Welcome to the ShopperScape™ Newsletter July 2004

• Expect an uptick in spending from June's restrained pace.
  
• Prepare for an improved back-to-school climate especially for school supplies, kids' clothing and footwear, backpacks and books.
  
• Expect parents to be spending on their kids' clothes instead of their own.
  
• Anticipate modest pullback in homegoods spending among cautious Down and Middle Market segments compared to this past year.
  

Back-to-school expected to best last year's sales. Doting parents plan to open their wallets wider this year and send their kids back to school with class.

• Thirty-eight percent of shoppers plan to buy B-T-S items during the July to September season.
  
• Of shoppers planning B-T-S purchases, 36% percent plan to spend more than they spent last summer on B-T-S while only 14% plan to spend less. Half plan to spend the same amount as last year.
  
• Among shoppers planning B-T-S purchases, over half plan to spend on school supplies, kids' clothing and footwear and backpacks.
  
• The 44% of parents planning for their kids to bury their noses into the books expect to spend a whopping $180 on average.
  

Will dog days hit homegoods? Tentative shoppers may leave homegoods retailers howling the dog day blues compared to last year's boom in the category. Tax refunds for parents from last summer further boosted homegoods sales, already propelled by home buying and refinancing. This summer finds shoppers with their tax refunds already spent and with jitters about increasing gas prices and resurfacing terrorist threats. As a result, Down and Middle Market shoppers are hesitant to commit to homegoods spending despite their improved employment picture and outlook. Retailers may need to wave a few treats in front of shoppers to close big ticket homegoods sales.

"Which of the following describes your plans for spending on goods for your home this summer compared to last summer?"

Modest Rebound from June Expected in July

In July, the Retail Forward Index of Future Spending™ posted a modest rebound following June's falloff, which bodes well for improved retail spending this month. The index rises modestly to 104 from 102 in June driven by more optimistic spending plans in the Middle and Up Markets, which account for the lion's share of spending. Stronger incomes and the stock market rebound last month-despite some recent potholes in the path-are helping Middle and Up Market shoppers feel better off. Improved employment will boost the Down Market's mood.

• In July, the index for Up Market households (incomes greater than $75,000) rose modestly from last month. The benefits of the rebound in the stock market and the improving job picture continue to flow disproportionately to these households. However, debt loads have become a concern for more Up Market households recently, which could temper an increase in spending.
• Among Middle Market households (incomes between $22,500 and $75,000), the consumer spending index rose to 103 in July from just under 100 in June. A more favorable view of investments and incomes offset heightened concerns about job security amid the recent slowdown in job growth. Also, home buying in this segment rebounded as mortgage rates stabilized following the recent uptick, providing further support to the spending outlook.
• The index for Down Market households (incomes less than $22,500) saw less improvement than in other markets, reflecting a dimmer view of job prospects and the burden of rising debt payments on homes and cars. That said, brighter job prospects among Down Market shoppers are expected to improve their outlook.
  

The monthly 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.

Who the heck is George?

Shoppers are recognizing that something is improving on the "softer side" of Wal-Mart but they don't seem to know who the heck George is.

• Two-thirds of Wal-Mart Supercenter shoppers are crossing the aisles from food into general merchandise and more Wal-Mart shoppers are shopping in multiple departments in the Supercenter.
  
• Shoppers believe Wal-Mart's apparel is improving. Over one quarter of Wal-Mart shoppers believe that Wal-Mart's apparel offer has improved from a year ago in terms of quality and style.
  
• Soft home fashions get even more kudos than apparel for improvement with about one-third of consumers seeing improvement in styles and almost 30% thinking quality has improved.
  
• That said, about seven out of ten Wal-Mart shoppers don't have a strong opinion of George-they are either neutral or have no opinion on the subject. Of those able to weigh in, more shoppers (17%) disagree than agree (13%) that the brand has improved apparel shopping at Wal-Mart.

Look for more details about consumers' shopping in Retail Forward's upcoming reports on Wal-Mart.

Back to the mines. In addition to children's back-to-school supplies and new shoes home office supplies show an uptick in spending plans for this coming month. Also, small-ticket homegoods seem to be holding up.

Less lawn care and sagging bottoms. Lawn care supplies continue to decline from their May peak. Last month paint topped the list of products that more shoppers planned to buy so it's not surprising to see painting plans down a little this month. With no holidays in sight, greeting card buying is anticipated to decline. Finally, men's and women's apparel looks like it will sag.

Going Up

Going Down

Online Underleveraged

"Once it became clear that online sales were in fact not going to displace stores, retailers began developing online features that enabled customers to use the Web not just as a place to buy, but as a place to shop. But even the largest retailers have only deployed a few of the multi-channel features customers expect. There's a lot of room for improvement just to satisfy customers today and with broadband access on the rise - and customer expectations along with it - retailers have to take a new look at their Web sites and stores…and the space in between them."

Jim Crawford, Vice President, Manager e-Retailing

For more information on Multi-Channel Retailing Benchmarks & Best Practices or the Retail Forward Intelligence System™ call Kathy Clarke at 614-355-4009 or visit www.retailforward.com.

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