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Welcome to the ShopperScape™ Newsletter May 2006 PREDICTIONS Expect a comparable Mother's Day to last year in terms of shoppers' spending intentions in the Middle and Up Markets but some cutback in the Down Market. Indeed, anticipate that Mother's Day may be the singular driver of a shopping spree in which consumers participate heavily. Prepare for a retreat from spending in May compared to April. Retailers will face challenges this month in maintaining positive year-to-year comparisons as shoppers moods turn more pessimistic and as high gas prices keep them from spinning their wheels as often. As more shoppers turn to online shopping, keep them coming back with ways that satisfy their desire for bargain hunting, convenience and problem-solving needs. HOT OFF THE PRESS Mother's Day Gift Intentions Hold Nearly Steady According to ShopperScape™, most moms can expect to receive Mother's Day gifts that are comparable in value to last year. Results indicate that more than half of all shoppers plan to spend about the same on gifts for Mother's Day this year compared with last year. More than one-quarter (28%) do not plan to spend anything for Mother's Day this year (Figure 1). Up Market shoppers are the most likely to spend much or somewhat more (combined 10%) on Mom this May, a shade more than the proportion who plan to spend less (9%). Middle Market shoppers are split between those who plan to spend more and those who plan to spend less. Down Market shoppers intend to spend less overall. Down Market shoppers are most likely to cut back on spending, with a combined 15% planning to spend somewhat or much less on gifts for Mother's Day this year compared with last year, nearly double the number who plan to spend more. Figure 1 Compared to last year, do you plan to spend more, the same, or less this year on gifts for Mother's Day? Source: Retail Forward ShopperScape™.   Shoulder to Shoulder in the Card Aisle Among shoppers planning to buy Mother's Day gifts, greeting cards will, again, be the most popular gift for Mother's Day this year. Flowers remain the second-most-popular gift. While the majority of all shoppers buying a Mother's Day gift plan to purchase a greeting card, the average spending level will be down overall on this Mother's Day mainstay. ShopperScape™ results indicate a $7 average amount budgeted for cards this year, a 13% decrease compared to 2005 (Figure 2). The next-most-popular category—flowers—also shows a slight downtick in the average amount that kids or Dad are planning to spend on mothers. Gift categories that should see an increase in the average amount shoppers plan to spend include clothing/shoes, candy and fine jewelry but the percentages of sons and daughters planning to buy these categories are far smaller than those buying cards or flowers. Other categories purchased by a small percentage of Mother's Day shoppers include consumer electronics and costume jewelry. Spending on these categories is expected to decline. Perhaps family members have concluded that Mom expects the real deal in jewelry this year. Figure 2 How much do you plan to spend on the following types of gifts for Mother's Day this year? Base = Shoppers planning to spend on Mother's Day gifts. *Average dollar amount presented Source: Retail Forward ShopperScape™. MAY CONSUMER OUTLOOK Some Clouds on the Horizon Everybody's More Pessimistic In May, the Future Spending Index decreased from the prior month for each key income segment. This signals a retreat from April's spending spree (Figure 3). The index for Down Market households (incomes less than $22,500) turned in the largest monthly decline among the three income segments, falling from 116.2 in April to 98.9 in May. Slipping job security and income growth helped push the index lower. Additionally, higher interest rates have taken a toll on home buying, refinancing activity and debt loads, contributing to the weaker outlook for this segment. Middle Market households (incomes between $22,500 and $74,999) are being strained by the same factors. Assessments of jobs and incomes are more pessimistic, while home buying has moderated and debts have become more of a burden. As a result, the index for this segment declined from 104.4 in April to 97.3 in May. Even Up Market households (incomes greater than $75,000), which are better able to bear economic stresses and strains, expressed concern about near-term spending plans. Dampened by heightened worries about the job outlook and stock market performance, the index for this cohort decreased from 107.6 in April to 93.3 in May. The drag of higher debts also played a factor. 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 Web site 101 Retailers continue to apply lessons learned from the early days of e-retailing to improve the functionality of their Web sites, and consumers are responding. More than eight out of 10 primary household shoppers (85%) take advantage of retailers' Web sites and the expanding array of features they have to offer. Using the Internet to extend store aisles to underserved markets is one benefit of Web retailing. Half of all shoppers have shopped at the Web site of a retailer that does not have stores in the area in which they reside. Middle and Up Market Shoppers are the most likely to use Web sites in this way, with Down Market shoppers following closely behind (Figure 4). Nearly half (44%) of all shoppers have used the store locator function on a retailer's Web site to find a store, and nearly as many have gotten directions, hours of operation or other information. Almost four out of ten (38%) of shoppers have checked out store ads on their Web sites. The ability to check product availability at local stores is important to more than a quarter of respondents (27%), while online gift registries are beginning to take hold. Of the listed activities, shoppers are least likely to use a retailer's Web site while actually shopping in a store but only a handful of retailers currently offer and actively promote this option. Figure 4 Thinking about your online shopping in the past 6 months, which of the following things have you done? Source: Retail Forward ShopperScape™. Online Shoppers Go for Bargains and Convenience This month's ShopperScape™ survey asked online shoppers to tell Retail Forward about their various motivations for shopping online. Of the Six Shopping Modes described in American ShopperScape 2005, two are the most popular among online shoppers—hunting for unique bargains and buying goods in the fastest and most convenient way. Almost two-thirds (63%) of online shoppers are bargain hunters at least sometimes when they shop online. This percentage does not vary much by income market (Figure 5). Another 61% of online shoppers buy goods online because it's fast and convenient. Up Market shoppers are most likely to be motivated by the convenience of online shopping. Across income markets about four out of 10 online shoppers use the medium to help them discover new things. A little more than one out of five go online to get advice and a little less than one out of five go online to buy products that need to be replaced routinely. Least popular (12%) is the most experiential shopping mode—shopping at a retailer's online site because it reflects one's lifestyle or how one expresses oneself. Figure 5 Six Shopping Modes for Online Shoppers Source: Retail Forward ShopperScape™. Retail Forward will be updating the American ShopperScape report this summer with fresh information comparing online and "off line" shopping behavior. PURCHASING PLANS Going Up: Mother's Day Gifts Not many categories show increases in purchase intentions from last month. Only Mother's Day-related items exhibit a slight increase and all show fewer shoppers planning to purchase the categories in the next four weeks than last year at this time (Figure 6). Figure 6 Categories Shoppers Plan to Purchase in the Next Four Weeks Source: Retail Forward ShopperScape™. Going Down: Media and the Grass is not Greener The iPod and other new media appear to be carving into sales of pre-recorded music or video tapes, CDs or DVDs. Book sellers as well as craft suppliers will be pressed to meet both last month's and last year's sales. Even the grass may be less green this year with purchase intention for fertilizer and grass seed slightly down (Figure 7). Figure 7 Categories Shoppers Plan to Purchase in the Next Four Weeks Source: Retail Forward ShopperScape™. POINT OF VIEW Competitive Outlook: Home Improvement, April 2006 "Home improvement retailers are exploring many different avenues as they seek to sustain growth. Leading players are ramping up merchandising efforts to get the most out of existing stores; promoting their installed services to tap the potential in the growing "do-it-for-me" market; testing alternative strategies such as upscale catalogs; and in the case of The Home Deport, making a major push into the pro market. Further, companies are looking at international expansion as the U.S. market approaches saturation and potential abounds globally. Nick McCoy, Senior Consultant with Retail Forward For more information on Competitive Outlook: Home Improvement, April 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. 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.