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Welcome to the ShopperScape™ Newsletter April 2005 PREDICTIONS Expect less sticker shock from the "jump at the pump" as consumers become desensitized over time to volatile gas prices. Look for shoppers to spend more on dressing up their landscapes than themselves this year compared with last year. Plan on shoppers stocking up on more lawn care and other fix-up-the-homestead types of products this month while directing resources away from home hardgoods. Anticipate renewed appetites for spending in the Middle Market this month and about the same level of enthusiasm for spending in the Down and Up Markets as last month. Expect negative news about Wal-Mart to have only a marginal effect on its traffic especially among its core shopper base. That being said, anticipate favorable publicity that Wal-Mart generates to have a positive effect on traffic. HOT OFF THE PRESS Gas Prices No Longer That Shocking ShopperScape™ results suggest that consumers are adjusting surprisingly well to spiking gasoline prices for the most part, likely helped by income gains generated by the sustained job market recovery. Also, consumers have been putting up with volatile pump prices for almost a year so many have already downshifted. Still, the most recent jump at the pump is not going completely unnoticed. Compared with last year's May and August results, a smaller proportion of respondents last month said they are planning errands to minimize distance traveled, going to stores closer to home or changing vacation plans to save on gas (Figure 1). The falloffs were steepest in the Down Market segment, which had expressed the greatest concern about bloated gasoline prices last year. For example, the percentage planning errands dipped to 46% in March from 58% last August. The percentage of all consumers planning to change their driving behavior if gas prices stay high rose from 30% in August to 38% last month. Additionally, the proportion not planning to change their driving habits at all dropped from 36% to 33% during the time period. Figure 1. Changes in Driving Behavior Due to Higher Gasoline Prices All Shoppers Down Market Middle Market Up Market   May- 04 Aug- 04 Mar- 05 May- 04 Aug- 04 Mar- 05 May- 04 Aug- 04 Mar -05 May- 04 Aug- 04 Mar -05 Planning your trips to run errands to minimize the distance you have to travel 53% 48% 45% 58% 58% 46% 56% 49% 49% 43% 38% 36% Going to stores that are closer to your home so that you don't have to drive as far 43% 41% 35% 52% 52% 40% 44% 41% 38% 33% 33% 28% Changing vacation plans to reduce the distance you travel 20% 16% 13% 20% 18% 14% 21% 18% 17% 16% 12% 9% Planning to change your driving behavior if gas prices stay high 44% 30% 38% 44% 36% 36% 46% 31% 42% 38% 25% 30% Not planning to change your driving behavior because of gas prices 27% 36% 33% 22% 25% 29% 24% 34% 28% 37% 47% 44%         Source: Retail Forward ShopperScape™ Consumers Dress up Their Yards, Not Themselves Apparel retailers should expect weaker clothing spending in 2005 in the wake of last year's apparel buying binge, but robust home buying means this year should be a strong one for lawn and garden supplies retailers. Compared to last spring, a higher percentage of consumers plan to spend more on gardening and landscaping around their homes this year than intend to boost spending on their wardrobes (Figures 2 and 3). When it comes to gardening and landscaping, nearly a third (32%) of all consumers plan to spend more this spring compared to last year, while about a quarter (24%) plan to spend less. Middle Market consumers are most likely to increase their landscaping budget. Thirty-nine percent say they will spend more, while only 16% plan to decrease their spending. Conversely, Down Market consumers— least likely of the segments to be homeowners—are the most likely to plan cut backs in spending on gardening and landscaping activities Meanwhile, only 22% of shoppers overall plan to increase spending on their personal wardrobes compared to last year. The weakness in planned apparel spending relative to last year's boom reaches beyond the typically weaker-spending Down Market into the Middle Market. Only the Up Market shows more shoppers planning to spend more on clothing (27%) than planning to spend less (16%). CONSUMER SPENDING OUTLOOK Middle Market Most Optimistic April's positive spending prospects are being driven by a resurgent Middle Market that is more optimistic about the job situation compared to last month. Middle Market strength is offsetting slight declines in the spending propensities of the Down and Up Markets this month (Figure 4). The Future Spending Index for Middle Market households (incomes between $22,500 and $75,000) improved to 102.8 in April from 99.1 the prior month. Much more favorable views of job security, buoyant incomes and more affordable debts primarily drove the index's increase. Up Market households (incomes greater than $75,000) saw their index edge slightly lower in April to 105.1 from 105.9 in March. A falloff in investment performance amid an iffy stock market and moderating home buying in this segment slightly more than offset stronger confidence in jobs and incomes. The index for Down Market households (incomes less than $22,500) also fell slightly this month, registering 104.0 compared with a reading of 104.8 in March. Weaker home buying and heightened concerns about jobs and incomes were balanced by easier debt loads compared with a year ago, which mitigated any concerns of a more pronounced falloff. 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 Have You Heard the One About Wal-Mart? When you're the world's largest retailer, you're bound to get some attention. Unfortunately, not all of it's desirable. Lately, shoppers' recall of negative news has outweighed their recall of positive news by a large amount. Over half of all consumers (58%) have heard stories about Wal-Mart in the news lately (Figure 5). Of those, over three-quarters (77%) have heard negative news, while only 19% have heard positive news (multiple responses were accepted to this question). Down Market shoppers were least likely to have heard stories about Wal-Mart in the news. Of the 51% who did, two-thirds (67%) heard negative stories and 28% heard positive ones. Both Middle Market and Up Market shoppers were more likely to have heard any Wal-Mart news (60%) and both segments were more likely to have heard negative (77% and 80% respectively) news than Down Market shoppers. Figure 5. Perception of News About Wal-Mart   All Shoppers Down Market Middle Market Up Market Have you heard anything about Wal-Mart in the news lately? Yes 58% 51% 60% 60% No 42% 49% 40% 40% Please check the statement that best describes the news you've heard about Wal-Mart lately (multiple responses accepted) Negative Stories 77% 67% 77% 80% Neither Negative or Positive 23% 23% 23% 22% Positive Stores 19% 28% 20% 15% Source: Retail Forward ShopperScape™ So What? Retailers and analysts pay close attention to Wal-Mart stories, but does the news affect where shoppers decide to part with their dollars? ShopperScape™ results suggest that any negative effect is marginal, while positive news may give a boost to Wal-Mart shopping. People who recalled negative news stories about Wal-Mart are marginally less likely (19%) than all shoppers (21%) to be shopping at Wal-Mart more than last year (Figure 6). Moreover, only a modestly higher percentage (24%) said they are more likely than all consumers (21%) to be shopping Wal-Mart much or somewhat less. People who heard positive news stories, on the other hand, are much more (32%) likely than the average consumer to state that they are shopping much more or somewhat more this year than last. Plus, they are also less likely to have cut back on their Wal-Mart shopping. Figure 6. Compared to this time last year, would you say that you are shopping Wal-Mart or Wal-Mart Supercenters...?   All Shoppers Heard Positive News about Wal-Mart Heard Negative News about Wal-Mart Much/Somewhat More 21% 32% 19% Same 58% 54% 57% Much/Somewhat Less 21% 14% 24% Source: Retail Forward ShopperScape™ PURCHASING PLANS Sprucing Up Lawn care, DIY supplies and Mom's wardrobe win. In support of spring gardening activities, shoppers are poised to stock up on gardening supplies and tools. Although shoppers are giving greater priority to their yards than their wardrobes this year, Mom is still planning to spend on casual clothes and accessories. Also look for the fix-it and paint-it projects to commence (Figure 7). Not a greeting card month. With only Passover on the near-term horizon fewer shoppers are planning to buy greeting cards this month. Other categories that are anticipated to be weaker this month include several kids-related categories—e.g., children's shoes, school supplies and toys and games. Also, as attention turns toward the exterior of the home, fewer resources will be directed toward home hardgoods purchases like furniture and appliances (Figure 8). Going Up Figure 7   Plan to Purchase Mar 05 Plan to Purchase Apr 05 Difference in Plan to Purchase Mar 05 - Apr 05 Fertilizer or grass seed 17.7% 22.9% 5.2% Lawn care tool (rake, shovel, hose, etc.) 9.4% 12.8% 3.4% Other women's casual bottoms (non-denim casual pants, shorts, etc.) 19.5% 21.9% 2.4% Women's casual tops (knit shirts, sweaters, casual blouses, etc.) 23.5% 25.5% 2.0% Building materials (lumber, concrete, etc.) 11.4% 13.3% 1.9% Paint 15.8% 17.4% 1.6% Women's Jeans 19.5% 21.0% 1.5% Women's athleticwear (pants, tops) 13.9% 15.2% 1.3% Women's accessories (belts, handbags, scarves, hair accessories, wallets, etc.) 14.7% 15.9% 1.2% Power lawn and garden (leaf blower, snow blower, mower, etc.) 6.5% 7.7% 1.2% Source: Retail Forward ShopperScape™. Going Down Figure 8   Plan to Purchase Mar 05 Plan to Purchase Apr 05 Difference in Plan to Purchase Mar 05 - Apr 05 Children's shoes 12.8% 10.0% -2.8% Greeting cards 32.5% 30.3% -2.2% Craft/Hobby supplies 21.0% 19.2% -1.8% Ready-to-assemble/Assemble-it-yourself furniture 10.1% 8.3% -1.8% Children's school supplies (paper, pens, folders, crayons, etc.) 9.7% 8.0% -1.7% Assembled furniture (sofa, table, etc.) 11.2% 9.5% -1.7% Men's athletic shoes 10.1% 8.6% -1.5% Toys/Dolls/Games (not video games) 13.1% 11.7% -1.4% Computer software 8.7% 7.3% -1.4% Color cosmetics (foundation, blush, eyeshadow, mascara, etc.) 23.9% 22.5% -1.4% Home office supplies (paper, pens, folders, etc.) 22.6% 21.3% -1.3% Major appliances 7.4% 6.1% -1.3% Infant's and toddler's clothing 14.1% 12.8% -1.3% Source: Retail Forward ShopperScape™. POINT OF VIEW Retailers Nip at Wal-Mart's Achilles Heel "For Wal-Mart to achieve its ambitious goal of capturing a 30% share in all categories, Wal-Mart must move beyond being the premier retailer for shoppers in Low-Cost Replenishment mode. Looking forward, Wal-Mart will need to engage consumers who are in alternative shopping modes, such as Self-Expression, Sense of Discovery and Speed & Convenience. If Wal-Mart masters these other shopping modes, it may once again redefine the retail landscape." Mandy Putnam, Vice President and Manager of ShopperScape™ For more information on Wal-Mart World™ Merchandising: Nipping at Wal-Mart's Achilles Heel or the Retail Forward Intelligence System™ call Kathy Clarke at 614-355-4009 or email her at kclarke@retailfoward.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. 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