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Welcome to the ShopperScape™ Newsletter August 2006 PREDICTIONS Expect back-to-school spending to rise among households with kids. Despite the early presence of back-to-school merchandise in some stores this year, prepare for tardy shoppers and bargain hunters. Look for clothing, shoes and accessories, including backpacks and messenger bags, to be the hot items. Except for purchases of back-to-school items, anticipate that consumers will curb their August spending as the Up and Middle Markets worry about debt and their investments and the Down Market worries about jobs and feels the most pain at the pump. HOT OFF THE PRESS Back-to-School Spending to Rise Prior to the last weekend in July, back-to-school shoppers had only spent 13% of their back-to-school budgets, expected to average an estimated $440 per household this year. This represents a healthy increase of 7% from last year's estimated $410 average back-to-school spending. As usual, clothing is expected to be the largest dollar volume category (Figure 1). Back-to-school shoppers estimate that they either have spent or will spend an average of $150 on clothing. The next-largest spending category is computers, averaging $73 for all back-to-school shoppers. Shoes ($55), books ($52) and school supplies ($46) also represent large spending categories. Figure 1 Estimated Total Average Back-to-School Spending by Category *Averages computed for households that have purchased or plan to purchase back-to-school Source: Retail Forward ShopperScape™.   AUGUST CONSUMER OUTLOOK INDEX SEES SLOWER SUMMER'S END SPENDING Synchronized Slowdown All three of the key income groups indicate they will spend at a reduced pace in August. Slipping investment worth and higher debts are discouraging spending among Up and Middle Market households, while Down Market shoppers are more worried about job prospects (Figure 2). Up Market households (incomes of $75,000 or greater) are expressing greater concern over rising debt burdens and a drop-off in investment worth, which is an important driver of spending among affluent households. As with the other income segments, home buying continued to drift lower for Up Market households, which could dampen spending in the near term. The Future Spending Index for Middle Market households (incomes of $22,500 to $74,999) decreased from 98.0 in July to 94.2 in August. These households on average reported that credit card and mortgage debts have become more difficult to manage. Moreover, investment gains have softened and home buying in this segment continued the downtrend from last summer's peak. The index for Down Market households (incomes of less than $22,500) slipped to 101.5 in August from 111.4 the month before. Job and income worries are weighing more heavily on this cohort. Steeper debt payments and a moderation in home buying also are factoring in the dimmer outlook for Down Market shoppers. 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 Tardy Back-to-School Shoppers Members of the three income segments are about equally tardy in their back-to-school spending. A larger percentage of Up Market shoppers than Down or Middle Market shoppers plan to make future back-to-school purchases (Figure 3). Forty-three percent of Up Market shoppers still plan to buy back-to-school items compared to 33% of Middle Market shoppers and 34% of Down Market shoppers. Figure 3 Percentage of Shoppers Planning to Make Future Back-to-School Purchases by Income Segment Source: Retail Forward ShopperScape™. Back-to-School Spending Not Uniform Estimated back-to-school spending varies widely among the Down, Middle and Up Markets (Figure 4). Up Market shoppers who had purchased back-to-school items by the end of July report spending $458 on average, compared to Middle Market shoppers spending $331 and Down Market shoppers spending $292 on average. Up Market shoppers who plan to purchase back-to-school items in the future anticipate spending $620 on average compared to Middle Market shoppers spending $450 and Down Market shoppers spending $368 on average. The net overall spending for the back-to-school season ranges from $572 on average for Up Market shoppers to $410 for Middle Market shoppers to $344 for Down Market shoppers. Figure 4 Estimated Back-to-School Spending by Income Segment Source: Retail Forward ShopperScape™.   Looking for a Discount on Back-to-School Clothes Back-to-school clothing and shoe shoppers' reports on where they are shopping this season show strong preference for retailers that offer bargains. Discount stores and value department stores should see plenty of small feet in their aisles during the coming weeks (Figure 5). Wal-Mart or Wal-Mart Supercenter will attract more than half (55%) of back-to-school shoppers looking for new outfits. Forty-five percent of back-to-school shoppers plan to go to Target for apparel. Forty-four percent plan to go to a value department stores-i.e., JCPenney, Kohl's, Mervyns or Sears. Store preference for back-to-school varies substantially by income segment: Up Market shoppers are more likely to shop at Target (56%) or value department stores (52%) than Wal-Mart (40%) for back-to-school. They also represent the segment most likely to be shopping at apparel specialty stores. In contrast, almost two-thirds (64%) of Middle Market and more than three-quarters (77%) of Down Market shoppers plan to shop at Wal-Mart for back-to-school. Although 43% of Middle Market shoppers have value department stores and 42% have Target on their lists of back-to-school retailers, only about one-quarter of Down Market shoppers include those retailers in their back-to-school store choice sets. Payless ShoeSource should enjoy fairly high foot traffic from all income segments. Figure 5 Store Types Where Shoppers Purchased or Plan to Purchase Back-to-School Clothing or Shoes Source: Retail Forward ShopperScape™.   GOING UP AND GOING DOWN Going Up: School Supplies No Surprise With the end of summer approaching fast, many households are gearing up for the new school year by completing back-to-school shopping. Popular back-to-school items such as children's school supplies, home office supplies, children's shoes, women's and men's jeans, men's underwear, undershirts, socks and girl's clothing will see the biggest increase from last month. New fall fashions boost women's dress clothing from last month. Non-prescription drugs and skin care products also will see an increase in the percentage of shoppers planning to make a purchase in the category this August. Despite anticipated increases in shopper spending on these categories from last month, year-to-year comparisons are flat at best. (Figure 6). Figure 6 Categories Shoppers Plan to Purchase in the Next Four Weeks Source: Retail Forward ShopperScape™. Going Down: Mostly Home Items With the new school year right around the corner the focus has been taken off purchases for the home. Bath textiles, paint, assembled furniture, cookware, rugs and storage and organization will all see declines in August. Downloads continue to wreak havoc on the pre-recorded music or video tapes, CDs or DVDs category especially when looking at the year-to-year comparison. Other categories seeing a decline this August include other women's casual bottoms, men's dress shoes and women's lingerie (Figure 7). Figure 7 Categories Shoppers Plan to Purchase in the Next Four Weeks Source: Retail Forward ShopperScape™. POINT OF VIEW Wal-Mart World™ Shopper Update: Food Shopping, August 2006 "Wal-Mart's feeding frenzy continues: The percentage of households using Wal-Mart Supercenter as their primary supermarket continues to climb. But while the share of household groceries bought at Wal-Mart is up from two years ago, it has stalled somewhat in the past year." Sandra J. Skrovan, Vice President and Manager of the Food/Drug/Mass, Wal-Mart World™ and Target programs of the Retail Forward Intelligence System™ For more information on the Wal-Mart World™ Shopper Update: Food Shopping, August 2006 or the Retail Forward Intelligence System™ call Kathy Clarke at 614-355-4009 or email her at kclarke@retailforward.com. New! Retail Forward Launches New ShopperScape™ Wal-Mart Panel! Wal-Mart has rocked the retail world and sent aftershocks throughout the supplier community. With two-thirds of shoppers visiting a Wal-Mart store at least once a month, its penetration into U.S. household is without precedent. Retail Forward's ShopperScape™ Wal-Mart Panel helps organizations discover the opportunities that exist within the walls of Wal-Mart. In its latest white paper, "Wal-Mart Shopper Insights: The High Demand for Low Price," Retail Forward provides an assessment of the results from its February 2006 ShopperScape™ Wal-Mart Panel. To receive a copy of this white paper and to learn more about Retail ShopperScape™ Wal-Mart Panel, contact Katherine Clarke 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.