  It seems that about a third might lean toward sensible gifts like socks and roadside emergency kits with 36.7% contending they’ve become more practical in the last six months.  However, little Johnny and Susie may be in luck…practicality in purchasing is down from last month (37.9%) as well as last year (39.7%).

 

With the impact of pump prices seemingly decreasing (perhaps offset by the “Charge It!” consumer spending mantra), penny pinching may be going out of style…in September, 43.2% proclaim they focus on needs over wants in spending, down from 46.5% last month and 49.5% in ’06.

 

 

The downturn in confidence breeds pessimism for the U.S. employment outlook…in September, almost two in five (38.8%) predict “more” layoffs in the next six months, up more than five points from August (33.3%) and the highest reading since February ’06 (42.6%).  The majority (52.6%) feels that layoff levels will remain the “same” (down from 57.1% last month), while only 8.6% optimistically say “fewer” (v. 9.6% last month).  Despite this, personal fears about becoming laid off lower to just 4.0% from August’s 4.7%.

 

Consumers continue to starve their piggy banks while favoring plastic over paper…this month, fewer than a third (32.0%) plan to pay down debt over the next three months, down from 33.1% in August and 36.5% in ’06.  Only about a quarter (25.8%) intends to decrease overall spending, lowering from last month (27.5%) and last year (31.6%).  Those planning to increase savings (24.4%) and pay with cash more (18.8%) face similar declines from a month ago as well as ’06.  With forecasters predicting a “near recession” for ’08, many should find it unsettling that more than two in five consumers (43.4%) say they aren’t saving enough for future needs.

 

With the Dow dipping below 13K in late August, investor confidence in the stock market falters slightly…62.1% say they will definitely/probably invest, lowering from 63.6%, but rising from last year (60.9%).  11.0% of investors contend they will buy stocks before the end of ’07, down a point from August (12.2%), while 6.2% plan to sell, flat from last month.

Although the average price for gas has risen $0.20/gal to $2.82 in the past year (source: AAA), drivers are feeling less of a sting from fluctuating gas prices when buzzing about town…more than a quarter (26.5%) now say that gas prices are having “no major impact” on their spending, up from 24.4% last year and 19.8% in ’05, though well below 45.7% three years ago.

 

But are gas prices impacting consumers less simply because they are adopting greener driving habits?  37.5% say they are abating the impact at the pumps by simply driving less, while 37.3% are shopping closer to home.  Additionally, more than one in ten (12.6%) are avoiding the trips to the stores by shopping more online (up from 11.1% in '06)…expect the World Wide Web to be a popular shopping destination again this holiday season.

 

Although the summer gas gouging season ended Labor Day, 45.2% of consumers are still anticipating a rise in pump prices by Halloween…44.4% contend that they will stay the same, while an optimistic one in ten (10.4%) predict they will lower.  Drivers expect an average price of $2.95/gal come Fright Night, $0.20 less than the $3.14 estimated for Labor Day.

  

 

T  SPECIAL: Advanced Holiday ’07 Outlook…Though about a fifth (20.4%) say it’s too early to tell, 6.9% indicate they plan to spend more this holiday season than they did the last, up slightly from last year (6.5%) as well as ’05 (6.3%).  About two in five (37.4%) say they'll spend the same, increasing from last year (35.7%).  The encouraging news for retailers?  While three in ten (30.9%) plan to spend less this year, that figure is up less than a point from last year’s 30.2% and down almost four points from '05 (34.7%).

 

T  So who are the holidays’ anticipated big spenders (spending more) and penny pinchers (spending less)?  Big spenders are more likely to be male, younger in age, and earning more than their pinching counterparts (see table).  Additionally, the big spenders tend to frequent specialty boutiques for apparel and shoes more often than the pinchers, who are more likely to head to discounters and department stores for these items.

 

 

It isn’t hard to conjecture that holiday shoppers will hit the ‘Net this year, especially given that almost nine in ten (89.2%) regularly or occasionally research products online before buying them in stores…Among the most frequently searched products are Electronics (35.8%), Apparel (19.9%), Appliances (19.3%), Home Improvement Items (16.3%), and Shoes (15.4%).  Web surfers tend to “Google” first (22.0% say so), followed by Amazon.com (6.9%), Yahoo.com (5.1%), eBay.com (2.7%), and WalMart.com (2.2%).

 

So which websites can we anticipate will fill the most holiday orders for Apparel items (clothing, shoes, accessories, and the like)?  Savvy budget-conscious shoppers bid on eBay.com most often (4.6%), while JCPenney.com (4.0%), WalMart.com (3.6%), Amazon.com (2.7%), and Kohls.com (2.2%) follow.  However, with the majority (53.3%) having “No Preference” for a particular Apparel site, it appears that smart marketers will have the opportunity to lure shoppers to their sites with exclusive merchandise, special offers, and free shipping.

And to which brick and mortar Apparel stores can we expect shoppers to trek?  Currently in Women’s Clothing, consumers opt for Wal-Mart most often (11.9% say so), though down from 14.0% in ’06.  Kohl’s (7.8%), JC Penney (5.9%), and Macy’s (5.3%) follow and continue to gain in share from last year, while fifth place Target (2.1%) remains flat.

 

It’s the same story in the Men’s department…Wal-Mart remains the top store shopped most often with 14.4%, down from 16.4% a year ago.  Following (and gaining from ’06) are JC Penney (7.9%), Kohl’s (7.7%), and Macy’s (4.7%)…Sears rounds out the Top 5 with 3.4%, even with last year.

While Wal-Mart had the slight edge on Payless for the past three months in Shoes, the discount specialty store has pulled even with the discount behemoth at 10.8% share each.  Following the “Big 2” in Shoes are Kohl’s (4.4%), JC Penney (3.2%), and DSW (2.6%).  Stayed tuned to see how Payless’ bid to “democratize design” by bringing designer shoes to the masses affects its share standing.  Perhaps it will increase its declining share among upper income consumers…check out a page from our monthly Retail Ratings Reports for the details: www.bigresearch.com/cast-members/big-rrr-shoes-aug07.pdf

 

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

 

On the Electronics front, Best Buy is still the biggest big box on the block with 29.1% shopping there most often (up slightly from 28.7% in ’06).  Wal-Mart, with 17.7% (down from 19.5% last year), finishes second, while Circuit City (7.9%), Sears (2.6%), and Target (2.1%) round out the Top 5.

 

Wal-Mart continues to court favor with consumers in Sporting Goods & Exercise Equipment, though Dick’s gains on the discount giant…this month, Wal-Mart leads with 14.6% shopping there most often for sporting and fitness needs and Dick’s follows with a relatively close 10.6% (up significantly from 7.9% last year).  Sports Authority (4.8%), Big 5 (2.8%), and Sears (2.6%) follow.

 

Though just because consumers tend to shop a particular store most often doesn’t mean that they never browse the aisles at other stores…one in five (18.2%) have shopped Wal-Mart for Sporting Goods in the past 90 days.  Consumers have also visited Dick’s (9.2%), Target (8.1%), Sports Authority (6.2%), and Sears (4.5%).

 

Motivation for shopping a particular store for Sporting Goods depends on where you shop…Wal-Mart loyalists naturally do so for price (91.8% say so) and location (53.5%), while customers of big boxes Dick’s (72.8%) and Sports Authority (72.2%) choose these stores based on selection.  Price is also the major reason consumers cite to shop Sears (75.2%) and Big 5 (79.0%).  While consumers spent an average of $175 on Sporting Goods last year, selection-based shoppers of Dick’s and Sports Authority tended to spend more, while priced-based customers of Wal-Mart, Sears, and Big 5 averaged less:

 

 

Wal-Mart and Dick’s are positioned to continue to be strong competitors in Sporting Goods/Exercise Equipment category according to this month’s Consumer Migration Index (CMI).  The 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 top stores Wal-Mart and Dick’s have experienced relatively strong growth in the past year with +3.4 and +5.6 ratings, respectively.  Sears and Big 5 are experiencing customer deficits, while Sports Authority remains even:

 

 

Sears and Big 5 take note: your current customers shop your stores based on price, but the top reason cited overall to switch stores was “high prices” (13.3% said so)…former shoppers also cited inconvenient location (11.4%), poor selection (6.8%), decline of store appearance (5.6%), and competitor advertising (5.4%).

 

Wal-Mart holds its lead in Groceries…with 14.8% shopping there most often the ubiquitous discounter leads Kroger (5.5%), Publix (3.1%), Safeway (2.7%), and Meijer (2.1%) nationally.  However, when analyzed by census region, it’s evident that Wal-Mart competitors like Shoprite, Stop ‘n Shop, and Safeway exhibit regional strength:

 

 

 

The Big W also continues to trump the competition in Health & Beauty Care…more than one in four (26.7%) shop Wal-Mart most often for this category, followed not-so-closely-behind by Walgreens (7.2%), CVS (6.9%), Target (5.5%), and Rite Aid (2.2%).

 

While ailing in Apparel categories, Wal-Mart has found the cure for increasing consumer share in Prescription Drugs…the discounter, who recently invested in heavy advertising regarding its deep-discount drugs, is #3 in this category with 8.9% shopping there most often, up from 7.3% last year.  Walgreens and CVS remain the top shops for Prescriptions with 15.0% and 12.5% share, respectively.  Rite Aid (4.6%) and Target (1.7%) round out the Top 5.

 

 

Heading into Holiday Season ’07, the 90 Day Outlook brightens from 2006 for many categories, according to the BIGresearch Diffusion Index (those who say they’ll spend less subtracted from those who’ll spend more).  Popular gift-giving categories like Electronics and Apparel improve from last month as well as last year:

Retail Merchandise Categories - 90 Day Outlook

(September 07 compared to August 07 and September 06)

However, it appears that many consumers will be scaling back their purchases of big ticket items compared to one year ago…purchase intentions for furniture, housing, jewelry, major home improvement, DVD/VCR, digital camera, appliances, and vacation travel are down.  Computer, autos, RV/boat, and stereo equipment are flat, while TV is the lone category that is up from ’06…widescreen plasma or LCD, anyone?

  

 

 

‘Tis the season…for College Football, that is.  Three in five (60.3%) contend that cheering on your favorite college is what’s hot!  (Go, Buckeyes!...Can you tell we're from Columbus?)  Disney’s High School Musical movies and caffeinated energy drinks follow.  While both of their new albums debuted on the same day, Kanye West’s got the edge over 50 Cent among their target 18-34 male audience.  Among females, pencil skirts and trench coats prove to be popular fall trends.  What’s Not?  Almost four in five (77.3%) wish that game show The Singing Bee would buzz off.

 

 

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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