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Welcome to the ShopperScape™ Newsletter August 2005 PREDICTIONS Look for Down and Middle Market shoppers to be especially price sensitive this month as pump prices rise. Expect the Up Market to resume its healthy spending pace this month. With apparel shopping alive and well, expect basics and classics to rule back-to-school. Prepare for more price-conscious back-to-school shoppers this season compared to last year especially in Down and Middle Markets. Anticipate "convenience, convenience, convenience" to increasingly influence shopping patterns. HOT OFF THE PRESS Down Market Suffering from Price Hikes Given the current change in prices, the majority of all shoppers in all markets feel they are getting somewhat less for their money than last year. While all markets are suffering from pricing pains, the Down Market has been most affected (Figure 1). Almost all shoppers (94%) feel they are getting about the same or less for their money than they did a year ago. The most optimistic are Up Market shoppers where 35% feel they are getting about the same amount for their money as they did last year, but 60% still perceive that they are getting less bang for their bucks these days. Figure 1. Given current changes in prices, do you think you are getting...                           Source: Retail Forward ShopperScape™. CONSUMER SPENDING OUTLOOK Up Market Up, Down and Middle Markets Slip The August outlook is being driven by a solid improvement in spending plans among Up Market households, whose spending accounts for about 40% of overall retail sales. Middle and Down Market plans moderated but remained at levels suggesting still-healthy spending growth (Figure 2). The Future Spending Index for Up Market households (incomes greater than $75,000) increased to 103.6 in August from 95.9 a month earlier. These households reported stronger overall financial positions compared with last month. In particular, they are more confident about jobs and incomes, investments and debt loads. The result should be stronger spending this month despite a modest slowdown in home buying in this segment. The index for Middle Market households (incomes between $22,500 and $75,000) eased slightly to 102.3 in August from 104.6 a month ago as shoppers in this cohort became less optimistic about job security and growth in take-home pay. Debt loads also generated some concerns, offsetting the positive impact on spending prospects of stronger home buying and refinancing activity in this shopper segment. After jumping to its highest level of the year last month (116.0), the index for Down Market households (incomes less than $22,500) declined to 106.8 this month. The fluctuating job market is weighing most heavily on this segment, which reported heightened pessimism about job prospects and incomes. Higher debt burdens and a falloff in home buying contributed to the decline. Figure 2. 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 Apparel Shopping Shoppers wear ordinary, very basic styles over all others. With the number of apparel outlets increasing and the Internet at their fingertips, shoppers are exposed to a variety of styles when it comes to shopping for apparel. However ordinary, very basic styles most often for work and casual/weekend wear still rule despite the wide variety of clothing styles available (Figure 3). More than half of all shoppers wear ordinary, very basic styles most often for casual/weekend wear. Comparatively, the percentages decrease significantly across all other styles of clothing with 23% wearing classic or traditional styles, 18% wearing contemporary fashions and only 6% wearing the latest, trend-setting styles. Shoppers in all markets are likely to be found wearing ordinary, very basic styles in the workplace. However, as income increases the percentage of shoppers wearing ordinary, very basic styles to work decreases and instead shifts towards classic or traditional styles. Fifty-nine percent of Down Market shoppers wear ordinary, very basic styles to work compared to only 35% of Up Market shoppers. In contrast, 23% of Down Market shoppers wear classic or traditional styles to work compared to 27% of Middle Market shoppers and 38% of Up Market shoppers. Figure 3. Which one of the following best describes the style of clothes that you wear most often for…. *Among full time employee's       Source: Retail Forward ShopperScape™. Most consumers shop for clothing at least four times a year. ShopperScape™ results indicate that one of America's favorite past times—apparel shopping—is alive and well. Survey data indicates that as income increases so does the frequency of apparel shopping (Figure 4). Seventy percent of all shoppers shop for clothing for themselves at least once every two to three months. And 45% shop at least once a month. As income increases, so does the frequency of shopping for clothes. Up Market shoppers are almost twice as likely to shop at least once a week (9%) for clothing as Down Market shoppers (5%). Over half (52%) of Up Market shoppers will browse retailers for apparel at least monthly compared to 46% of Middle Market shoppers and 34% of Down Market shoppers. Figure 4 How often do you shop for clothing for yourself, whether or not you actually intend to buy anything?                                    Source: Retail Forward ShopperScape™. Wal-Mart capitalizing on casual clothing brands. With a wider variety of apparel retailers has come a wider variety of brands. Shoppers favor the everyday low prices of Wal-Mart for everyday casual/weekend clothing while they turn to department stores for business casual workwear and formal/dress business workwear (Figure 5). Nearly one quarter of all shoppers (23%) purchase brands sold exclusively at Wal-Mart for their everyday casual/weekend clothing. Significantly fewer (10%) choose moderate department store brands when purchasing everyday casual/weekend clothing. Business casual workwear purchasers favor moderate department stores' and lifestyle clothing specialists' brands. A combined twenty-two percent of all shoppers purchase these brands most often when purchasing business casual workwear. Better department store brands are the most popular among shoppers purchasing formal/dress business workwear. Figure 5. What one type of clothing brand do you purchase most often for each of the following types of clothing: everyday casual/weekend clothing, business casual workwear, and formal/dress business workwear?          Source: Retail Forward ShopperScape™. Shoppers are getting out of malls and into cyberspace. Fewer shoppers are opting for spending time in big city shopping districts and enclosed malls compared to other venues. Instead, shoppers are turning to one-stop-shopping venues like strip shopping centers that include a supermarket. Plus, an increasing number of shoppers are going online to shop. Online shopping has seen the largest increase during the last year among all shopping locations (Figure 6). Due to frequent grocery store visits, more than half (59%) of all shoppers shop at a small to mid-size strip shopping center that includes a supermarket at least once a month. Similarly, 57% of all shoppers choose to shop at least once a month at a larger strip shopping center that includes at least one discount department store. The Internet is gaining popularity among shoppers with 27% shopping on the Web at least once a month and nearly three-quarters (72%) shopping online at least once a year. Shopping at least monthly via the Internet has increased by 11 percentage points since July 2004. Small- to mid-size strip shopping centers that include a supermarket have also experienced a leap from the 49% visiting this type of location at least once a month in July 2004. Figure 6. How often do you shop, whether or not you purchase anything, at each of the following types of shopping locations? Source: Retail Forward ShopperScape™. PURCHASING PLANS Going Up: Back-to-school Preparations As the new school year approaches, shoppers are making school supplies and clothing a priority on their shopping list. Children's school supplies will see the biggest jump between July and August with an increase of 7.8 percentage points. Similarly, home office supply sales will be increasing as well. For many, a new school year means new clothes for growing children and teens. Children and teen clothing, shoes and accessories dominate other planned purchases for August 2005. Compared with last year, back-to-school purchase plans appear slightly softer, which suggests that retailers will need to ring the price savings bell to ring the register (Figure 7). Figure 7. Going Up Source: Retail Forward ShopperScape™. Going Down: Lawn Care and Adult Apparel With much of August being focused on back to school, adult apparel categories like casual bottoms will sag. Men and women's apparel will see a decrease, especially for other women's casual bottoms, other men's casual bottoms and men's dress clothing. End-of-summer will see landscaping products such as lawn care tools and fertilizer or grass seed on the decline. Tight wallets will also limit spending on major appliance and consumer electronics like iPods. (Figure 8). Figure 8. Going Down Source: Retail Forward ShopperScape™. POINT OF VIEW Industry Outlook: Dollar Stores and Other Small Format Value Retailers "High growth and geographic expansion will continue to characterize the small format value retailing sector during the next five years. Leading companies will continue to get bigger and small players will find it tougher to compete. But the picture is not as pretty as it's been the recent years as some big players begin to experience growing pains. Given the torrid pace of store expansion in recent years and wider geographic coverage, existing processes and management information systems are being pushed to their limits. Looking forward, industry players will need to invest in the infrastructure necessary to control bigger businesses."                                                                 Sandra J. Skrovan, Vice President and Manager of the North American                                                                 Food/Drug/Mass Intelligence System™ and Wal-Mart World™ For more information on Industry Outlook: Dollar Stores and Other Small Format Value Retailers, July 2005 or the Retail Forward Intelligence System™ call Kathy Clarke at 614-355-4009 or email her at kclarke@retailfoward.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.