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Confidence drops in wake of bank busts, economic turmoil

Practicality in spending reaches new high

“More” layoffs expected over next 6 months

THE consumer mantra: Decrease overall spending

Apparel: Cutbacks in style not expected

Wal-Mart = Winner in Shoes

Consumers brew a spooky 90 Day Outlook for October

What’s Hot?  Election special…Biden v. Palin

Fresh Economic, Retail & Consumer Insights for Shopper Understanding
Edited and Produced by BIGresearch…Providing Unique 
Insights Each Month from the Consumer Intentions & Actions Survey.

October 2008 
(Respondents Surveyed 9/30 – 10/07/08
)

SPECIAL EDITION: VIDEO BRIEFING

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This special "video" edition includes a video briefing which recaps the key consumer insights for the month of October.

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This newsletter summarizes the pulse of the consumers based on BIGresearch’s monthly national Consumer Intentions and Actions (CIA) Survey every month. The CIA survey findings are available by shoppers of most major retailers and can be licensed and delivered via electronic download. For more information on the CIA,
click here.




 

 

 

Consumers opt for the trick over treat for October’s confidence reading…this month, those very confident/confident in chances for a strong economy drops nine points to 19.0%, erasing gains of almost five points per month in August (23.6%) and September (28.3%).  October’s teen reading represents a 25+ drop from one year ago (44.8%) and, heading into a critical holiday season, the first September-to-October decline in confidence since 2004 (which saw a relatively inconsequential 45.6% to 44.3% decrease that rebounded in November).

 

Bank busts, election-fueled backbiting, and the downhill slide on Wall Street have Main Street-ers’ concern about political and national security issues reaching a fever pitch…in October, about one in three (30.8%) continue to worry, up from 25.8% last month, 17.4% one year ago, and the highest reading since April 2003 (35.9%).

Retailers are hoping to weather the storm forecasted for the Q4 selling season, but consumers have yet to find the holiday spirit…more than half (51.7%) indicate this month that they’ve become more practical in purchasing, rising from 49.4% last month, 38.6% last year, and a new high.  So it appears that many will be opting for cotton over cashmere and sterling over platinum when it comes to bagging perfect gifts this year.

It may take some savvy letter-writing to Santa in order to procure the latest and greatest toys and games…with close to four in five (57.8%) emphasizing needs over wants in purchasing, it appears that a number of shoppers will be headed to stores just for the staples in the near-term…this figure increases almost two points from September (56.1%) and a whopping 10+ points from October ’07.

 

 

Sliding confidence coupled with the banking crisis, credit crunch, and foreclosure fallout breed record pessimism for the employment outlook…in October, four in five (63.5%) indicate they expect “more” layoffs in the next 6 months, rising from 45.7% last month and a new high.  Fewer than one in three (29.6%) contend layoff levels will remain stable (v. 44.3% last month), while an optimistic minority (6.9%) hope for a decrease, dropping from 10.0% in September.  Personal fears of the pink slip are on the rise as well…7.5% reveal they worry about becoming laid off, up from 6.7% last month and the highest reading since May ’02 (8.3%).

While many are blowing their budgets feeding their fuel tanks and their families, consumers remain vigilant about also nourishing their bank accounts…almost two in five (38.1%) contend that they intend on decreasing overall spending, up 10 points from last year (28.4%) and not good news to retailers, as this is the highest recorded reading heading into a holiday season…36.2% plan to pay down debt (v. 34.9% in October ’07).  Increasing savings (27.5%) and paying with cash more often (25.5%) also rise from 26.4% and 21.3%, respectively, over the past year.

With the Dow recently sinking below 10K, investor confidence has soured, but a few bulls remain…two in five (42.2%) investors say they would definitely/probably invest in the stock market, down more than 10 points from a month ago (53.7%).  One in ten investors (10.3%) remains ready to buy, flat from September, while 5.3% plan to sell, declining slightly from 5.6% last month.

While dropping demand has consumers paying relatively less at the pump these days, drivers continue to keep the brake on spending…almost half (48.1%) contend they continue to take fewer shopping trips, while 44.2% shop closer to home and 34.9% are increasingly relying on coupons…how does this compare to shoppers circa 2007?  Take a look below:

Although pump prices are on the decline, it appears that the dismal forecast on the economic front have consumers wary about the longevity of this downward trend…two in five (42.8%) predict that gas prices will rise by Thanksgiving, up from the 34.0% who felt the same come Halloween.  39.7% contend gas prices will stabilize, while one in five (17.6%) are optimistic about a continued decline.  The Turkey Day forecast is $3.76/gal, up only marginally from the $3.73 brewed up for Fright Night.

 

 

While consumers are looking to curb overall spending, that hasn’t meant similar cutbacks in their sense of style…18.5% contend they crave newest fashion trends and styles, up almost five points from a year ago (14.0%).  Almost half (47.0%) indicate that value and comfort dictate their wardrobes, down from 50.2% in October ’07, while 34.5% take a traditional, conservative approach to attire (v. 35.8% in ’07).

Budget-conscious consumers continue to head to Wal-Mart most often for Women’s Clothing…11.4% shop the discounter (down half a point from October ’07), followed relatively closely by cheap-chic purveyor Kohl’s (8.6%), who’s up from 8.2% one year ago.  Macy’s (7.8%) jumps JC Penney (6.9%) for third, while Target (2.7%) rounds out the Top 5.

It appears that Macy’s made its big gain in Women’s Clothing with loyalty among fashion-conscious shoppers…15.8% who follow newest trends and styles shop the department star most often, followed weakly by Kohl’s (6.6%)...Wal-Mart maintains higher concentrations of value/comfort and traditionally styled shoppers.  Take a sneak peek at our October Retail Ratings Report for Women’s Clothing for a clear view: www.bigresearch.com/big-cias-rrr-oct08-womens.pdf.

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

Wal-Mart’s at the forefront for Men’s Clothing shoppers as well…14.1% shop the big discounter most often, followed by Kohl’s (8.7%), JC Penney (8.0%), Macy’s (6.5%), and Sears (3.4%).

With almost half (48.9%) opting for a particular tot shop based on price, discounter Wal-Mart completes the apparel trifecta with the lead (13.5%) in Children’s Clothing as well, more than double the share of nearest competitor, Kohl’s (5.4%).  Target (5.3%), JC Penney (4.1%), and Gap (2.8%) complete the Top 5.  Selection (34.8%), quality (27.9%), location (24.6%), and good size selection (20.7%) follow price as top reasons to shop.

Though is Wal-Mart continuing to court Children’s consumers?  According to the October 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, confirms that Wal-Mart will likely continue to rule the kid’s kingdom with positive 1.2 CMI rating…fellow discounter Target also gains (+2.5%), while Sears (-1.7) and JC Penney (-0.9) face customer deficits:

It appears that discount pricing and one-stop-shopping convenience may be boosting Wal-Mart and Target’s customer base…high prices (14.6%) and inconvenient location (9.4%) were cited as top reasons to stop shopping a particular Children’s Clothing store.  Poor selection (7.2%), decline of store appearance (4.9%), and poor customer service (4.5%) followed.

Wal-Mart gets its stride back in Shoes this month…after two consecutive months of finishing second to Payless, the big discounter leads the discount specialty with 10.9% shopping there most often to 10.1%.  Kohl’s (4.5%), Macy’s (2.7%), and JC Penney & DSW (tied, with 2.6% each) round out the Top 5.

Wal-Mart and Bed Bath & Beyond continue to strengthen in the home softlines segment…the big discounter (16.2%) continues to lead the big box (12.3%) in Linens/Bedding/Draperies, though both retailers improve from ’07 (15.9% and 10.3%, respectively).  JC Penney (6.7%), Target (5.5%), and Linens ‘N Things (5.0%) complete the Top 5.

While budget-and-practical-minded holiday shoppers may be opting for video games, movies, and other accessories over the latest players and gaming consoles this season, where can we still expect them to head for these Electronics “needs”?  Best Buy remains tops in this category, with almost one in three (30.9%) shopping there most often…Wal-Mart remains a relatively strong competitor (16.7%), while Circuit City (6.8%), Target (2.5%), and Sears (2.0%) round out the Top 5.

While Grocery shoppers in general tend to head to grocers (50.5%) more often than discounters (19.1%), Wal-Mart’s got the national edge on its regional-minded competition, leading this category with 16.1%.  Grocers Kroger (6.0%), Publix (4.0%), Safeway (2.7%), and Stop ‘n Shop & Shoprite (tied, with 2.1% each) follow not-so-closely behind.

Wal-Mart continues its clean sweep in the Health & Beauty Aisle as well, leading with 26.8% shopping there most often for soaps, shampoos, and cosmetics and gaining from 25.5% in October ‘07.  CVS (9.0%), Walgreens (7.8%), Target (6.1%), and Rite Aid (2.7%) continue to trail the Bentonville behemoth.

Druggists continue to hold the cure for consumers in Prescription Drugs…Walgreens (15.1%) and CVS (14.2%) lead this category, while Wal-Mart remains in third position (9.6%).  Rite Aid (5.7%) and Target (2.1%) complete the Top 5.

 

 

October gives us two reasons to grab our coats: (1) there’s a chill in the air and (2) we’re headed down the Frozen Food Aisle…Wal-Mart’s dominance in the Grocery category is evident for these foodstuffs, as 15.7% shop the discounter most often for frosted veggies, pizza, and entrees…Kroger is a distant second with 5.5%, while Publix (3.3%), Safeway (2.3%), and Costco (2.0%) round out the Top 5.

While organic produce and farmer’s markets are gaining recognition from the general public, the frozen food shoppers buy most often remains vegetables (58.5% buy at least 2-3 times per month).  Chicken & turkey (42.5%), juice (42.2%), dinner entrees (41.6%), and ice cream/frozen yogurt (40.4%) are also among the most frequently purchased frozen foods.

While three in four (74.7%) frozen food shoppers agree/strongly agree that these products are arranged in an easy to shop manner, about half (54.3%) still regularly or occasionally have trouble finding the items they want to buy…why?  33.2% of these shoppers say they have difficulty finding the exact product form they want, 25.9% have trouble finding the types of products they need, 24.9% complain of stock-outs, 22.9% can’t locate the right brand, while 19.5% indicate the store doesn’t carry the item they want to buy.

Overall, though, it appears that shoppers are generally pleased with their frosty shopping experiences…91.7% assert that they would recommend the store they shop most often for frozen foods to others.

About $32 of monthly grocery budgets are allocated to frozen food products…households earning $50,000+ per year tend to spend a little more ($35) than those earning under $50,000 ($29).  Men also tend to spend a little more in this aisle ($33) compared to the fairer gender ($31).

 

 

Increasingly pessimistic consumers brew a downright spooky 90 Day Outlook, according to the BIGresearch Diffusion Index (those who say they’ll spend less subtracted from those who will spend more).  With Toys the lone improver from September and all categories declining from October ‘07, it appears that retailers heading into holiday ’08 selling season might need to send an SOS to Santa to help turn these grinches into givers:

Retail Merchandise Categories - 90 Day Outlook
(October 08 compared to September 08 and October 07)

Category

September 08

October 07

Category

September 08

October 07

Children's

DOWN

DOWN

Toys and Games

UP

DOWN

Women's Dress

DOWN

DOWN

CDs/DVDs/Videos/Books

DOWN

DOWN

Women's Casual

DOWN

DOWN 

Electronics

DOWN

DOWN

Men's Dress

DOWN

DOWN

Groceries

DOWN

DOWN

Men's Casual

DOWN

DOWN

Home Improvement

DOWN

DOWN

Shoes

DOWN

DOWN 

Lawn & Garden

DOWN

DOWN

HBC

DOWN

DOWN 

Home Furniture

DOWN

DOWN

Dining Out

DOWN

DOWN 

Decorative Home Furnishings

DOWN

DOWN

Sporting Goods

DOWN

DOWN 

Linens/Bedding/Draperies

DOWN

DOWN

Six month purchase intentions for high dollar durables hold some hope for retailers looking to end Q4 in the black this year…compared to last month, all categories either improve (autos, computer, appliances, housing, jewelry/watch, major home improvements, stereo equipment, DVD/VCR, digital camera) or remain relatively flat (furniture, RV/boat, vacation travel).  While most categories declined from October ’07, two bright spots remain…purchase intentions rose for computers (12.5% plan to purchase) and TVs (11.6%).
 

 

With the historic Presidential election on the horizon, more than eight in ten (84.0%) consumers agree…registering to vote is what’s hot this month!  Also on the election front, Sarah Palin bests Joe Biden in the “popular” vote for next VP.  It’s renting movies over going to the theater, and bold necklaces are making a statement with women, while the MLB playoffs are a hit with men.  What’s Not?  Unless you’re a lumberjack by trade, it’s best to keep your flannel behind closed closet doors.

 


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