If you cannot read this ShopperScape(tm) Newsletter for March 2005, go to http://www.retailforward.com/shopperscape/shopperscape0305.htm

Welcome to the ShopperScape™ Newsletter March 2005

• Expect spending to rise in March with the arrival of new spring merchandise.
  
• Anticipate that retailers serving the Down and Up Markets will benefit the most from rising spending.
  
• Watch out as Wal-Mart Supercenter continues on its path of stealing more share in Down and Middle Markets especially in the grocery aisles.
  
• Look for more shoppers in all markets to satisfy their Thrill of the Hunt shopping mode at dollar stores.
  
• Leverage the shopping mode that your customers most closely associate with your channel.
• Short term, look for shoppers to come out of hibernation and get into the swing of spring with purchases focused on repairing winter damage around the house and buying better weather wardrobes.
  

Wal-Mart Gaining Girth in the Middle

Wal-Mart's aggressive expansion in supercenters, coupled with low prices, is driving the retailer's market share gains in the grocery market. Gains have been highest in the Middle Market, but a rise has also occurred among Wal-Mart's core Down Market shoppers.

• According to ShopperScape™ results, Wal-Mart's overall share of grocery purchases has increased 3 percentage points from July 2004 to February 2005 (Figure 1).
• Down Market consumers still spend the highest percentage of their grocery budgets at Wal-Mart (29%). In less than one year, this share has grown 5 percentage points. At this rate, Wal-Mart will control one-third of Down Market grocery purchases within the next few months.
• The largest percentage point gain in grocery share since October occurred among Middle Market shoppers, who are now purchasing on average 24% of their household groceries at Wal-Mart. This is notable because the rate held steady from July to October in 2004.
• Not surprisingly, share gains among Up Market households continue to be harder to come by. The share of 16% posted last month was essentially unchanged from October.
  
  

Its small footprint and "thrill of the hunt" orientation has made the dollar store one of the most popular formats today. ShopperScape™ results indicate that dollar stores growing as a key destination for shoppers across all income segments as more stores pop up in conveniently-located spots.

• Nearly a quarter of dollar store shoppers are spending more in this channel than they were a year ago (Figure 2). Only 10% of shoppers visiting dollar stores in the past month said they were spending less.
• Remarkably, these figures vary little by income, suggesting that everyone-Up Market households included-loves to hunt for bargains.
  

Up and Down Markets Witness Broad Strength

In March, households in the high and low ends of the income spectrum reported greater satisfaction with nearly all the key economic drivers of spending, particularly jobs and incomes. Near-term spending plans for Middle Market households edged lower as debt loads took a bigger toll on checkbooks.

• The Future Spending Index for Up Market households (incomes greater than $75,000) bounced from 99.8 in February to 105.9 in March. Rising investment worth, lighter debt loads, home buying, and a jump in refinancing activity contributed to that strong increase (Figure 3).
• With household cash flow benefiting from a falloff in credit card debt and better incomes compared with a year ago, the index for Down Market households (incomes less than $22,500) rose to 104.8 in March. That was up from a reading of 98.5 in February. A pickup in home buying and better investment performance also played factors in that increase.
• The index for Middle Market households (incomes between $22,500 and $75,000) slipped again modestly in March, coming in at 99.1 compared with the 102.7 showing the month before. Confidence in this segment has been dented by the combined impact of heftier debt burdens and some lingering concerns about the job situation. But buoyant home buying continued to provide support for Middle Market spending plans.
  

Figure 3. Retail Forward Future Spending Index
(December 2003 = 100)

Six Faces of Shoppers

This month's ShopperScape™ survey investigated six different shopping modes that motivate shopping occasions and which retail channels are most closely associated with each shopping mode. We asked shoppers in which of the described modes they shop and discovered:

• The vast majority of shoppers (93%) participate in Low Cost Replenishment shopping-the shop to replace products that have been consumed, used up, or worn out (Figure 4).
• Three-quarters of consumers enjoy the Thrill of the Hunt, and nearly as many shop in Speed and Convenience mode.
• Over half of consumers participate in Sense of Discovery mode, and 28% see retailers as partners in the path to Self Expression.
• Another 28% rely on retailers to help them to Solve a Problem.
  

Figure 4. Shopping Modes: Percent Shopping in Mode

• Channels most closely associated with Low Cost Replenishment mode include supermarkets, discount stores/supercenters and drug stores (Figure 5).
• Factory outlet stores, off-price stores, small-size value and dollar stores, and warehouse Clubs most appeal to shoppers who seek the Thrill of the Hunt.
• Of no surprise, convenience stores are most closely aligned with Speed and Convenience.
• Softgoods retailers (accessories stores, apparel specialty stores, department stores, jewelry stores, and shoe stores) appeal to consumers shopping seeking Self Expression. Home furnishings and furniture stores are also vehicles for self-expression.
• Book and media stores, gadget, gift and theme stores, and toy stores all lure consumers looking for Sense of Discovery.
• Home Improvement/hardware stores draw shoppers who need help to Solve a Problem.
  

Spring in the Air and Step

Spring is right around the corner. Shoppers are optimistic this month that spring's right around the corner. More plan to buy fertilizer/grass seed and lawn care tools to repair their winter damage. Women are putting a spring in their steps with new shoes and thoughts are turning toward buying more casual bottoms-likely some shorts, especially with Bermudas back in style.

Slight dips in drugs, media and supplies. Shoppers are also optimistic that the winter cold and flu season is abating with fewer planning to buy OTC and prescription drugs. With consumers coming out of hibernation to spend more time outdoors, plans to buy books and pre-recorded video tapes/DVDs are down a bit as are plans to buy home office and school supplies.

Going Up

Going Down

More Wal-Mart Shoppers Crossing into Apparel Territory

"As Wal-Mart aggressively rolls out more stores, it continues to capture an increasing share of wallet. Three out of five consumers shopped for gifts at Wal-Mart this past holiday season. U.S. households now buy, on average, 22% of their groceries at Wal-Mart. A quarter of all shoppers indicate that they are spending more of their clothing budget at Wal-Mart now compared with a year ago. These ShopperScape™ findings lend credence to Retail Forward's premise that Wal-Mart will continue to push the boundaries of what consumers will allow it to be."

Sandy Skrovan, Vice President and Manager of Wal-Mart World

For more information on Shopper Update: Wal-Mart World or the Retail Forward Intelligence System™ call Kathy Clarke at 614-355-4009 or email her at kclarke@retailfoward.com.

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