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Welcome to the ShopperScape™ Newsletter March 2006 PREDICTIONS With spring just around the corner, look for spending to rise in March from February. Expect a slightly subdued level of spending compared to last year's brisk pace especially in goods related to home sales and areas of the country where the housing market is slowing down. Anticipate continuation of the bargain-hunting mentality and for Wal-Mart to be the top retailer to deliver the goods to meet shoppers' needs for bargains. Expect Wal-Mart to continue to grow services and other ancillary offers to gain more share of wallet from its enormous shopper base. Prepare for shoppers to be more focused on sprucing up their wardrobes than their homes this spring. Look for shoppers to increase their demands for shopping anytime, anywhere, anyplace for anything. HOT OFF THE PRESS Almost Everyone Shops at Wal-Mart Sometimes Nearly everyone has been inside a Wal-Mart store. And while it should come as no surprise that less-affluent households are more likely to shop at Wal-Mart weekly, ShopperScape™ results also show that similar proportions of shoppers across the key income segments have visited a Wal-Mart store on a monthly or less-frequent basis. More than nine out of ten primary household shoppers have made a shopping trip to a Wal-Mart store at some point in the past. Down and Middle Market shoppers are most likely to have shopped at Wal-Mart. Only 7% of Middle Market shoppers and 9% of Down Market Shoppers have never shopped the retailer (Figure 1). A startling 39% of all primary shoppers have visited a Wal-Mart within the past week. And, more than one-third (35%) of Up Market primary shoppers have visited a Wal-Mart within the past week. No wonder that Wal-Mart is moving to upgrade merchandise. Figure 1 When was your last shopping trip to a Wal-Mart discount store, Wal-Mart Supercenter or Wal-Mart Neighborhood Market store? Source: Retail Forward ShopperScape™.   MARCH CONSUMER OUTLOOK Shoppers' Spirits Set for Spring According to Retail Forward's Future Spending Index, consumer spending should rise in March from last month. The overall index improved to 101.6, the highest level since September (Figure 2). Spending should be a bit weaker than a year ago, though, because the latest index is a shade lower than in March 2005. The Future Spending Index for March increased for Up and Down Market households but moderated for Middle Market shoppers. The index for Up Market households (incomes greater than $75,000) rose to 101.6 for March compared with 98.5 in the prior month. An increase in home buying and a more optimistic view of job security lifted the index for this segment. Lagging investment gains compared with last year somewhat restrained the expected improvement in March spending. Down Market households (incomes less than $22,500) are showing some resilience this month. The index for this cohort jumped to 110.0 from 99.8 in February and 104.8 in the same month last year. A rebound in optimism about job and income prospects, less-weighty debt burdens and a bounce back in home buying were the key drivers of performance. Dampened by lingering job worries in the wake of the hurricanes, the index for Middle Market households (incomes between $22,500 and $75,000) slipped to 98.8 for March, down from 100.6 in February. That decline was softened by a pickup in recent home purchases and debt loads that have become more manageable. Figure 2 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 Almost Everyone Shops at Wal-Mart, but not for Everything Retail Forward asked primary shoppers what categories they bought in the past four weeks anywhere and then what categories they bought at Wal-Mart in the past four weeks. The results demonstrate that Wal-Mart's penetration of categories ranges from a high of 58% for seasonal merchandise to a low of 18% for prescription drugs (Figure 3). Wal-Mart penetrates a high percentage of the women's plus-size market (48%) but a relatively low percentage of the women's missy market (35%). Wal-Mart performs well in baby- and pet-related categories (48% and 46% respectively) but not so well in the "sinful" categories of tobacco (23%) and alcohol (21%). Wal-Mart is more successful at penetrating household cleaning products (48%) than perishables such as meats/seafood/deli (30%) and produce (33%). Other areas where Wal-Mart shows weaker penetration are some "category killer" player categories such as hardware/paint (32%), sporting goods (33%) and office supplies (33%). But in sharp contrast is Wal-Mart's high level of penetration in toys (49%). Figure 3 Percentage of Past 4 Week Shoppers of Category that Purchased Category at Wal-Mart in Past 4 Weeks Source: Retail Forward ShopperScape™.   Shopping Frequency Boosts Services The high shopping frequency at Wal-Mart drives business to its in-store services and fast food counters (Figure 4). ShopperScape™ data shows that photofinishing is the most popular service offered by Wal-Mart, with 21% of all shoppers having purchased this service during the past year. Vision care, portrait studio and hair salons also are among the most popular services offered by Wal-Mart. Among the least popular services are tax assistance and financial services. Only 1% of all shoppers have opted to take advantage of those services. Overall, fast food counters are more popular than Wal-Mart's service offers. Nearly half (47%) of all shoppers have purchased food from one of the fast food counters in Wal-Mart. Down Market Shoppers are the most likely to stop by one of the counters for a bite to eat, while Up Market Shoppers are the least likely (Figure 5). Figure 4 Which of the following services have you used at Wal-Mart discount store, Wal-Mart Supercenter or Wal-Mart Neighborhood Market during the past year? Base=Wal-Mart Shoppers Source: Retail Forward ShopperScape™ Figure 5 How often do you buy food from any of the fast food counters in a Wal-Mart discount store, Wal-Mart Supercenter or Wal-Mart Neighborhood Market? Base=Wal-Mart Shoppers Source: Retail Forward ShopperScape™ PURCHASING PLANS Shoppers Don't Go to Wal-Mart for the Ambiance ShopperScape™ data indicates that Wal-Mart is perceived as offering better everyday prices even when not on sale and one-stop shopping benefits for food, personal care and everyday household essentials. Nearly one-third of Wal-Mart shoppers reported that being open 24/7 is a primary reason they shop at Wal-Mart. And another 29% view the product selection as meeting more of their needs than alternative stores' selections (Figure 6). On the negative side of the ledger are "areas for improvement"—perceptions of other stores offering higher quality products, more appealing atmospheres and easier shopping experiences plus being more convenient to home or work. Figure 6. Reasons for Shopping Wal-Mart vs. Other Stores for Food, Personal Care and Everyday Household Essentials (e.g., Paper and Cleaning Products) Source: Retail Forward ShopperScape™. Retail Forward is launching a Wal-Mart Panel dedicated to helping our clients discover what opportunities reside within the walls of Wal-Mart. For more information about the Wal-Mart Panel and Wal-Mart World™, call Kathy Clarke at 614-355-4009 or email her at kclarke@retailforward.com. Going Up: Spring Wardrobes Although spring wardrobe purchasing may not be quite as robust as last year, it will be in full swing in March. It looks like casual apparel purchasing, especially women's athleticwear, will outpace interest in new dress apparel. Other categories of increasing interest this month range from music and video tapes, CDs or DVDs to OTC drugs. Although fertilizer and grass seed buying is expected to pick up with the advent of spring, focus off the homestead may make this year's sales look like…well, fertilizer…compared to last year (Figure 7). Figure 7. Categories with Increased Purchase Plans for March vs. February Source: Retail Forward ShopperScape™. Going Down: Spring Housekeeping Reflective of the softening housing market in some pockets around the country is a decline in anticipated purchase plans in many home-related categories that go hand-in-hand with moving into a new house. Storage/organization and small housewares purchasing show the largest anticipated declines in both month-to-month and year-to-year comparisons (Figure 8). Figure 8. Categories with Decreased Purchase Plans for March vs. February Source: Retail Forward ShopperScape™. POINT OF VIEW Industry Outlook: Multi-Channel Softgoods Retailing "Building an online presence has become an imperative for apparel retailers in order to fulfill today's demand for shopping anytime, anywhere, anyplace for anything. Apparel retailers continue to make the transition from being companies with distinct divisions between their historical bases—whether they began as stores or catalogs—and their online operations to companies with fully integrated customer-facing and back room support systems. Looking forward, retailers will need to make appropriate levels of investment in order to remain competitive and responsive to the changing shopping habits of apparel shoppers." Mandy Putnam, Vice President and Manager of ShopperScape™ For more information on the Industry Outlook: Multi-Channel Softgoods Retailing, February 2006 or the Retail Forward Intelligence System™ call Kathy Clarke at 614-355-4009 or email her atkclarke@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. 700 Ackerman Road Suite 600 Columbus, Ohio 43202 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.