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Welcome to the ShopperScape™ Newsletter October 2005
Due to the recent rise in gas prices, consumer spending is down. More than half of all shoppers report spending much/somewhat less due to the increase in prices at the pump (Figure 1).
Although some consumers are turning to online shopping to cut back on gas, most shoppers claim their online shopping has not changed due to the increase in gas prices.
Figure 1
Retail Forward's Future Spending Index turned sharply lower in October, indicating that shoppers intend to curtail their spending this month. The index dropped to 94.0 from 104.6 in September (Figure 2). "The economic side effects of Hurricanes Katrina and Rita have sent a collective shudder through the consumer sector," said Steve Spiwak, an economist with Retail Forward. "Higher energy costs are the main culprit for the falloff in spending intentions for October. But the storms also have heightened concerns about job security and the direction of equity markets, contributing to the soft near-term outlook." In fact, this month's ShopperScape™ results show that higher gas prices and charitable contributions in the wake of the hurricanes currently are causing a majority of shoppers to think twice about opening their wallets. The sectors that should bear the brunt of any spending cutbacks are entertainment-related, such as vacations and eating out. And while there is still a lot of uncertainty about the longer-term effects, results also suggest that the hurricane impact likely will diminish as the holidays approach.
October's falloff in spending plans is due to greater pessimism among Up and Middle Market households, segments that had exhibited some strength in recent months. Interestingly, plans for Down Market households held nearly steady. This is partly because spending plans for the Down Market segment had already fallen steeply in the prior two months in response to the impact of rising energy costs.
Figure 2 Retail
Forward Future Spending Index™
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.
Donations and charitable contributions causing some to cut back spending. The majority of shoppers have made some type of donation or charitable contribution to the victims of Hurricane Katrina. While the donations made have caused a significant percent of shoppers (47%) to cut back, more than half of all shoppers (54%) have not cut back their spending at all (Figure 3).
Figure
3
Source: Retail Forward ShopperScape™
Figure 4 Which
of the following categories, if any, do you expect to reduce
Figure
5
Which of the following products, if any, do you expect to pay more for due to Hurricane Katrina?
Figure 6 Thinking
ahead to the December holidays, how will Hurricane Katrina
Going Up: Not Much Good News Very little upward movement occurred for purchase plans between September and October. Books represents the single category that registered above one percentage point difference but the category's year-to-year difference between October 2004 and October 2005 still was slightly down. In apparel categories women's accessories, casual tops and costume jewelry held their own, suggesting that women may be planning to update current wardrobes through accessorizing and buying new tops rather than buying complete outfits (Figure 7). Figure 7. Going Up
Going Down: Not Terrible News Of no surprise children's school supplies buying plans drifted downward from last month now that the kids have settled into the school year. Home office supplies also slipped. Showing
the largest decline from last year is the paint category, which
may portend weaker interest in home decorating. Home decorating
usually begins with paint and less interest in buying paint could
be a sign that relatives visiting for the holidays will find themselves
surrounded by last year's furnishings (Figure 8). Figure 8. Going Down
Consumer Electronics Industry Outlook "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."
For more information
on the Consumer Electronics Industry Outlook, August 2005 or the
Retail Forward Intelligence System™ call
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Look
for spending on other goods to drop as gas prices rise.
Gas
Prices Up, Spending Down
Hurricane
Ripple Effects Hit Spending Plans
Up
and Middle Markets Dip Most
Effects
of Hurricane Katrina on Consumer Spending
Vacations/travel
will see the biggest cut back due to Hurricane Katrina.
ShopperScape™ results indicate that a large percentage of shoppers
plan to reduce their spending on vacations/travel. Dining out and
entertainment outside of the home also will see reduced spending
as a result of Hurricane Katrina (Figure 4).
Shoppers
are anticipating an increase in the price of gas due to Hurricane
Katrina. Shoppers are expecting to pay more for a number of
products due to the effects of Hurricane Katrina. As gas prices
soar, 95% of all shoppers expect increases at the pump. Heating
fuel and food also are anticipated budget busters according to many
shoppers (Figure 5). 
Effects
of Hurricane Katrina on holiday spending are split.
With the holidays quickly approaching, many shoppers are mindful
of how Hurricane Katrina will affect their spending. While some
shoppers feel the hurricane will have an effect on their holiday
spending, others just are not sure yet (Figure 6).
