If you cannot read this ShopperScape(tm) Newsletter for September 2004, go to http://www.retailforward.com/shopperscape/shopperscape0904.htm

Welcome to the ShopperScape™ Newsletter September 2004

• Expect the summer dog days in spending to continue into September.
  
• If your store isn't on the main drag between home and work anticipate some gas pains.
  
• Watch out for cooling sales as some consumers put their revolving credit cards on ice in the wake of rising interest rates.
  
• Look for continued shift in apparel shopping from catalogs to online.
  

Most consumers get used to gas pains.

Retail Forward repeated some of the questions from our May ShopperScape™ survey about how consumers plan to modify their behavior in the wake of erratic prices at the pump. Findings show fewer consumers modifying their driving diets due to gas pains at the end of summer. One key exception across Markets is that about the same percentages of consumers are shopping closer to home as found in May. Three reasons for a more moderate response to rising gas prices than we found in late spring include:

• More employed consumers are helping to offset higher gas prices.
  
• Many consumers likely already modified their driving behaviors between the May and August survey waves and have limited appetites for further conservation. As evidence, we observe a steep falloff among people who say that they plan to change their driving behaviors if gas prices stay high.
  
• Finally, with summer vacations winding to a close fewer consumers are changing upcoming vacation plans in response to gas prices.
  

Of no surprise, Down Market households are bearing the brunt of steeper gas prices and the most likely to minimize the amount of driving they do to go shopping.

Putting credit cards on ice.

Higher interest rates are making a quarter of shoppers think twice about making purchases they can't pay for right away. This could dampen consumer spending, particularly among Down Market households. However, most consumers are taking rising rates in stride as the income gains generated by a recovering job market keep rates affordable.

• Credit card debt is the most sensitive to interest rate changes. A quarter of all shoppers said they are postponing revolving credit card purchases because of higher rates.
• To a lesser extent, big-ticket purchases like cars, home improvement activities that require a loan, and loans for school are also being deferred.
• Despite the recent falloff, higher mortgage rates than earlier in the year have caused 12% of all households to hold off on buying a house.
  

Shoppers pause to catch their breath.

The Retail Forward Index of Future Spending™ declined further this month indicating that shoppers plan to tighten the purse strings in September. From a fast sprint during the first half of the year, shoppers have slowed to a jog due to declining optimism about job prospects, gas prices remaining elevated and rising short-term interest rates. However, Retail Forward expects only a pause, not a screeching halt, in spending as job growth improves.

• Among Up Market households (incomes greater than $75,000), the Index of Future Spending slipped modestly to 102 mostly due to persisting stock market weakness but also some weakness in assessment of job prospects and income gains. Home buying rebounded strongly in the Up Market, cushioning the falloff.
  
• For Middle Market households (incomes between $22,500 and $75,000) the Index of Future Spending slid to 101 amid an uptick in concerns about job security. Debt loads also became more of a concern, tempering the spending outlook. But home buying in this cohort remained strong and refinancing activity nudged higher. This suggests persisting buoyancy in spending among Middle Market households, which account for the biggest share of consumer spending.
  
• For Down Market Households (incomes less than $22,500) the Index of Future Spending also declined to 101. This segment continues to worry most about jobs, incomes and debt burdens. Some of the decline was softened by increases in home buying and refinancing among Down Market households.
  

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.

The majority of shoppers do at least some of their shopping online…

Almost three-fourths of primary shoppers in households have shopped online in the past 6 months for products other than what they use for business. Additionally, 59% of primary shoppers have made an online purchase in the past 6 months.

• Up Market households are the most likely to shop and buy online, with three-fourths of them making an online purchase in the past 6 months.

...and they're not just buying media anymore.

Although books still rank supreme on the list of online purchases, online shopping for clothing has increased significantly and is expected to continue to grow. Retail Forward has observed a seismic shift from apparel catalog shopping to apparel online shopping over the past couple of years. Just this past month Wal-Mart relaunched apparel shopping on its Web site as its largely Down and Middle Market shopper base increases its online apparel shopping.

Other categories showing gains especially in the Up Market include beauty care, home décor/cookware/tabletop and shoes.

Look for more details about online shoppers in Retail Forward's E-Retailing reports.

Casual for Mom and new shoes and toys for Dad.
With kids back in school, consumers are showing small, but at least positive, plans for spending increases in categories like women's jeans and athleticwear, men's shoes and big-boy toys like sporting goods, power tools and consumer electronics (down last month). Greeting cards look healthier and it's almost time to fertilize the lawn for winter.

Back-to-school winding down. Having outfitted the kids, parents' plans for buying children's school supplies, home office supplies and kids' clothing and shoes are down for September. Also down are summer "vacation accessories" like photographic film and books. Finally, it looks like fixing the car or redoing bedroom décor are less likely to be on the September "to do" list.

Going Up

Going Down

Softgoods specialists on a quest for growth

"Softgoods specialists are on a quest for growth, with high growth 'stars' working to maintain momentum by rolling out successful concepts nationally while investing in new concepts that offer long-term growth. The less stellar performers are striving to catch up by reinvigorating tired concepts and strengthening margins through better inventory and promotions management. A saturated marketplace will motivate more specialists at both ends of the spectrum to seek growth by building a portfolio of concepts focused on ever-finer consumer groups. Concepts will vie for more share of wallet by developing and applying deep customer insights to their assortment strategy, the shopping experience, and store brand building and communication."

Lois Huff, Senior Vice President, Manager Softgoods

For more information on Industry Outlook: Softgoods Specialty Stores 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

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