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Welcome to the ShopperScape™ Newsletter January 2008

• Prepare for further tightening of shoppers’ purse strings in the coming months as perceptions of decreased spending become reality.
• Note that toys/dolls/games, video games/gaming systems, gift cards and fine jewelry represented the categories with at least the same, if not more, shoppers purchasing during the holidays; in contrast, CDs/DVDs, personal care or beauty items and home décor or home-related furnishings lost popularity.
• Also note that Wal-Mart, Kohl’s and Best Buy performed best within their respective lines of trade in converting holiday gift shoppers to purchasers this season.
• Take comfort that gift cards’ popularity will prolong the holiday shopping season into January and beyond.
• Look for more consumers to be carrying their coffee from home this month as gift-givers reduced their appetites for restaurant/coffee shop gift cards.
• Expect retailers to sharpen their online strategies to convert browsers to buyers as the holiday surge in online shopping wanes.
  

Subdued Shopping Season

ShopperScape™ survey findings from the few days directly following Christmas and before New Year’s Eve show the same percentage of shoppers buying holiday gifts this year as last.  But this year’s shoppers perceive they spent less than last year’s sample of shoppers: $635 on average this year vs. $710, on average, last year (Figure 1).

• Up Market holiday spending held up best.
  

Figure 1

Spending  on Holiday Gifts 2007 vs. 2006*

			Spending 2007
	All Shoppers 2007	All Shoppers 2006	Down Market	Middle Market	Up Market
Percentage purchasing holiday gifts	87%	87%	75%	89%	92%
Average Amount Spent on Holiday Gifts *	$635	$710	$381	$564	$996

* Among shoppers buying holiday gifts. Average dollar amount shown.
Source: TNS Retail Forward ShopperScape™

This more subdued season is underscored by examples of fewer shoppers buying certain categories of holiday gifts compared with last year (Figure 2). 

• Not surprisingly, the percentage of shoppers buying pre-recorded media continues to decline (-4 percentage points) as more consumers turn to iTunes and other alternatives. 
• Home décor or home-related furnishings suffered a 3 percentage point decline in a weak housing environment where fewer shoppers are decorating newly purchased homes.
• Purchasers of personal care or beauty items as gifts also dropped 3 percentage points.

On a positive note, parents opened their pockets for gifts for kids.  Also, fine jewelry held its own along with gift cards.

• Toys/dolls/games and video games/gaming systems purchasing increased.

Figure 2

Types of Gifts Given for Holiday: 2007 vs. 2006*

*Among shoppers buying holiday gifts. Average dollar amount shown.
** Not comparable between years Source: TNS Retail Forward ShopperScape™

Wal-Mart Wins at Conversion-to-Purchase

Despite belt-tightening among Wal-Mart’s shoppers, the retailer has the highest ratio of gift purchasers to gift shoppers (4:5) of the listed retailers (Figure 3)

• Wal-Mart fared slightly better than Target and significantly better than Kmart in converting shoppers to purchasers within the discount store/supercenter channel. 
• With a 69% conversion-to-purchase ratio, Kohl’s performed better than JCPenney and significantly better than Sears and Mervyn’s within the value department store channel.  At 64% conversion-to-purchase, traditional department store Macy’s performance was equivalent to JCPenney’s.
• Best Buy outperformed Circuit City in converting shoppers to buyers by 16 percentage points.  Circuit City failed to close the sale with more than half of shoppers.
• The Home Depot and Lowe’s were neck-in-neck with 51% and 52% of gift shoppers making purchases respectively.

Figure 3

Percentage of Shoppers Shopping at and Purchasing Holiday Gifts from Retailers



	Shopped	Purchased	Purchase: Shop Percentage
Total Discount Store/Supercenters	78%	67%	-
Wal-Mart/Wal-Mart Supercenter	62%	50%	80%
Target/Target Greatland/SuperTarget	47%	36%	76%
Kmart/Big Kmart	23%	15%	66%
Total Toy Retailers	33%	24%	-
Toys 'R Us	28%	20%	70%
Total Value Department Store Retailers	48%	36%	-
JCPenney	30%	19%	64%
Kohl's	30%	21%	69%
Sears	22%	11%	52%
Mervyn's	6%	3%	45%
Traditional Department Store Retailers (e.g., Dillard's, Macy's)	35%	25%	-
Macy's	24%	15%	64%
Upscale Department Store Retailers (e.g., Bloomingdale's, Neiman Marcus, Nordstrom, Saks 5th Avenue)	7%	4%	-
Total Consumer Electronics Retailers	37%	24%	-
Best Buy	29%	17%	59%
Circuit City	15%	7%	43%
Total Home Improvement/Hardware	23%	15%	-
The Home Depot	15%	7%	51%
Lowe's	14%	7%	52%
Books and Media Retailers	36%	28%	-
Supermarkets	28%	21%	-
Warehouse Clubs (e.g., Costco, SAM'S Club)	24%	16%	-
Personal Care and Beauty Retailers	23%	16%	-
Drug Store Retailers	20%	15%	-
Small-format Value Retailers (e.g., dollar stores, close-out retailers)	20%	14%	-
Apparel Specialty Retailers	18%	12%	-
Craft or Fabric Retailers	16%	11%	-
Sporting Goods Retailers	15%	11%	-
Factory Oullet Stores	13%	8%	-
Shoe Retailers	11%	6%	-
Jewlery Store Retailers	10%	5%	-
Gadget/Theme Retailers (e.g., Brookstone, Discovery Channel Store)	10%	6%	-
Home Furnishings/Domestics Retailers	9%	5%	-
Office Supply stores	9%	5%	-
Other	22%	19%	-

Source: TNS Retail Forward ShopperScape™

The Gift That Keeps on Giving

Figure 4

Holiday Gift Cards Purchased*



	All Shoppers 2007	Down Market	Middle Market	Up Market
Average Number of Gift Cards Purchased	4	4	4	5
Average Amount Spent on Gift Cards	$152	$107	$148	$183


*Among shoppers buying holiday gifts cards. Average dollar amount shown.
Source: TNS Retail Forward ShopperScape™

It was apparently better to give gift cards than to receive them this year because primary shoppers getting gift cards as presents reported receiving an average $124 worth of them—slightly below last year’s report of $136, on average.  Fifty-six percent of households received gift cards vs. 58% last year (Figure 5).

• Up Market households fared somewhat better in the gift card department.  Almost two-thirds of them received gift cards with an average value of $171.

Figure 5

Holiday Gift Cards Received



			Gift Cards Received 2007
	All Shoppers 2007	All Shoppers 2006	Down Market	Middle Market	Up Market
Percentage of Households Receiving	56%	58%	47%	53%	64%
Average Total Value Received*	$124	$136	$100	$109	$171


*Among shoppers receiving holiday gifts cards. Average dollar amount shown.
Source: TNS Retail Forward ShopperScape™

Types of gift cards received this holiday season did not vary much from last year with one notable exception.  The percentage of households receiving restaurant/coffee shop gift cards plummeted from 31% in 2006 to 23% in 2007—bad enough news to curdle the latte at coffee shops (Figure 6).

• Differences among income market segments show Down Market consumers much more likely to have received Wal-Mart gift cards than any other type of gift card. 
• In contrast, Up Market recipients got more restaurant/coffee shop, book and media store and Target gift cards than any other types of gift cards and about twice as many as Down Market consumers.  They also received about three times the number of Best Buy, traditional department store and apparel retailer gift cards as Down Market consumers.
  

Figure 6

Top 10 Types of Retailer Gift Cards Received

Source: TNS Retail Forward ShopperScape™

A large percentage (61%) of gift card value is expected to be redeemed in January (Figure 7).

• Down Market shoppers have been redeeming their gift cards slightly faster than other income segments.

Figure 7

Percentages of Gift Card Values Redeemed

Source: TNS Retail Forward ShopperScape™

Online Slows Compared with Last Year

Despite soaring gasoline prices, fewer shoppers (82%) this holiday season said they shopped online for gifts vs. last year (88%).  The percentage of online purchasers (77%) declined only slightly from last year (80%) (Figure 8).

Figure 8

Percentage of Shoppers Gift Shopping and Gift Purchasing Online: 2005 - 2007

*Among shoppers buying holiday gifts.
Source: TNS Retail Forward ShopperScape™

Online spending estimates dipped slightly to $262, on average, vs. $272 last year (Figure 9).

• Up Market shoppers spent $344, on average, well above what Down and Middle Market shoppers spent online. 

Figure 9

Spending Online for Holiday Gifts*

*Among shoppers buying holiday gifts and shopping online for holiday gifts. Average dollar amount shown.
Source: TNS Retail Forward ShopperScape™

The ability to convert browsers to buyers varies widely among common retail Web sites.  Amazon.com was the most popular Web site to visit during the holidays and converted the highest percentage of shoppers to purchasers (Figure 10).

• Next in popularity were Wal-Mart’s and Target’s Web sites.  Wal-Mart converted a higher percentage of online shoppers to purchasers than Target.
• Best Buy was shopped by a greater percentage (25%) of shoppers than Circuit City (17%), but converted about the same percentage of shoppers to purchasers (a little more than one in five).
• Only about one quarter (26%) of Overstock.com shoppers found bargains attractive enough to buy.  QVC.com shoppers had better luck with more than half (55%) of shoppers making purchases on the site.
• One in five shoppers visited the Toys “R” Us site this holiday season and almost one-third (30%) made a purchase from the site.
• Among department store players, JCPenney outranks its direct competition in both attracting and converting shoppers online.
• Small percentages of shoppers visited Costco’s and/or SAM’S Club’s sites, but more Costco shoppers bought online.
• Comparing Apple’s with Dell’s shoppers shows Apple’s shoppers more likely to have purchased from the site than Dell’s shoppers.

Figure 10

Web Sites Shopped for Holiday 2007*

*Among shoppers buying holiday gifts and shopping online for holiday gifts.
Source: TNS Retail Forward ShopperScape™

Industry Outlook: Drug Stores

Growth at drug stores is expected to remain solid, driven by strong prescription drug demand and expansion—both organic and though acquisition—by leading players.  But alternative players, such as supercenters and supermarkets, threaten to steal scripts with their aggressive efforts to gain pharmacy customers, e.g., $4 generics.  Expect the most progressive drug store players to challenge conventional wisdom—and redefine the drug store via the addition of new products and services.

Jennifer Halterman, Senior Consultant, TNS Retail Forward

For more information on “Industry Outlook: Drug Stores” and the Retail Forward Intelligence System™ contact Kathy Clarke at 614-355-4009 or kclarke@retailforward.com.

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