If you cannot read this ShopperScape(tm) Newsletter for August 2004, go to http://www.retailforward.com/shopperscape/shopperscape0804.htm

Welcome to the ShopperScape™ Newsletter August 2004

• Expect a short intermission in spending in August in the Down and Up Markets.
  
• Keep an eye on rising interest rates and fuel costs at the pump.
  
• Don't worry about campaign rhetoric, or lack of it, putting a damper on spending.
• Prepare for back to school in full swing.
  

Geopolitical uncertainty takes a backseat to concerns over rising interest rates.

When it comes to spending cut backs consumers are only likely to change their behaviors when economics kick them in their back pockets.

• Of the geopolitical and economic events surveyed, rising interest rates are of most concern to consumers across the Down, Middle and Up Markets. Retail Forward will be keeping a close watch as the Federal Reserve inches the interest rate up.
  
• Recent "flat" stock market performance (at the time of the survey) affects fewer consumers. Of no surprise, Middle and Up Market consumers are affected the most when the market falters.
  
• While the campaigns are trying to get consumers revved up, uncertainty over the presidential elections is a "ho-hummer" when it comes to changing spending habits for the majority of Americans, especially the Middle and Up Markets.
  
• Even the threat of terrorism and the war in Iraq seem to have a negative influence on only a minority of consumers' spending plans with the least effect on the Up Market.
  

Short intermission expected in August.

The Retail Forward Index of Future Spending™ for August fell slightly from July as a result of easing of spending plans this month among the Up and Down Markets. Middle Market spending, which accounts for nearly half of consumer spending, is expected to remain stable.

• Among Up Market households (incomes greater than $75,000), the Index of Future Spending slipped modestly to 104 in August from 105 in July. Reduced expectations related to near-term stock market performance and moderating home buying weighed on this group. But easier debt loads and a pick up in refinancing activity kept their outlook for spending generally healthy.
  
• For Middle Market households (incomes between $22,500 and $75,000) the Index of Future Spending held steady at about 104. Tempered views about job security and investments were balanced by more favorable assessments of incomes and debt burdens. Plus home buying in the Middle Market logged another strong increase, delivering a boost to their spending outlook.
  
• For Down Market households (incomes less than $22,500) the Index of Future Spending dipped markedly to 104 in August from 113 in July-the highest level of the year. The Down Market is still worrying about job prospects although some of the negative impact is offset by affordable mortgage rates driving home buying and refinancing.
  
  

The monthly Retail Forward Index of Future Spending™ 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.

They know a designer brand when they see one

With the proliferation of designer brands at discount stores RFI thought that it was time to ask what shoppers think about them. What's surprising is the consistency among the Down, Middle and Up Market in terms of their perceptions of designer clothing brands at discount stores:

• First of all, shoppers don't seem to be confused about what a designer clothing brand is.
  
• Second, a large percentage of shoppers likes having access to designer brands at discount stores.
  
• And just to make the department stores shudder, the majority of shoppers view designer brands sold at discount stores to be just as fashionable as those sold at department stores.

More information about apparel shoppers and how they interact with brands will be forthcoming in RFIS Softgoods track reports for release later this month and next month.

Who the heck is George: Part II?

Last month we reported that we didn't think that shoppers knew who the heck George is. This month we report that six percent of shoppers know who he is because they've bought George. And, Middle and Up Market shoppers are just as likely to have bought George as Down Market shoppers.

So what do shoppers who have sampled George think of him? Well, he may be no Isaac Mizrahi, but he's comfortable.

• George gets high marks for comfortable fit, suitable styling and quality, great value for the price and durability- all factors signaling a good start toward becoming a reliable apparel brand.
  
• George appears to give Wal-Mart fashion a bit of a boost in some purchasers' views but hasn't fully engaged shoppers. George doesn't yet seem to be a remarkably more compelling suitor for shoppers' attention than other Wal-Mart apparel brands.
  
• Three-fourths of George buyers say that they will likely buy the brand again but George is not yet in the consideration set of "favorite brands." Time will tell how the relationship progresses and whether or not shoppers ultimately become engaged.
  

Look for more details about Wal-Mart shoppers in Retail Forward's upcoming report entitled The Wal-Mart Shopper Update.

Back to school in full swing. Back-to-school supplies and kids clothing are showing even larger percentages of primary shoppers planning to buy this month than last month. More men are planning to stock up on basic apparel items this month. Home office supplies continue to show strength and crafts/hobby supplies are showing a slight uptick in purchase plans.

Lawn care continues to dry up. As summer rolls on, lawn care supplies continue their steady decline from their May peak. Some declines in plans to buy DIY materials indicate that summer fix-up plans are winding down. Other categories that are showing some weakness--DVD players, music tapes/CDs, digital camcorders and VCRs--signal a tough August for consumer electronics retailers.

Going Up

Going Down

Consumer Electronics Battle Heating Up

"The consumer electronics landscape-for both retailers and manufacturers-is rapidly changing. Mass retailers, most notably Wal-Mart, and companies historically functioning primarily as suppliers to retailers are becoming more relevant from a retail perspective while Best Buy and Circuit City continue to battle. In the coming years, category spending will be driven by digital and wireless products as well as price deflation and the continued commoditization of key technologies. Manufacturers will reposition themselves to take advantage of the digital boom, while direct sourcing will allow small players to effectively compete and further drive down product prices and margins."

Geoff Wissman, Vice President, Manager Homegoods

For more information on Industry Outlook: Consumer Electronics or the Retail Forward Intelligence System™ call Kathy Clarke at 614-355-4009 or email her at kclarke@retailfoward.com.

700 Ackerman Road Suite 600
Columbus, Ohio 43202
Voice: 614 355 4000
Fax: 614 355 4059
http://www.retailforward.com

TO UNSUBSCRIBE Send a blank email to: $subst('Email.UnSub')