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Welcome to the ShopperScape™ Newsletter January 2007 NEW YEAR PREDICTIONS Anticipate January’s same-store sales to benefit from large numbers of gift cards being redeemed this month plus incremental sales opportunities from recipients unable to resist spending more than the value of their gift cards. Realize that Wal-Mart reigns as the top retailer for gift purchasing even among Up Market shoppers.  Even if they don’t shop the store, they are shopping walmart.com. Expect Down Market consumers to continue to put the brakes on discretionary spending as they did during the holidays. Expect the number of online shoppers to grow gradually, but the amount of shopping conducted by online shoppers will continue to outpace growth in other venues. HOLIDAY WRAP UP Apparel, gift cards and toys most popular holiday gifts Retail Forward’s December ShopperScape™ survey showed that 88% of shoppers purchased holiday gifts this season.  Apparel, gift cards and toys were the most popular types of gifts among all shoppers (Figure 1). Apparel held the top spot across income markets with more than two-thirds of holiday shoppers making apparel, accessories and/or footwear purchases. Larger percentages of Up Market shoppers made an above-average amount of purchases in every category.  But apparel, gift cards, books and consumer electronics categories attracted far above average percentages of Up Market shoppers. Among Down Market shoppers toys/dolls/games took priority over gift cards. Figure 1 Percentage Purchasing Holiday Gifts         December 2006         All Shoppers Down Market Middle Market Up Market       Yes 88% 78% 89% 93%       No 12% 22% 11% 7% Types of Gifts Purchased this Holiday Season   December 2006   All Shoppers Down Market Middle Market Up Market Clothing, clothing accessories or shoes 69% 59% 68% 77% Gift cards / gift certificates 53% 40% 52% 62% Toys/dolls/games (not video games) 51% 47% 51% 54% Books 42% 29% 40% 52% Pre-recorded music or videotapes, CDs or DVDs 42% 30% 42% 48% Personal care or beauty items 32% 29% 31% 36% Food-related gifts 28% 26% 28% 32% Video games, video gaming systems or related accessories 25% 18% 23% 33% Consumer electronics or personal computer-related accessories 24% 13% 22% 35% Home décor or home-related furnishings 23% 19% 23% 25% Sporting goods or leisure items 17% 10% 16% 22% Fine jewelry 15% 11% 14% 20% Other 22% 26% 23% 17% Source: Retail Forward ShopperScape™. Wal-Mart most popular retailer for holiday gifts Wal-Mart was the store where the largest percentage of shoppers—almost two-thirds (64%)—bought holiday gifts followed by Target (42%) (Figure 2). Other top retailers frequented by holiday shoppers included JCPenney, Kohl’s, Best Buy and Toys “R” Us. Boosted by a large percentage of online buyers, books and media stores outperformed traditional department stores and clothing specialists for gift buying. Twenty-nine percent of shoppers bought gifts at supermarkets this holiday season, reflecting the broadening mix of holiday merchandise offered in addition to popular food-related gifts. December’s store results also were affected by online shopping’s ability to attract holiday gift buyers (Figure 2). Despite its relatively recent emergence as a broad offer Web site, walmart.com convinced six percent of shoppers to make holiday purchases from its site. The next-best individual Web site performer was seasoned multi-channel retailer JCPenney. Tied with JCPenney in terms of Web site performance was Toys “R” Us, which likely brought a little more cheer and less hassle to parents seeking TMX Elmos. Target and Best Buy round out the list of individual retailers reaping the most incremental rewards from their Web sites during the 2006 holiday season. Figure 2 Percentage of Shoppers Purchasing Holiday Gifts from Retailers in 2006   All Shoppers   Purchased holiday gifts at this retailer Purchased holiday gifts at store Purchased holiday gifts from Web site Wal-Mart/Wal-Mart Supercenter 64% 62% 6% Target/Target Greatland/SuperTarget 42% 40% 3% Books and media stores 36% 27% 11% Supermarkets 29% 28% <1% JCPenney 29% 26% 4% Traditional department stores (e.g., Dillard's, Macy’s) 27% 26% 1% Kohl's 27% 25% 2% Best Buy 26% 24% 3% Toys “R” Us 25% 22% 4% Small-format value retailer (e.g., Big Lots, Dollar General) 24% 24% 0% Clothing specialty stores 24% 21% 4% Kmart/Big Kmart 23% 23% 1% Home furnishings stores 23% 21% 2% Gadget/theme/greeting card stores (e.g., Brookstone, Discovery Channel Store, Hallmark) 23% 20% 3% Sears 20% 19% 2% Office supply stores 17% 15% 2% The Home Depot 16% 15% 1% Lowe's 15% 14% <1% SAM'S Club 14% 13% <1% Shoe stores 12% 11% 2% Circuit City 12% 10% 2% Costco 11% 11% 1% Other supercenter/discount department stores (e.g., Fred Meyer, Meijer, Shopko) 11% 10% 0% Jewelry and accessories stores (e.g., Claire's, Coach, Zales) 11% 9% 1% Other toy stores (e.g., KB Toys) 11% 8% 3% Convenience stores (e.g., 7-Eleven, Speedway) 10% 10% 0% Factory outlet stores 10% 9% 1% Other consumer electronics stores (e.g., Fry's, Radio Shack) 10% 8% 1% Other home improvement/hardware stores 6% 5% 0% Bloomingdale's, Neiman Marcus, Nordstrom or Saks 5th Avenue 6% 5% 1% BJ's Wholesale Club 5% 4% 0% Mervyn's 5% 4% 0% Other 27% 19% 8% Source: Retail Forward ShopperScape™. Among Down Market shoppers, Wal-Mart outperformed other retailers as the place to go for holiday gifts and small-format value retailers moved further up the list of preferred channels for holiday shopping (Figure 3). Kmart moved ahead of JCPenney and Kohl’s. The percentages of shoppers in the Down Market segment who purchased gifts at retailers geared toward this market show that only an average, at best, percentage of Down Market shoppers are shopping these stores.  This underscores continued caution in spending among Down Market shoppers. Online shopping was relatively limited among Down Market shoppers—primarily to walmart.com, books and media stores (e.g., Amazon.com, barnesandnoble.com) and jcpenney.com. Figure 3 Top 10 Places Where Down Market Shoppers Purchased Holiday Gifts in 2006   Down Market   Purchased holiday gifts at this retailer Purchased holiday gifts at store Purchased holiday gifts from Web site Wal-Mart/Wal-Mart Supercenter 67% 65% 4% Target/Target Greatland/SuperTarget 26% 24% 2% Books and media stores (e.g., Borders Books and Music) 24% 18% 6% Small-format value retailer (e.g., Big Lots, Dollar General) 24% 24% 1% Kmart/Big Kmart 21% 21% <1% JCPenney 21% 19% 3% Supermarkets 21% 21% <1% Best Buy 14% 13% 1% Gadget/theme/greeting card stores (e.g., Brookstone, Discovery Channel Store, Hallmark) 14% 12% 1% Toys “R” Us 13% 11% 1% Source: Retail Forward ShopperScape™. The Top 10 list of where Middle Market shoppers purchased holiday gifts this season includes many of the same places where Down Market shoppers bought gifts (Figure 4). Wal-Mart and Target remain at the top of the list followed by books and media stores. Kohl’s and traditional department stores are included on the Middle Market’s Top 10 list instead of gadget/theme/greeting card stores and Toys “R” Us, which are on the Down Market’s list. Popular online shopping sites included the same sites—books and media retailer sites, walmart.com and jcpenney.com—as noted for Down Market shoppers.  But online shopping was more prevalent among Middle Market shoppers. Figure 4 Top 10 Places Where Middle Market Shoppers Purchased Holiday Gifts in 2006   Middle Market   Purchased holiday gifts at this retailer Purchased holiday gifts at store Purchased holiday gifts from Web site Wal-Mart/Wal-Mart Supercenter 66% 64% 6% Target/Target Greatland/SuperTarget 41% 39% 3% Books and media stores (e.g., Borders Books and Music) 33% 25% 10% Supermarkets 30% 29% <1% JCPenney 29% 25% 4% Kmart/Big Kmart 25% 25% 1% Kohl's 25% 23% 1% Traditional department stores (e.g., Dillard's, Macy’s) 25% 24% 1% Small-format value retailer (e.g., Big Lots, Dollar General) 25% 25% <1% Best Buy 24% 22% 2% Source: Retail Forward ShopperScape™. The Up Market’s top three places where they purchased holiday gifts mirror the top three for the Down and Middle Markets: Wal-Mart, Target and books and media stores.  Following the top three, department stores and specialty stores were favored for gift purchasing (Figure 5). Not included in the Top 10 lists of either Down Market or Middle Market shoppers are clothing specialty stores and home furnishings stores—both places where more than one-third of Up Market shoppers bought holiday gifts this season. Larger percentages of Up Market shoppers indicated purchasing from Web sites, especially books and media sites, clothing specialty sites, walmart.com and ToysRUs.com.  Figure 5 Top 10 Places Where Up Market Shoppers Purchased Holiday Gifts in 2006   Up Market   Purchased holiday gifts at this retailer Purchased holiday gifts at store Purchased holiday gifts from Web site Wal-Mart/Wal-Mart Supercenter 60% 57% 8% Target/Target Greatland/SuperTarget 53% 51% 4% Books and media stores (e.g., Borders Books and Music) 49% 37% 15% Traditional department stores (e.g., Dillard's, Macy’s) 39% 38% 3% Kohl's 38% 36% 3% Best Buy 37% 34% 5% Toys “R” Us 36% 32% 7% Clothing specialty stores 36% 32% 7% Home furnishings stores (e.g., Bed, Bath & Beyond, Crate & Barrel, Pier 1 Imports) 34% 31% 3% JCPenney 33% 30% 5% Source: Retail Forward ShopperScape™. Online shopping edged higher Compared with 2005, online shopping for holiday gifts and gift buying online edged, not surged, higher (Figure 6). In 2006, 88% of holiday shoppers shopped online compared with 87% in 2005.    Of those 88% of online shoppers, four out of five (80%) made a purchase online—edging up from 79% in 2005.  Shoppers both buying holiday gifts and shopping online spent $286 on average.  Surprisingly, Down Market shoppers are just as likely to shop online as Middle Market shoppers.  However, they remain less likely (72%) to make a purchase online, which is reflected in a much lower-than-average ($139) amount spent online. Figure 6 Percentage of Shoppers Gift Shopping Online   December 2005 December 2006   All Shoppers All Shoppers Down Market Middle Market Up Market Yes 87% 88% 86% 86% 92% No 13% 12% 14% 14% 8% Percentage of Shoppers Gift Shopping Online   December 2005 December 2006   All Shoppers All Shoppers Down Market Middle Market Up Market Yes 79% 80% 72% 79% 86% No 21% 20% 28% 21% 14% Spending Online for Holiday Gifts*   December 2006   All Shoppers Down Market Middle Market Up Market Average Amount Spent Online for Holiday Gifts $286 $139 $233 $403 *For shoppers buying holiday gifts and shopping online for gifts.  Average dollar amount shown. Source: Retail Forward ShopperScape™. Among all shoppers, including those not buying holiday gifts and those not shopping online, books edged out clothing as the most popular type of online purchase during the month of December (Figure 7). Up Market shoppers were about twice as likely as Down Market shoppers to buy any of the listed categories online. Figure 7 Top Categories Purchased Online in Past Month December 2006 All Shoppers Down Market Middle Market Up Market Books 22% 14% 21% 28% Clothing 20% 14% 18% 27% Pre-recorded videos/DVDs 15% 9% 15% 18% Toys 14% 8% 13% 20% CDs/Cassette tapes 13% 7% 13% 18% Consumer electronics (e.g., TV, stereo, VCR, camcorder) 7% 4% 6% 11% Cosmetics and other beauty care products 7% 4% 6% 10% Home accent pieces/cookware/housewares/tableware 6% 4% 6% 9% Shoes 6% 4% 6% 8% Source: Retail Forward ShopperScape™ Gift Cards Spending and Receiving Significant Gift cards will help pump up January results for retailers.  The 57% of shoppers buying gift cards during the holiday season (Figure 1) spent an average of $168 on them (Figure 8).  Figure 8 Spending on Gift Cards* All Shoppers Down Market Middle Market Up Market Average Amount Spent $168 $106 $150 $214 *Average dollar amount shown for shoppers purchasing gift cards. Source: Retail Forward ShopperScape™ Coincidentally, 57% of households received gift cards as holiday gifts (Figure 9). Among various types of gift cards, restaurants/coffee shop cards were by far the most popular followed by books and media store, credit card, clothing specialty store and traditional department store gift cards. Among retailers, Wal-Mart gift cards were the most popular overall especially among Down Market households.  Target gift cards were most popular among Up Market households.  Best Buy gift cards also were quite popular among Up Market households.  The Home Depot did well with Middle and Up Market households. Kohl’s gift cards showed up in about one out of 20 households receiving gift cards across income markets. Figure 9 Percentage of Households Receiving Gift Cards during 2006 Holiday Season   All Shoppers Down Market Middle Market Up Market Yes 57% 49% 56% 62% No 43% 51% 44% 38% Top 10 Type of Retailer Gift Cards Received   All Shoppers Down Market Middle Market Up Market Restaurant/coffee shop 31% 22% 31% 35% Wal-Mart/Wal-Mart Supercenter 22% 41% 22% 14% Books and media stores (e.g., Borders Books and Music) 13% 8% 11% 18% Target/Target Greatland/SuperTarget 12% 9% 10% 17% Best Buy 8% 5% 7% 12% Credit card gift card (e.g., AmEx, Discover, MasterCard, Visa) 8% 5% 8% 9% Clothing Specialty stores 7% 4% 6% 11% Traditional department stores (e.g., Dillard's, Macy’s) 6% 3% 6% 7% The Home Depot 6% 1% 6% 8% Kohl's 5% 5% 5% 6% Source: Retail Forward ShopperScape™ Underscoring the notion that it’s better to give than receive, households received gift cards totaling a lesser value, averaging $122, than they said they gave ($168) (Figure 10). By the end of December 2006 only about one-fifth of the value of gift cards had been redeemed providing retailers with opportunities for a Happy New Year. Figure 10 Dollar Value Received* All Shoppers Down Market Middle Market Up Market Average Dollar Value Received $122 $91 $110 $159 Dollar Value Redeemed* All Shoppers Down Market Middle Market Up Market Average Dollar Value Redeemed $25 $26 $23 $26 *Average dollar amount shown among shoppers receiving gift cards. Source: Retail Forward ShopperScape™ POINT OF VIEW Designer Evolution at Target “Target has hit the nail on the head with its designer strategy.  Since the introduction of its first designer line of products from architect Michael Graves in 1999, Target has continued to grow its family of designers.  As the company has added more designers its strategy also has evolved.  With its designer success, Target now has a bull’s-eye on its back and must continue to raise the bar as more competitors chase it down the runway.” Jennifer Halterman, Consultant, Retail Forward, Inc. For more information on Retail Forward’s Designer Evolution at Target or the Retail Forward Intelligence System™ call Kathy Clarke at 614-355-4009 or email her at kclarke@retailforward.com. What's Retail Forward ShopperScape™? Retail Forward ShopperScape™ focuses on today's consumers and their shopping behaviors. Retail Forward ShopperScape™ has been fielded since November 2003 to a sample of 4,000 consumers each month. The survey gathers timely, up-to-date information about where consumers shop and what they buy. Retail Forward ShopperScape™ is administered through TNS/NFO's online household panel, weighted based to be representative of U.S. households. For more information, call Kathy Clarke at 614-355-4009 or visit http://www.retailforward.com and select ShopperScape™ under Product & Services in the navigation bar located at the top of the home page to view sample reports and learn more about how to access ShopperScape™ information.

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