If you cannot read this ShopperScape(tm) Newsletter for January 2005, go to http://www.retailforward.com/shopperscape/shopperscape0105.htm

Welcome to the ShopperScape™ Newsletter January 2005

• Expect late holiday season momentum in shopping to extend into a Happy New Year.
  
• Especially anticipate a surge in Up Market spending.
  
• Prepare for gift card recipients to swarm stores this month.
  
• Congratulate online retailing for having another banner holiday season.
• Expect a holiday hangover to dampen enthusiasm for purchasing categories representing the most popular gift items last month.
  

Shoppers Get Carded

Love them or hate them, gift cards are a staple of American gift-giving. Consumers received an average of 2.5 gift cards/gift certificates per household this holiday season, and purchased nearly the same number to give as gifts. Down Market households received more gift cards/certificates than they gave, while Up Market households were more likely to give than to receive.

• The average total value of all gift cards/certificates received per household was $142. This figure varied less by market than might be expected - ranging only $63 more from the Up Market average of $174 to the Down Market average of $111.
  

A whopping 86% of shoppers at least did some online shopping and almost three-quarters of them made gift purchases online this season. Not surprisingly, online shopping increases with income.

• Free shipping lured a number of shoppers to buy online. Forty-five percent reported receiving free shipping.
• Popular online shopping activities ranged from researching products to comparison shopping among various retailers to locate desired products. Auction site activity also buzzed.

January to Benefit from Broad-based Market Strength

Spending plans for both the Up and Down Markets improved in January, boosting the overall consumer spending outlook. Meanwhile, the index for Middle Market households held nearly steady compared with December's level, suggesting continued healthy spending among these households.

• The index for Up Market households (incomes greater than $75,000) surged in January to its best showing since last April, rising to 105.4 from 89.9 the month before. These households expressed greater optimism about jobs and incomes, which bolstered the index. The stock market bounce in November and December and Up Market home buying fed the increase.
• The Future Spending Index for Down Market households (incomes less than $22,500) continued to rebound from October's low, indicating rising optimism about near-term spending plans. The index for these households registered 105.5 in January, up from 103.7 in December. Better incomes compared with a year ago offset lingering worries about job security to generate that increase. However, heavier credit card debt loads weighed somewhat on the Down Market index.
• With a reading of 104.2 in January, the index for Middle Market households (incomes between $22,500 and $75,000) continued to hover near its highest levels in six months. Better views of incomes and investment performance coupled with persisting strength in Middle Market home buying were offset by wariness about the availability of jobs and heightened concerns about credit card debt burdens.

Wal-Mart Corners the Down Market Gift Buyer

Six out of ten shoppers at least shopped for holiday gifts at Wal-Mart but only about one in five ultimately bought holiday gifts at Wal-Mart. The average amount spent on gifts (among those purchasing gifts) was $180. The most popular gifts were apparel, toys and CDs/DVDs.

• The world's largest retailer converted a high percent of its core Down Market and a decent percent of Middle Market customers into gift purchasers.
• Down Market gift purchasers spent about half of their gift budgets ($164 of $369) at Wal-Mart, while those in the Middle Market shelled out about a quarter of their budgets ($183 of $674) there.
• Although over half of Up Market shoppers ventured into Wal-Mart during their present-buying treks, few found goods that fit their gift recipients' profiles--only 8% of the Up Market made a gift purchase. The rare Up Market Wal-Mart gift purchaser did have the widest-open wallets and spent an average of $200. Up Market purchasers were far less likely to buy apparel at Wal-Mart as gifts than others. Instead, they bought toys and DVDs/CDs--categories where Wal-Mart's low pricing on easily comparable goods provides a compelling reason to buy.
  

Holiday Shopping at Wal-Mart

Wal-Mart Remains in the Lead for "Best Deals" for Holiday Gifts

Over half of all shoppers said that Wal-Mart was among the stores where they found the best deals for their money when they purchased holiday gifts this season. Target came in second at 25% and, not surprisingly, more favored by Up Market shoppers (36%).

• Value department store Kohl's placed third overall, based on its strong showing in the Up Market. Rival JCPenney, tied for fourth with Best Buy, was seen as a better value by the Middle Market.
• Best Buy attracted Up Market shoppers with high-end consumer electronics products. They were more likely to give Best Buy kudos for having the best deals than their Down and Middle Market counterparts.
• Filling out the rest of the "best deals" retailer line up are Toys "R" Us, with a narrower buying audience for kids, Sears and Kmart.
• Among lines-of-trade, online retailers as a whole overpowered other channels for offering the best deals.
  

Purchasing Plans Indicate Holiday Hangover

Treating a Holiday Hangover. Shoppers' plans to purchase various categories dip significantly this month with the holiday season winding to a close. Instead, you'll find consumers at their local drugstores treating their holiday ills and sprucing up their personal appearances for the New Year. Some limited upturn in interest in furniture, plumbing and "other" flooring signals attention being drawn back into the winter nest and anticipation of semi-annual furniture sales events.

Trimming the Budget Instead of the tree. Top holiday categories--toys for the kids, greeting cards for friends, clothes for Dad, perfume for Mom, CDs and DVDs for the family and film to photograph it all--show a precipitous drop in spending plans for January from December.

Going Up

Going Down

Alternative Players Threaten Traditional Home Furnishings Retailers

"The lingering effects of a strong housing market will continue to stimulate solid demand for home furnishings and furniture. The eventual slowdown in the housing market will be offset by an improving job market and income gains, which will support growth during the outlying years of the forecast period. Alternative players will continue to grow their market share and represent the biggest threat to home furnishings and furniture stores going forward."

Jenny McAlister, Consultant, Retail Forward, Inc.

For more information on Industry Outlook: Home Furnishings/Furniture or the Retail Forward Intelligence System™ call Kathy Clarke at 614-355-4009 or email her at kclarke@retailfoward.com.

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