To view this email as a web page, click here.

Welcome to the ShopperScape™ Newsletter September 2005 PREDICTIONS Look for the tail end of back-to-school shopping to be weighted toward apparel as the kids check out what everyone else is wearing before they commit. Prepare for Katrina's impact on pump prices to have a negative effect on Down Market spending. Expect the Middle Market to open its pockets a little wider this month. Anticipate steady growth in online shopping with continued focus on media and apparel categories. Expect consumers to pull in the reins on spending in September with shoppers not focusing their dollars in any one category. HOT OFF THE PRESS Back-to-School Looked Good before Katrina Ditched in Line While school-age children dread the end of summer vacation, parents and guardians face a difficulty of their own—back-to-school shopping.  The latest ShopperScape™ survey, which was fielded about halfway through the August-September back-to-school shopping season, indicates that many shoppers already have made back-to-school purchases.  But almost as many appear to be waiting perhaps to see what others are buying for back-to-school. Overall, 29% of all primary household shoppers have purchased school supplies such as clothing, shoes, books and backpacks for the new school year (Figure 1).  Conversely, 71% of all shoppers have not made any back-to-school purchases, likely due to school-age children not being present in the household.                   Source: Retail Forward ShopperScape™. Up Market shoppers are most likely to engage in back-to-school spending.  Thirty-six percent have shopped early in the season and more than one quarter (27%) still have back-to-school shopping planned in the near future. In comparison, 25% of Down Market shoppers and 27% of Middle Market shoppers are ready for the first day of class.  Also, 20% of Down Market shoppers and 22% of Middle Market shoppers still have shopping to complete before their kids are ready to get on the bus for the first day of school. School supplies are the most common items purchased so far by 84% of shoppers buying back-to-school items (Figure 2).   In contrast, clothing (80%) tops the list of purchases of those still planning to purchase back-to-school items.  This is likely because many kids want to check out what their friends are wearing and in many school districts what they are allowed to wear before committing their apparel dollars (Figure 3).   Also, many shoppers haven't purchased books yet, likely waiting for the list although many have already bought the backpacks to haul them in. Figure 2. Percentage of those having already purchased the following back-to-school items              Source: Retail Forward ShopperScape™. Figure 3.  (For shoppers purchasing this category) How much have you spent on back-to-school purchases in each of the following categories?*            *Average dollar amount presented           Source: Retail Forward ShopperScape™. Back-to-School Spending Amounts Everything from pens and pencils to computers and electronics can start to add up when the back-to-school season is in full swing.  In fact, ShopperScape™ shows that shoppers already have spent a large chunk of their back-to-school budgets. Overall, a large percentage of shoppers so far have spent more of the money allotted in their budgets for each of the key back-to-school product categories.  For example, the 10% of shoppers who have bought a new PC on average have spent $813 (Figure 4) so far this season, the most expensive back-to-school item.  Meanwhile, the seven percent of shoppers still planning to buy a PC expect to spend an average of $667 before the back-to-school shopping season ends (Figure 5). Dormitory furnishings, bedding and bath also have put a significant dent in the wallets of the 10% of back-to-school shoppers buying those categories—$237 on average so far.  Average spending in this category is expected to slip to $119 during the rest of the shopping season with nine percent of shoppers still planning to buy furnishings for their college students. With tighter budgets, Down Market shoppers are most likely to wait until later in the season to purchase big-ticket merchandise.  For example, eight percent of Down Market shoppers buying back-to-school items have already spent an average of $457 on computers, but six percent of Down Market shoppers buying back-to-school items plan to spend nearly twice that amount ($828) in the coming weeks.  In contrast, both Middle and Down Market households are more likely to have spent their computer-allotted dollars.  Figure 4.  Percentage of those planning to purchase the following back-to-school items              Source: Retail Forward ShopperScape™. Figure 5.  (For shoppers purchasing this category) How much do you plan to spend on future back-to-school purchases in each of the following categories yet this season?*              *Average dollar amount presented             Source: Retail Forward ShopperScape™. The Bottom Line: Back-to-School Spending Up vs. Last Year The net result is that retailers can expect spending during the back-to-school shopping season to be stronger than last year.  Those already having made back-to-school purchases at the time of the survey (29% of households) spent an average of $452. Those still planning to purchase (22% of households) reported an average of $348 in future spending. Forty percent of shoppers predict they will spend about the same this year as they did last year on back-to-school purchases.  But nearly as many (39%) plan to spend somewhat more or much more.  In comparison, fewer than half that amount (16%) plan to spend somewhat less or much less than a year ago.  For a small percentage of shoppers (5%), this will be the first year their little one steps into the classroom (Figure 6). Similar proportions of Down (36%), Middle (41%) and Up (39%) Market households plan to spend more than last year.  However, Down Market shoppers will be watching their budgets more closely than the other income segments.  Twenty-three percent plan to spend less, which is significantly higher than the percentage of Middle (16%) and Up (13%) Market shoppers who plan cut backs. Figure 6.  Compared to last year, how much will you spend on back-to-school purchases?              Source: Retail Forward ShopperScape™. CONSUMER SPENDING OUTLOOK Middle Market Buoys Overall Spending Plans The September uptick in spending intentions is the result of higher confidence among Middle Market households, which reported more optimistic assessments of most of the key economic drivers of consumer spending.  Meanwhile, spending plans for both the Down and Up Market segments moderated from elevated levels (Figure 7).  The September Future Spending Index for Middle Market households (incomes between $22,500 and $75,000) increased to 110.9 from 102.3 in August.  This improvement in spending plans is being driven by more upbeat appraisals of jobs, incomes and debt levels.  Stronger home buying also is putting Middle Market shoppers in a better spending mood. The index for Down Market households (incomes less than $22,500) slipped to 102.8 for September from 106.8 last month.  This segment reported a moderation in job security, the key driver of spending for this cohort.  Still, Down Market shoppers are benefiting from higher incomes than a year ago as well as the extra cash generated by stronger mortgage refinancing activity, both of which are cushioning the falloff in spending plans. After bouncing to 103.6 last month, the index for Up Market households (incomes greater than $75,000) dipped to 98.1 for September.  That decline reflects more sober views of job security, income growth and investment worth in this income segment.  The positive impact of a pickup in home buying and refinancing activity will keep Up Market spending at healthy levels, however. The survey was conducted prior to Hurricane Katrina.  As a result, Retail Forward’s economists believe that the surge in gasoline prices in the aftermath of the hurricane will dampen overall spending, especially in the Down Market. 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 Online Shopping Rolls On Media and apparel still tops online.  Online shopping continues its popularity with 83% of our online panel members purchasing products for non-business use from an online shopping site.  Media i.e., books, CDs and DVDs and apparel still top the list of types of purchases that consumers are making online (Figure 8).  Find more about online buying and online aggravations in Retail Forward's upcoming report on e-retailing.                                  Source: Retail Forward ShopperScape™. PURCHASING PLANS Going Up: Shoppers Almost at a Standstill With the focus away from back-to-school shopping, many consumers are regrouping in what looks like a "holding pattern" for September. ShopperScape™ data shows that shoppers will not be focusing their spending in any one category in the upcoming month. Slightly more attention will be paid to the home, however not significantly more than last year. Key categories that can expect a boost in September include fertilizer or grass seed, wallpaper, hand tools, home accent pieces and power tools. Toys/dolls/games, vitamins and nutritional supplements, women's jeans, and infant's and toddler's clothing also should see an increase in September, although fewer will be purchasing these items compared to this time last year (Figure 9). Figure 9. Going Up Source: Retail Forward ShopperScape™. Going Down: DVD Purchases on Pause With back-to-school season behind us, it looks like spending on school supplies and office products will take a back seat for another year. Although some homegoods items are on the rise from last month, bath textiles purchasing will decline a bit. However, the big news is the anticipated drop in the percentage of shoppers buying DVDs compared with last year likely a result of more box office busts than blockbusters this summer (Figure 10). Figure 10. Going Down Source: Retail Forward ShopperScape™.   POINT OF VIEW Industry Outlook, Consumer Electronics "Best Buy continues to lead in the consumer electronics industry, with its latest initiative being its customer-centricity program, while other top players are generally holding their own.  Opportunities for growth still exist, but only for retailers that are capable of educating shoppers and facilitating the shopping process for key products and technologies.  Retailers can also find growth by stepping out of the superstore box, providing opportunities in turn for suppliers that are willing to partner with their retail customers and help identify and fulfill underserved consumer segments." Julie Campitelli, Consultant with Retail Forward For more information on Industry Outlook, Consumer Electronics August 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 LISA, PLEASE PUT IN LINK RFI WEBSITE 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.