If you cannot read this ShopperScape(tm) Newsletter for November 2004, go to http://www.retailforward.com/shopperscape/shopperscape1104.htm

Welcome to the ShopperScape™ Newsletter November 2004

• Expect spending to continue to ease from the lofty levels of the first half of the year.
  
• After the storm created by the election clears, anticipate shoppers settling back into a healthy pace of spending.
  
• Prepare for shoppers to shop late this holiday season as most of them, especially those in the Down Market, haven't yet been in the mood to spend.
  
• Keep practicality and affordability at the top of the holiday list of enticements for shoppers to open their wallets.
  

Hostility of election dumps cold water on holiday cheer.

ShopperScape™ results show shoppers still cautious toward holiday spending. Compared with last month's results, even more consumers this month indicated that they plan to reduce this year's holiday spending compared to last year's. All income segments, including the usually upbeat Up Market, express this sentiment.

During the latest survey fielding the election cycle was reaching a fevered pitch and it's likely that the hostile tone of the election and uncertainty about its outcome heightened pessimism in an otherwise favorable spending environment. Now that the election is over, Retail Forward expects some renewed optimism before the holidays barring any major crises.

• More (31%) shoppers in November said they plan to spend less on holiday gifts compared with last year's holiday, up five percentage points from last month while about the same number of shoppers as last month said they would spend more.
• Down Market shoppers are the most pessimistic in their outlook with 38% this month planning to spend less this holiday than last holiday, compared with 32% last month.
  

Source: Retail Forward ShopperScape™

Late shopping could become a nail biter.

Stay tuned for updates on holiday spending because only about half of consumers have started to shop for the holidays. Plus, those who have begun shopping have plenty of their budgets left to spend. Hope endures that better news, especially on the economic front, will spur shoppers to open their wallets wider as the holiday season draws nearer.

• Almost half (47%) of shoppers overall haven't started to shop yet and Down Market shoppers are least likely to have begun shopping.
• Shoppers who have begun their shopping haven't spent even one-third (29%) of their holiday budgets so far. Up Market households are least likely to have blown their budgets yet.

Practical shopping remains in vogue.

This season shoppers are likely to remain in a practical state of mind with shopping for their children being the exception to the rule. Even constrained shoppers want to put smiles on their kids' faces.

• Affordability wins over uniqueness for most. Most shoppers will be more concerned about getting the lowest price than finding unique gifts.
• Gift cards will be even hotter this year than last, if that's possible. One quarter (26%) of shoppers plan to spend more of their holiday budget on gift cards and gift certificates than they did last year—figure that outshines increased spending plans for any of the four categories of goods polled.
• Responses to questions about category spending further underscore that practicality will win out this season. Clothing will be an especially popular option this year. Parents with kids will buy toys and games, of course, but consumer electronics may see softer sales except in the Up Market. Of the four categories queried, sporting goods received the most pessimistic prognosis.
  

Holiday Shopping Plans, 2004 vs. 2003
Percentage of respondents agreeing or disagreeing with each statement

Source: Retail Forward ShopperScape™

Up and Down Markets moderate spending.

The Retail Forward Index of Future Spending™ for November drifted downward again this month as a result of slippage in the Up and Down Market indices. However, the index for the large Middle Market segment, which accounts for nearly half of consumer spending, remained nearly stable with a slight increase.

• Among Up Market households (incomes greater than $75,000), the Future Spending Index slid to 94 this month from 101 in October, suggesting the recent strong pace of spending in this segment should weaken in November. A falloff in home buying and weaker assessments of job security, compared to the prior month's high levels, dampened their outlook and offset the Up Market's greater optimism about the performance of their investments.
• For Middle Market households (incomes between $22,500 and $75,000) the Future Spending Index improved slightly to 100 from 99 last month. Improved job security and more optimism about investments fueled the improvement, which should feed a slight uptick in spending in the segment. Tempering the outlook for this segment was a weaker pace of home buying.
• For Down Market Households (incomes less than $22,500) the Future Spending Index declined from 106 in October to 102 in November. Higher debt burdens, boosted by an increase in home buying in this segment, fed the falloff even as their perceptions about employment and income growth showed more optimism.
  

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.

Wal-Mart continues its feeding frenzy

Wal-Mart's share of the grocery market continues to creep up, especially among Down Market consumers. Small share gains from July to October are also evident among Up Market grocery shoppers.

Look for more details about Wal-Mart shoppers in Retail Forward's Wal-Mart World reports. For more information on Retail Forward's newest publication series Wal-Mart World call Kathy Clarke at 614-355-4009 or email her at kclarke@retailforward.com.

Purchasing Plans

It's beginning to look a lot like the holidays. With the threat of not being able to get the popular toys this holiday, parents' attention has begun to turn toward procuring the latest Bratz, Barbies and the ever-popular Whac-a-Mole. Also look for the greeting cards business to heat up. As mentioned, practical gifts like apparel will be found on most shopping lists this year.

No poinsettias? In addition to live plants and other gardening products losing favor this month, even sprucing up the house with homegoods before the holidays will take a backseat to purchasing for the kids this next month. Small appliances are also lagging at this point. Perhaps spouses are beginning to realize that a present with no entertainment value that needs to be plugged in doesn't scream with romance.

Going Up

Going Down

Growing like gangbusters

"The warehouse club industry is humming along like gangbusters. The sector is on pace to post another banner year in terms of sales growth. Same store sales are performing well despite tough year-ago comparisons. But the industry will face some key issues over the five-year horizon. How can clubs continue to eek more out of existing stores and existing members? And just how many new warehouse clubs can the market bear?" 

Sandy Skrovan, Vice President, Manager Food, Drug, Mass
Retail Forward Intelligence System™

For more information on Industry Outlook: Warehouse Clubs or the Retail Forward Intelligence System™ call Kathy Clarke at 614-355-4009 or email her at kclarke@retailfoward.com.

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