To view this email as a web page, click here. Welcome to the ShopperScape™ Newsletter May 2007 PREDICTIONS Anticipate department stores to continue to outperform apparel specialty stores short term. Look for discount stores/supercenters catering to the Down Market to continue to be challenged by external factors such as rising gasoline prices taking bigger chunks from taxed wallets.  Leverage the growing affluent market by keeping the luxury goods flowing in their channels of choice. Have a Happy Mother’s Day as shoppers plan to spend with about as much enthusiasm as last year. Expect healthy spending on greeting cards and flowers this Mother’s Day. Anticipate some shift in spending on Mom from the traditional rocks to rocking with consumer electronics. HOT OFF THE PRESS Department Stores Soar into Spring TNS Retail Forward’s February ShopperScape™ survey findings underscore this spring’s shift favoring department stores compared with other lines of trade, especially specialty apparel retailers (Figure 1): Increasing year-to-year by 11 percentage points, the gain in the percentage of shoppers visiting department store retailers far exceeded gains in other lines of trade. Discount department stores/supercenters registered a healthy 5 percentage point increase in April’s shoppers. Following closely are consumer electronics retailers with a 4 percentage point increase in shoppers visiting the channel. Slight gains in shoppers at home textiles/home furnishings retailers and home improvement centers demonstrate that shoppers continue to visit these channels, which have been battered by the weak housing market. Once again at the bottom of the list is the apparel specialty store channel, which continues to significantly underperform relative to department stores. Figure 1 Percentage of Primary Shoppers Shopping Line of Trade in the Past 4 Weeks                     All Primary Shoppers                    April, 2006 April, 2007 Y-T-Y Percentage Point Difference Department Stores 48% 59% +11 Discount Stores/Supercenters 80% 85% +5 Consumer Electronic Stores 30% 34% +4 Home Textiles/Home Furnishings Stores 27% 29% +2 Home Improvement Centers/Hardware Stores 54% 55% +1 Adult Apparel Specialty Stores 46% 47% +1         As of January 2007, past four week shoppers are defined by shoppers selecting retailers from lists that organize retailers by channel.  Previously, shoppers initially selected retailers they shopped during the past six months.  Shoppers’ responses to this past six month question defined the list of retailers from which they selected the retailers they shopped during the past four weeks. ShopperScape™ data is balanced to key demographics, which from January 2007 forward include race and ethnicity. Source:  TNS Retail Forward ShopperScape™. SHOPPER INSIGHTS Crossing the Aisles ShopperScape™ compared 27 departments shopped in the past four weeks by Wal-Mart Supercenter customers and SuperTarget customers.  Significant differences in the percentages of shoppers penetrating the departments were noted in 11 departments (Figure 2). Wal-Mart Supercenter attracts more of its customers into groceries and HBC than SuperTarget. SuperTarget attracts higher percentages of customers to home furnishings. Reflective of its customer base, Wal-Mart Supercenter attracts more plus-size women into women’s wear. SuperTarget holds the lead in costume jewelry and accessories.  SuperTarget outperforms Wal-Mart in toys. Wal-Mart Supercenter attracts a significant percentage of its customer base to the pet department with its private brand pet food Ol’ Roy—despite its recall. Automotive supplies, hardware/paint and lawn & garden departments at Wal-Mart Supercenter also significantly outperform SuperTarget’s comparable departments. Figure 2 Departments Shopped by Past 4 Week Shoppers During Last Visit to Wal-Mart Supercenter and SuperTarget   Percentage of Wal-Mart SuperCenter Shoppers Percentage of SuperTarget Shoppers   n = 1569 n = 387 Groceries 78% 49% Health and Beauty Care 52% 41% Housewares 21% 24% Small Appliances 10% 9% Home Furnishings 14% 23% Fabric and Crafts 16% 4% Home Textiles 15% 18% Infants and Toddlers Clothing 12% 14% Men's Clothing 11% 6% Boy's Clothing 8% 8% Girl's Clothing 9% 11% Women's Wear 17% 13% Ladies Wear 22% 25% Teen Girl's Clothing 5% 5% Shoes 18% 22% Costume Jewelry/Accessories 9% 15% Sporting Goods 7% 5% Consumer Electronics 13% 11% DVDs/CDs 23% 24% Computer/Video Games 10% 8% Office Supplies 17% 14% Toys 14% 20% Seasonal 14% 17% Pets 34% 19% Automotive Supplies 10% 3% Hardware/Paint 10% 3% Lawn & Garden 25% 11%   Shading indicates significant differences between column percentages. Source: TNS Retail Forward ShopperScape™ Up Market Redefined In this newsletter issue, TNS Retail Forward has redefined the Up Market—roughly the upper quartile of household incomes.  The break previously at $75,000 has shifted upward to $85,000 as the rich get richer.  According to the Federal Reserve the number of millionaire households in the United States has more than doubled since 1995.  The soaring wealth at the top of the income spectrum is propelling luxury spending.  Channels which show at least twice the percentage of affluent (defined as $175,000+ incomes, which represent about the top 5% of household incomes) past four week shoppers include: Upscale department stores (more than three and a half times more likely to shop) Fine jewelry retailers (about two and a half times more likely to shop) Children’s specialty apparel, specialty home improvement and health/natural supermarket retailers (more than twice as likely to shop) Moms Will Rock Instead of Getting Rocks Slightly fewer children will be spending on mothers this Mother’s Day than last year.  However, most of the two-thirds (68%) who are spending on mothers are planning to spend about the same amount this year as last (Figure 3). More Up Market shoppers (80%) will spend on mothers and their spending will slightly increase. Down Market shoppers are much less likely to be spending on mothers this Mother’s Day (58%). Figure 3 Compared to last year, do you plan to spend more, the same, or less this year on gifts for Mother's Day?   All Primary Shoppers 2006 All Primary Shoppers 2007 Down Market (Less than $22,500) Middle Market ($22,500 to $84,999) Up Market ($85,000+) Much More 1% 2% 2% 2% 2% Somewhat More 7% 7% 8% 7% 8% About the same 52% 50% 39% 50% 63% Somewhat Less 6% 6% 5% 6% 6% Much Less 4% 4% 4% 4% 2% Do not plan to spend anything for Mother's Day this year 29% 32% 42% 32% 20%   Source: TNS Retail Forward ShopperScape™ This Mother’s Day, consumer electronics purchases will outshine fine jewelry in terms of spending, although twice as many children plan to purchase fine jewelry (10%) as consumer electronics (5%) (Figure 4). Plans to spend on the two most popular categories—greeting cards and flowers—are up 6 percentage points. Slightly more children plan to buy clothing/shoes for Mom and plan to spend significantly more. About the same percentages of Up Market shoppers plan to spend in luxury categories of consumer electronics, fine jewelry and fragrances/cologne as shoppers in other markets but the average amounts they plan to spend are higher: $445 on consumer electronics, $318 on fine jewelry and $90 on fragrances/cologne.  Figure 4 How much do you plan to spend on the following types of gifts for Mother's Day this year?                            All Primary Shoppers                Down Market (Less than $22,500) Middle Market ($22,500 to $84,999) Up Market ($85,000+)   Percentage Planning to Purchase Y-T-Y Difference in Percentage Planning to Purchase Average Amount Planning to Spend* Y-T-Y Dollar Difference Percentage Planning to Purchase Average Amount Planning to Spend* Percentage Planning to Purchase Average Amount Planning to Spend* Percentage Planning to Purchase Average Amount Planning to Spend* Greeting Cards 78% +6 $9 $2 72% $11 78% $9 81% $9 Flowers 39% +6 $49 $14 37% $40 38% $55 41% $45 Clothing/Shoes 14% +2 $105 $19 16% $156 13% $55 16% $154 Candy 13% +5 $16 -$3 20% $19 12% $11 9% $23 Fragrances/Cologne 10% +3 $51 -$1 11% $26 10% $43 9% $90 Fine Jewelry 10% +4 $171 -$54 13% $73 8% $135 10% $318 Consumer Electronics 5% +2 $202 $66 8% $101 4% $123 5% $445 Costume Jewelry 5% +2 $29 $0 8% $18 4% $29 4% $45 Other (not including spending on services like dining out, movies, hotels, vacations, etc.)  35% 0 $78 $12 29% $103 34% $60 40% $96   Base = Shoppers planning to spend on Mother's Day gifts. *Average dollar amount presented Source: TNS Retail Forward ShopperScape™ Among shoppers planning to buy Mother’s Day gifts, the average amount they are planning to spend is $89 (Figure 5). Down and Middle Market shoppers are planning to spend about the same amount—around $80. Up Market shoppers will open their fatter wallets and spend around $117 on Mom. Figure 5 Overall, what is the total amount you plan to spend for Mother's Day this year?   All Primary Shoppers 2007 Down Market (Less than $22,500) Middle Market ($22,500 to $84,999) Up Market ($85,000+) Average amount $89 $81 $78 $117           Base = Shoppers planning to spend on Mother's Day gifts. Source: TNS Retail Forward ShopperScape™   POINT OF VIEW Retail Perspectives: Food Landscape in Transition “Expect the retail food landscape to look different five years from now. The transition now underway is being propelled by an intense battle for consumer food dollars. Existing food retailers are trying to retain their positions. New players are entering an already crowded food scene. Merger and acquisition activity is heating up among big and mid-tier players. Feeling the pressure from many different angles, conventional supermarkets are busy looking for ways to re-establish themselves as a dominant force in the food marketplace.” Katia Watson, Consultant, TNS Retail Forward For more information on Retail Perspectives and the Retail Forward Intelligence System™ call Kathy Clarke at 614-355-4009 or email her at kclarke@retailforward.com. STRATEGIC OUTLOOK CONFERENCE Retail Forward Intelligence System™ 2007 Strategic Outlook Conference Retailing 2015: New Frontiers 2015 is only eight short years away, but the environment for retailing will be dramatically different than it is today. What are the top 15 trends that will challenge retailers and suppliers in the years ahead? How can your organization best navigate the new frontiers? Attend THE premier industry event for retail and supplier executives for the answers. Hundreds of senior executives in strategy, marketing, consumer insights, merchandising, category management, business development and market research, will convene at TNS Retail Forward’s 2007 Strategic Outlook Conference Retailing 2015: New Frontiers. Join us and learn from the industry’s leading analysts as they explore what lies ahead and help you prepare for the new frontiers of Retailing 2015. Find out: How the shopper landscape will evolve Where suppliers will find growth What new formats and concepts will develop Which new technologies will change the balance of power What tomorrow’s retail enterprise will look like DOWNLOAD THE INVITATION REGISTER NOW What's TNS Retail Forward ShopperScape™? TNS Retail Forward ShopperScape™ focuses on today's consumers and their shopping behaviors. TNS 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. TNS 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/retailintel/ss_default.asp.

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