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Welcome to the ShopperScape™ Newsletter June 2008

• Look for shoppers to use further cost-cutting measures to offset rising gasoline and food prices.
• Expect shoppers to move beyond coupon-clipping to buying more private brand and opening price point versions of items on their shopping lists. 
• Anticipate that most shoppers will take a pragmatic view regarding shopping as they perceive they are getting “less for more”—and in need of stretching their shrinking dollars further.
• Watch for shoppers to trade down—not only in terms of buying less expensive items where they typically shop for consumables but also in terms of shopping in more value-oriented venues.  Expect dollar stores and extreme value grocers to benefit.
• Don’t count on too many shoppers to go on spending sprees for big ticket items with their tax rebates.   Most are using their rebates just to make ends meet or pay off debt.
• Think gift cards vs. the traditional tie for Father’s Day.

Higher Gasoline and Food Costs Continue to Curb Shopper Appetites

During the last four months, the percentages of shoppers saying they plan to spend much less or somewhat less than they did last year have increased steadily (Figure 1).

• The shift from future intention to spend about the same to future intention to spend less was most pronounced between February and March.
• Almost half of shoppers in May said they planned to spend less in June 2008 than they did in June 2007—markedly higher than February’s 28%.

Figure 1

Compared to this time last year, in the next month do you plan to…?

Source: Source: TNS Retail Forward ShopperScape™

As the price of gasoline rises, shoppers are curbing their spending elsewhere (Figure 2).

• Although Down Market shoppers are most vulnerable to rising gasoline prices, Middle Market and, to a lesser extent, Up Market shoppers are feeling pain at the pump too.  Four-fifths of Middle Market and two-thirds of Up Market shoppers say they have changed their spending habits due to rising gasoline prices.

Figure 2

How has the increase in gas prices affected your overall spending?

*Highlighting under all shoppers indicates significant difference between percentages in July 2007 and May 2008; highlighting under income markets indicates significantly higher percentages between the income segments and the all shoppers percentages in May 2008.
** Source: U.S. Regular All Formulations Retail Gasoline Prices, Energy Information Administration
Source: TNS Retail Forward ShopperScape™

Food prices, which have climbed steadily during the course of several months, spiked even higher in April resulting in increased focus by shoppers on saving money at the grocery store (Figure 3).

• Comparing February’s results with May’s shows no increase in the percentages of shoppers who are cutting back on “just too expensive” items, dining out or clipping coupons—common strategies for saving money on food.  This suggests that shoppers who employ those methods had already done so by February.
• What has changed significantly between February and May is the percentage of shoppers who are trading down to less expensive versions of the products on their shopping lists—increasing from 33% to 40%.

Figure 3

How are rising food prices affecting your household spending?    Are you ... ?

*Highlighting under all shoppers indicates significant difference between percentages in February 2008 and May 2008; highlighting under income markets indicates significantly higher percentages between the income segments and the all shoppers percentages in May 2008.
Source: TNS Retail Forward ShopperScape™

The combination of rising food prices and higher gasoline prices has negatively affected shoppers’ views about whether they are getting as much “bang for their buck” as they did last year (Figure 4). 

• Almost nine out of 10 shoppers think they are now getting less for their money compared with last year vs. about two-thirds of shoppers last September.

Figure 4

Given current changes in prices, do you think you are getting…?

Source: TNS Retail Forward ShopperScape™

In the wake of rising food prices, one-fifth of all shoppers are changing the stores where they shop for groceries and other consumable goods (Figure 5).

• One-quarter of Down Market shoppers are changing stores to find better deals.

Figure 5

Overall, have you changed the stores you shop for groceries and other household essentials given the current economic conditions?

Highlighting indicates a significant difference between individual segment and all shoppers.
Source: TNS Retail Forward ShopperScape™

As a result, a few channels are gaining shoppers, some are losing shoppers and some are holding their own (Figure 6).

• Formats benefiting from the economic downturn are dollar stores and extreme value grocers such as Save-A-Lot and ALDI.
• Formats with the biggest losses are convenience stores and drug stores followed by specialty food stores and health/natural food stores.
• Wal-Mart Supercenter is holding its own, but discount stores—especially Target and Kmart—are being shopped less often compared with a year ago, according to shoppers.

Figure 6

Given the current economic conditions, which of the following store formats/retailers are you shopping more often, about the same or less often compared to a year ago for your grocery shopping?*

*Among shoppers who have changed the stores they shop due to economic conditions
Source: TNS Retail Forward ShopperScape™

Help Is On the Way?

Tax rebate checks began flowing in May.  Shoppers who received them most commonly paid credit card and other bills, put them into savings or used them for everyday expenses—not on special purchases as some retailers had hoped.   Still, recent same-store sales increases among warehouse clubs, discount stores and drug stores indicate that some retailers’ sales are being positively affected by the rebates (Figure 7).

• Up Market shoppers were most likely to treat themselves to a special purchase.   However, relatively few indulged themselves in spending sprees compared with those who paid bills or put the money into savings.
• Down Market and Middle Market shoppers often used the money to pay for everyday expenses such as gasoline and food.

Figure 7

The government has started to distribute tax rebates.  If you received a rebate, how did you use the money? 

*Highlighting indicates a significant difference between an individual segment and all shoppers.
Source: TNS Retail Forward ShopperScape™

Comparing  the group of shoppers who used the money in May with the group of shoppers who planned to use the money in February shows that shoppers became more short-term focused and more pragmatic during the time period.  Fewer shoppers than anticipated put the money into savings or used it for a special purchase (Figure 8).

Figure 8

How Shoppers Planned to Use vs. Used Tax Rebate Money*

*Among shoppers who expect to get a rebate, have received a rebate or have decided how to use the money from their rebate
Source: TNS Retail Forward ShopperScape™

Most commonly, shoppers who have yet to receive their rebate checks are undecided about how they are going to spend them but bill-paying, savings and using the checks to pay everyday expenses—vs. spending sprees—remain at the top of their lists
(Figure 9).

• Many more Down Market shoppers than other shoppers are aware they will need to spend their rebate checks to make ends meet.

Figure 9

If you have not received your rebate yet or if you have not used the money from your rebate,
how will you use the money?* 

*Among shoppers who have not received a rebate yet or have not decided how to use their rebate money
Highlighting indicates a significant difference between an individual segment and all shoppers.
Source: TNS Retail Forward ShopperScape™

Fathers Get Equal Opportunity

Last month ShopperScape™ findings suggested that mothers were getting the short shrift compared with last year’s Mother’s Day spending.  Fathers also should expect more frugality this year as more shoppers indicate plans to spend less on Father’s Day gifts (Figure 8).   

• Those opening their pockets wider outnumber the ones tightening their belts for Father’s Day only in Up Market households.

Figure 8

Compared to last year, do you plan to spend more, the same, or less this year on gifts for Father's Day? 

*Highlighting under all shoppers indicates significant difference between percentages in May 2007 and May 2008; highlighting under income markets indicates significantly higher percentages between the income segments and the all shoppers percentages in May 2008.
Source: TNS Retail Forward ShopperScape™

Clothing/shoes gifts for Father’s Day are expected to experience the largest decline in the percentage of shoppers purchasing for Father’s Day—down 4 percentage points from last Father’s Day (Figure 9).

• This is the first year gift cards have been tracked as a potential Father’s Day gift but already they are the third most-popular choice—another indicator of pragmatism pervading shopping in the current climate.

Figure 9

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: TNS Retail Forward ShopperScape™

Target’s To-Do List in a Tough Economy, May 2008

Target—whose relatively affluent shopper base was once thought to be fairly insulated from economic pressures such as rising gasoline prices and food price inflation—is now feeling the pinch as a myriad of challenges come to a head.  While Target’s performance is suffering, Wal-Mart is benefiting from the challenging economic environment.  Target is determined not to stray from its existing strategy—a decision that will serve Target well in the long run.  But at present, it should focus on some initiatives to minimize the immediate impact of the economic downturn.

Jennifer Halterman
Senior Consultant

For more information on the Target program and the Retail Forward Intelligence System™ call Kathy Clarke at 614-355-4009 or email her at kclarke@retailforward.com.

TNS Retail Forward
Two Easton Oval Suite 500
Columbus, OH, 43219
United States
Voice: 614 355 4000
Fax: 614 355 4059
http://www.retailforward.com

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