Top Line Findings on the Retail side

Looking forward on how consumers are adjusting to the world around them, this information gives key indicators on how your local sales will begin to shape up for the 4th quarter.

* Gas prices decrease, confidence increases…
* Practicality eases in August …
* U.S. employment outlook improves…
* Close to majority feel “worse off” financially…
* Drivers still wary about spending on alternative goods…
* Wal-Mart or Whole Foods for organics?...
* Purchase Intent: Computers, TVs up from July, August ’07…
* What’s Hot? Paper, Plastic, or Neither?...

90 Day Outlook -
Easing gas prices may have alleviated some of the immediate pain at the pump, but with cautious consumers still worried about their financial futures, the 90 Day Outlook is mixed this month, according to the BIGresearch Diffusion Index (those who say they’ll spend less subtracted from those who will spend more).  The bump in confidence this month seems to have lifted consumers’ spending spirits compared to July, but not enough to improve from ’07.

Retail Merchandise Categories - 90 Day Outlook
(August 08 compared to July 08 and August 07)

With one of retail's biggest selling seasons upon us (Back-to-School) and that other one (Holiday) right around the corner, it appears that some consumers are planning for a few big ticket expenditures…six month purchase intentions for computers (11.5%) and TVs (10.1%) are on the rise from July as well as one year ago.  Intentions for furniture, household appliances, jewelry, major home improvements, DVD/VCR are up marginally from last month, but continue to trend downward from August ’07.  And…Auto Dealerships = the next ghost towns?  Only 8.9% plan to buy an auto in the next six months, down from 9.4% in July, 10.5% one year ago, and the lowest reading since December ’04 (8.5%).

Personal Finance -

With an uptick in confidence, the consumer outlook for the U.S. employment environment becomes a bit less dire for August…the majority (54.0%) still expects “more” layoffs in the next six months, though declining more than eight points from July (62.3%).  Two in five (37.7%) contend that layoff levels will remain the same, rising from 31.2% last month, while just under one in ten (8.3%) hope for fewer (v. 6.5%).  Personal concerns with becoming laid off, though, haven’t abated…6.8% continue to fear the pink slip, up almost a point from July (6.0%) and two points from one year ago (4.7%).

With close to the majority (47.3%) feeling “worse off” financially compared to a year ago, it appears that consumers are attempting to shake this ailment by paying off a few of those IOUs…paying down debt returns as the top financial plan in August (35.8% plan to do so in the next three months), while decreasing overall spending slips to second with 34.1%...both plans are on the rise from 33.1% and 27.5%, respectively, in August ’07.  Intentions to increase savings (27.5%) and pay with cash more often (22.5%) also increase from one year ago.

Although the Dow continues to ride below 12K, investors seemed to have gained more bullish attitudes in August…the majority of investors (53.2%) say they would definitely/probably invest in the stock market, up more than five points from July (47.8%).  More than one in ten (10.4%) also plans to buy stocks in the next three months, rising half a point from last month, while 5.0% plan to sell, relatively flat from July.

Even though pump prices are cooling off to an average $3.787/gal (from $4.109/gal last month, according to AAA), drivers are still wary about spending on alternative goods…among the 82.5% who continue to be affected, plans for reducing dining out (49.9%), decreasing vacation/travel (46.3%), and spending less on clothing (41.1%) rise from July.  Savvy shoppers are also increasingly bargain hunting more often (45.6%) and taking fewer shopping trips (54.4%) compared to thirty days ago (44.6% and 52.2%, respectively).

Though will this spending pattern continue?  About two in five (39.5%) fear that gas prices will rise again by Labor Day, though lowering substantially from the 82.7% who felt the same way about the direction of pump prices come August 1.  More than a third (36.5%) contends they’ll remain the same, while about one in four (24.0%) plans on a continued decline.  And although Labor Day weekend heralds the last opportunity for summer gas gouging traveling, drivers remain “optimistic” that prices at the pump will only increase to a $3.93/gal average by that weekend, much lower than the $4.44/gal expected on August 1.

Retail –

Budget-friendly prices and one-stop shopping convenience continue to provide reason for 12.0% of consumers to head to Wal-Mart most often for Women’s Clothing…Kohl’s (8.2%), JC Penney (6.1%), Macy’s (5.3%), and Target (2.8%) follow the discount leader.  But how do stores fair among fashionistas?  Those who follow newest trends and styles tend to head to Macy’s most often, while traditional-minded and value-conscious shoppers maintain a penchant for Wal-Mart:



In the Men’s section, Wal-Mart’s got a six point advantage on the nearest competitor…with 14.9% shopping there most often, the big discounter leads Kohl’s (9.1%), JC Penney (8.7%), Macy’s (4.9%), and Target (3.2%).

However in the latest installment of the Shoe Wars, Wal-Mart surrenders the lead to Payless…in August, the discount specialty bests the Bentonville behemoth with 11.4% to 10.7% share, ending Wal-Mart’s two-month lead in this category.  Kohl’s (4.9%), DSW (3.4%), and Macy’s (2.8%) round out the top 5.

With consumers planning to spend a little extra on Electronics for Back-to-School this year (see the NRF/BIGresearch News Release here), where can we expect these shoppers to head for the latest calculators, computers, and digital paraphernalia?  One third (33.5%) say their best bet for Electronics is Best Buy, increasing from 30.5% last year.  Discounter Wal-Mart comes in at a relatively close second (18.0%, up from 16.6% in ’07).  Circuit City (7.7%), Sears (2.3%), and Target (2.0%) complete the top 5.

However, Wal-Mart’s got the lock on the top spot in Linens/Bedding/Draperies…the big discounter leads big box Bed Bath & Beyond with 18.3% to 12.5% share, both increasing from one year ago.  JC Penney (7.0%), Target (6.4%), and Linens ‘n Things (5.2%) follow.

With food prices on the rise, it should be no surprise that consumers are increasingly shopping one ELDP leader most often…Wal-Mart (with 18.2% share) maintains an 11+ point lead on #2 Kroger (6.8%) in the Grocery aisle, gaining almost three points from August ’07 (15.6%).  The complete top 5: Wal-Mart (18.2%), Kroger (6.8%), Publix (4.4%), Safeway (3.2%), and Stop ‘n Shop (2.4%).  Though the top reasons to shop a particular store for Groceries depends on whose customers you talk to…grocery shoppers at discounters Wal-Mart and Meijer choose price (92.9% and 92.5%, respectively), traditional grocers’ customers tend to be more location-driven, and Publix stands out as a quality leader.

Though how do grocers fare with their word-of-mouth advertisers?  Using the Net Promoter® Score* (NPS), respondents were asked to rate the likelihood that they would recommend the store they currently shop at most often for Groceries on a scale of 0 (Not at All Likely) to 10 (Extremely Likely).  Among the top 10 stores for Groceries, it appears that customers of Publix, Shoprite, and HEB are most apt to pass along the praise, while those shopping Giant, Albertsons, and Safeway maintain smaller “promoter” bases:


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

Wal-Mart’s substantial lead is substantiated this month by the Consumer Migration Index (CMI)…the August 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, shows that Wal-Mart is likely to remain the long-term leader in this category with a +7.6 rating, while grocers Kroger (-3.0) and Albertsons (-1.9) face customer deficits: 




High prices (24.1%) and inconvenient location (24.0%) were the top reasons cited by shoppers of one year or less to switch Grocery stores...Poor selection (9.5%), decline of store appearance (8.9%), and poor customer service (8.8%) were additional culprits.

Although budget-wise consumers continue to face rising food prices, that hasn’t deterred 64.8% from regularly or occasionally trying out generally higher-priced organic options (rising from 61.5% in May)…organic items purchased most often among these consumers include produce (55.8%), breads (30.5%), cereals (30.0%), dairy (29.7%), and juices & meat/poultry (tie, 26.2%).  “Naturally,” shoppers head most often to Wal-Mart (10.2%), Whole Foods (6.8%), Kroger (4.9%), Trader Joe’s (4.9%), and Publix (3.5%) to fill their green carts.

It’s a Wal-Mart world, at least where Health & Beauty Care is concerned…one in three shoppers (31.4%) heads to the big discounter for soaps and shampoos most often, more than triple the share of nearest competitor CVS (8.8%).  Walgreens (7.5%), Target (7.0%), and Rite Aid (2.9%) complete the top 5.
Although one-third currently head to druggists Walgreens (16.1%) or CVS (14.6%) for Prescription Drugs, Wal-Mart’s continued growth in this category may have us telling a different story in future months…the big W settles for bronze this month with 11.0%, gaining from 8.7% one year ago.  Rite Aid (5.7%) and Target (2.3%) round out the top 5.

(source: BIGresearch August briefing www.bigresearch.com )