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Welcome to the ShopperScape™ Newsletter February 2006 PREDICTIONS Don't hold your breath for the "big surprise" on Valentine's Day. Chances are good that you will have to settle for a nice greeting card and maybe some candy. Look for spending to hold steady this month, similar to January's spending. Shoppers will hang in there, but not quite at last year's pace. Expect spending by Up Market shoppers to accelerate from January as spending by Middle and Down Market shoppers eases a bit from last month. Anticipate that the holiday season will extend well beyond January as shoppers wait to tap out gift cards they received in lieu of presents that ring the register in December. HOT OFF THE PRESS Odds Are that Your Valentine Is Cheap or Forgetful No need to feel left out. This month's ShopperScape™ results indicate that you won't be alone if you don't receive a gift this Valentine's Day. And even if you do, don't expect much beyond what you received last year. More than one-third (38%) of all shoppers report that they do not purchase gifts for Valentine's Day. Down Market shoppers (49%) are nearly twice as likely as Up Market shoppers to be romantic scrooges (Figure 1). Shoppers who plan to purchase gifts will spend an average of $63.76 on them. Among shoppers who plan to purchase gifts, 42% plan to spend about the same as they did last year. More than twice as many shoppers plan to spend less (14%) this year than expect to spend more (6%). Figure 1 Compared to last year, do you plan to spend more, the same, or less this year on gifts for Valentine's Day? Source: Retail Forward ShopperScape™. Among the Valentine's Day diehards, fine jewelry will be the biggest budget buster, however most shoppers plan to purchase the ever-popular greeting card and candy. Consumer electronics, apparel, sporting goods, flowers and fragrances/cologne also will bring in extra money for retailers this February. The Down Market especially favors candy as a Valentine's Day gift with 45% planning to buy an average of $27 worth of sweets (Figure 2). In contrast, Middle and Up Market shoppers are more likely than Down Market shoppers to think of flowers. Figure 2 Percentage Planning to spend in category on Valentine's Day Gifts Average dollar amount represented Source: Retail Forward ShopperScape™. FEBRUARY CONSUMER OUTLOOK Shoppers Remain Undaunted Spending at retail this month is expected to hold steady at January's buoyant pace. Retail Forward's Future Spending Index clocked in at 99.6 for February, nearly matching the 99.7 value for last month (Figure 3). The index remains below year-ago levels, however, indicating a moderation in spending compared with last February's strong rate. The index for Up Market households (incomes greater than $75,000) improved to 98.5 for February from 95.9 last month. The pickup in optimism was generated by stronger incomes and higher stock values than a year ago. A falloff in home buying among these relatively affluent households will restrain the outlook a bit though. After jumping to 102.1 in January, the index for Middle Market households (incomes between $22,500 and $75,000) eased to 100.6 for February. A moderation in home buying and less mortgage refinancing activity, which results in fewer home-equity cash outs, pulled the index lower. Assessments of jobs and incomes remain buoyant, however, which will provide support for spending in February. The index for Down Market households (incomes less than $22,500) slipped again in February following a recent peak during the holidays. The 99.8 February showing is down from 103.0 in January and 109.5 in December. The falloff in spending intentions tracks with a rise in job concerns among these households early this year. A sharp decline in home buying contributed to the decrease. Figure 3 Retail Forward Future Spending Index™ (December 2003 = 100) Source: Retail Forward ShopperScape™. The Retail Forward Future Spending Index combines households' current assessments of key drivers of spending across income segments, including the job situation, incomes, investments, debt levels, home buying, and seasonal factors to produce a forward-looking indicator of spending for the coming month. SHOPPER INSIGHTS Holiday Shopping Keeps Rolling On Gift cards did indeed turn out to be one of the most popular gifts during the past holiday season, and most of that spending power does not yet appear to be tapped out. Affluent shoppers have the largest unspent card balances. ShopperScape™ data shows that the majority of all households (62%) received at least one gift card during the 2005 holiday. The average amount of all gift cards received came in at $151 per household (Figure 4). However, gift card receivers have not drained all of the money from those holiday cards despite generous post-holiday deals-shoppers still have about two-thirds of their balances ($100) left to spend. Down Market Shoppers have an average of $59 left on their gift cards while Middle Market Shoppers have $87 and Up Market Shoppers have $131. Figure 4 Did you or any other household member receive gift cards this holiday season? *Average dollar amount represented Source: Retail Forward ShopperScape™.   Discounters Dominate The average household reported spending $830 on holiday gifts this past season. Down Market shoppers spent the least amount-a little under $400 (Figure 5). Middle Market shoppers spent almost twice as much as Down Market shoppers—an average of $771. Up Market shoppers spent the most—an average of $1,324. Figure 5 How much did your household spend on gifts this past holiday season? Source: Retail Forward ShopperScape™ PURCHASING PLANS Going Up: Subdued Hearts Greeting cards rank tops in terms of the category that will be purchased more this month than last month, but not in terms of year-to-year purchase intentions, which slipped four percentage points. In fact, all of the categories that show more interest in planned purchases in February compared to January exhibit negative year-to-year percentages—another indication of a bit slower pace of growth than last year (Figure 6). Figure 6. Categories Shoppers Plan to Purchase in the Next Four Weeks Source: Retail Forward ShopperScape™. Going Down: Time to Face the Music The two categories showing the largest percentage drops year-to-year are non-prescription drugs and pre-recorded music, videos, CDs or DVDs. The slide in the latter category has been consistent, with music downloads taking their toll on the category. Several consumer electronics categories show typical signs of post-holiday and post-Super Bowl slowdowns in February but little year-to-year change to worry CE retailers. But, women's lingerie purchase plans are down not just from January but also year-to-year-another indicator that women's lingerie is further down the list of Valentine's gifts this year (Figure 7). Figure 7. Categories Shoppers Plan to Purchase in the Next Four Weeks Source: Retail Forward ShopperScape™. POINT OF VIEW Convenience Store Industry Outlook "The convenience store industry faces a challenging environment: turning around shrinking margins, reducing reliance on gasoline and tobacco, battling intense competition from alternative channels, and stemming losses in weekly shoppers and fill-in trips. To secure long-term health, convenience stores must reevaluate current strategies. Progressive players will challenge the conventions of the c-store box, taking steps to redefine the image, store experience and merchandise offer." Jennifer Halterman, Consultant, Retail Forward Intelligence System™ For more information on the Convenience Store Industry Outlook, January 2006 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. %%Member_Busname%% %%Member_Addr%% %%Member_City%%, %%Member_State%%, %%Member_PostalCode%% %%Member_Country%% Voice: 614 355 4000 Fax: 614 355 4059 http://www.retailforward.com To subscribe to the Monthly ShopperScape Newsletter™ or other Retail Forward newsletters, click here. If you would like to stop receiving the ShopperScape™ Monthly newsletter, please edit your content preferences here.