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Welcome to the ShopperScape™ Newsletter June 2006 PREDICTIONS Expect spending on Father's Day to follow a similar pattern as spending on Mother's Day did. For the most part shoppers expect to spend about the same amount this year as they did last year. Anticipate the most moderation in Father's Day spending among Down Market shoppers. Welcome shoppers' improved moods about their jobs and income growth in June, which should have a positive effect on shopping. But, keep in mind that consumers remain concerned about the high cost of gasoline, which affects the number of trips shoppers are willing to make and the distances they are willing to travel to shop. Even though indicators show that consumers are less shocked by high gas prices than they were last October, the majority still reports shifting their spending in order to pay the price at the pump. Anticipate an upturn in some home-related purchases this month as well as items to keep vacationing kids occupied. HOT OFF THE PRESS Spending on Dad With Father's Day right around the corner, many shoppers plan to spend about the same this year on gifts for Dad as last year. Nearly half (48%) of all shoppers plan to spend about the same this year on Father's Day gifts. Up Market shoppers are the most likely to have the same budgets, with 59% planning to spend about the same as last year (Figure 1). At the same time, nearly twice as many Up Market shoppers plan to spend more (12%) than less (7%) on Dad this year. The situation is reversed for Down Market shoppers. About one-third (34%) of shoppers do not plan to spend anything for Father's Day. Twice as many Down Market shoppers do not plan to spend anything for Father's Day this year compared to Up Market shoppers. Figure 1 Compared to last year, do you plan to spend more, the same, or less this year on gifts for Father's Day? Source: Retail Forward ShopperScape™.   Addressing and Dressing Dad with Cards and Clothes Shoppers who are buying Father's Day gifts plan to spend an average of $66 this year, which is down 14% from last year's average (Figure 2). Father's Day gift givers are most likely to purchase greeting cards or clothing/shoes for Dad this month. However, retailers can expect consumer electronics and jewelry to bring in the most money per item when it comes to Father's Day gifts. More than two-thirds (68%) of all Father's Day gift purchasers plan to purchase the ever-popular greeting card and more than one-quarter (27%) plan to purchase clothing/shoes for Dad this June. The average ticket is expected to be lower in both of these categories this year compared with last year. In fact, average spending should be down in all of the most popular gift categories except sporting goods. Shoppers in all income markets purchasing gifts for Dad this June will spend the most on consumer electronics and jewelry. Shoppers plan to spend an average of $134 on consumer electronics and $132 on jewelry. Up Market shoppers are the most likely to purchase greeting cards, clothing/shoes, consumer electronics and sporting goods. Figure 2 How much do you plan to spend on the following types of gifts for Father's Day this year? Base = Shoppers planning to spend on Father's Day gifts. *Average dollar amount presented Source: Retail Forward ShopperScape™. JUNE CONSUMER OUTLOOK Spending Plans Show Resilience In June, the Future Spending Index increased from the prior month for each of the key income segments (Figure 3). An improved job outlook, easier debt loads and a pick up in home buying were common themes across income groups. The index for Middle Market households (incomes between $22,500 and $75,000), which account for nearly half of overall spending, rose to 102.6 for June compared with 97.3 in May. The main reason was that assessments of job security logged a strong rebound from May's falloff. Also, consumer and mortgage debts have become easier to shoulder while home buying in this segment improved. Down Market households (incomes less than $22,500) posted the strongest improvement among the three income segments. The index for this group increased from 98.9 in May to 106.4 in June. As with Middle Market households, Down Market spending prospects are being buoyed by better job security, lighter debt burdens and a modest improvement in home buying. More optimistic views of job and income growth and debts along with an improvement in home buying bolstered the outlook for Up Market households (incomes greater than $75,000), whose index increased to 97.9 in June from 93.3 in May. The outlook was dampened somewhat by concerns about recent investment performance. 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 Pump Price Pressures Persist, but Ease Compared with last fall, the pressure of rising gas prices has eased according to ShopperScape™ results. This is due in part to incomes that are rising at a solid clip, leaving enough cash to fuel other spending after filling up the tank. Moreover, consumers likely are finding ways to cope with increases at the pump other than by curbing spending, such as carpooling and coordinating shopping trips. Overall, 62% of all shoppers are spending much or somewhat less due to the increase in gas prices. This compares to 67% in October 2005, a five percentage point decline (Figure 4). The increase in gas prices has hit Down Market shoppers the hardest. Three-quarters (75%) of all Down Market shoppers have cut back their overall spending because of rising gas prices, down slightly from 77% in October. The combined percentage of Middle Market shoppers who are spending much or somewhat less due to the increase in gas prices (70%) held steady compared with October. The proportion of Up Market shoppers who have restrained their overall spending because of rising fuel prices slipped significantly, from 57% to 49% in October and May respectively. Figure 4 How has the increase in gas prices affected your overall spending? Source: Retail Forward ShopperScape™. PURCHASING PLANS Going Up: Home and Summer Supplies Shoppers will be increasing their spending on diverse categories in June. Home items such as window coverings and cookware will see an increase from May along with categories to keep the kids happy this summer like good beach books and children's school supplies. Teen girl's clothing will also increase this month from May. In general spending plans are about the same as last year (Figure 5). Figure 5 Categories Shoppers Plan to Purchase in the Next Four Weeks Source: Retail Forward ShopperScape™. Going Down: Lawn and Garden and Women's Apparel Women's wardrobes and lawn and garden items will move to the back burner in June. Specifically, other women's casual bottoms and women's dress clothing will see a decline in June compared with May as well as fertilizer and grass seed and lawn care tools. In general purchase intentions for health and beauty care items are down from last month and last year, which may portend a need to crank up the air freshener in close quarters. For example, fewer shoppers are planning to purchase hair care products in June compared to May 2006 (Figure 6). Figure 6 Categories Shoppers Plan to Purchase in the Next Four Weeks Source: Retail Forward ShopperScape™. POINT OF VIEW Shopper Update: Food Drug Mass, May 2006 "Findings from Retail Forward's ShopperScape™ underscore how pervasive Wal-Mart's influence is on the shopping behaviors of Americans. Given the overwhelming number of shoppers it attracts, Wal-Mart falls short of fully leveraging the opportunities it has—especially among Middle Market and some Up Market shoppers. The channels that are least vulnerable to losing more share of wallet to Wal-Mart are those that appeal to a differentiated customer base (e.g., home improvement retailers that serve professionals as well as consumers) and/or differentiate with higher quality products, a better shopping experience and more convenient locations." Mandy Putnam, Vice President and Manager of ShopperScape™ For more information on Shopper Update: Food Drug Mass, May 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.