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Welcome to the ShopperScape™ Newsletter December 2006 HOLIDAY PREDICTIONS Look for more shoppers to let their fingers do holiday shopping via online and catalogs. Recognize that smaller percentages of shoppers plan to shop at discount stores/supercenters this season. Anticipate that consumers expect enticements to visit stores and part with holiday money. Prepare for gift-card buyers to cross more recipients off their shopping lists with gift card purchases this year. Remember that three-quarters of holiday shopping has yet to be done! HOT OFF THE PRESS More Shoppers Let Their Fingers Do the Shopping Retail Forward's ShopperScape™ survey results this month show that more shoppers are letting their fingers do holiday shopping instead of their feet. This may reflect the impact of persistently high fuel prices and efforts by shoppers to shop less at stores to save on gasoline. This year 43% of shoppers say they are going online—up seven percentage points from last year—and more shoppers (16%) are planning to shop by catalog than last year (Figure 1). The discount store/supercenter channel is paying the highest price for shifts in holiday shopping plans. The weakness at Wal-Mart and others can be partially explained by the sharp decline in shoppers planning to shop at discount stores and/or supercenters (55%) compared with last year's (61%) survey. One other area of weakness may be specialty apparel stores and shoe stores, where there is a slight let up—three percentage points in each case—in the share of shoppers planning to shop there this year compared with last year. Otherwise, most other retail channels show insignificant differences in shoppers' plans for the channel compared with last year. Figure 1 Where do you plan on doing your holiday shopping?   November 2005 November 2006 Y-T-Y Percentage Point Difference Discount store/Supercenter 61% 55% -6 Online 36% 43% +7 Value department store (such as JCPenney, Kohl's, Sears, etc.) 38% 37% -1 Book and media stores 31% 30% -1 Traditional department store (such as Belk,  Dillards, Macy's, etc.) 24% 25% +1 Warehouse clubs 19% 18% -1 Catalog 13% 16% +3 Consumer electronics/appliance/computer stores 15% 14% -1 Gadget/gift/theme stores 14% 12% -2 Specialty apparel stores (such as Ann Taylor, Chico's, Gap, etc.) 14% 11% -3 Sporting good stores 12% 11% -1 Factory outlet stores 12% 10% -2 Crafts or fabrics store 11% 10% -1 Home furnishings/domestics stores 9% 8% -1 Home improvement/hardware stores 9% 7% -2 Grocery store/supermarket 7% 7% 0 Small-format value stores (such as dollar stores) 9% 7% -2 Drug store 7% 6% -1 Jewelry stores 6% 6% 0 Upscale department store (such as Bloomingdale's, Nordstrom, Saks 5th Avenue, etc.) 6% 6% 0 Shoe stores 7% 4% -3 Office supply stores 5% 3% -2 Other 11% 14% +3 I am not doing any holiday shopping 3% 3% 0 Source: Retail Forward ShopperScape™. Holiday Shoppers Holding Up with Enticements Looking beyond the shopping shifts among retail channels, the November ShopperScape™ survey gives reason to expect overall holiday shopping to hold up well this year: Compared with last year's responses, more shoppers this year say that they are going to spend about the same amount on holiday gifts as they did the previous year. A little more than half (52%) of shoppers think their holiday spending will be about the same as last year's spending compared with 45% last year (Figure 2). The improvement comes from fewer shoppers (29%) saying they are spending less this year than a year ago compared with last year's responses from pessimistic shoppers (35%). Conversely, slightly fewer shoppers (13%) say they will spend more this year compared with last year's responses from optimistic shoppers (16%). Overall, the average amount shoppers plan to spend this year ($650) on holiday gifts is roughly equivalent to what they said they were planning to spend last year at the same time. Figure 2 Which of the following categories best describes how much you think you will spend on holiday gifts this year (for holidays including Christmas, Chanukah/Hanukkah, or Kwanza) compared to last year?   November 2005 October 2006 November 2006   Much more 3% 2% 2%   Somewhat more 13% 9% 11%   About the same 45% 55% 52%   Somewhat less 20% 19% 18%   Much less 15% 9% 11%   I don't buy holiday gifts 4% 6% 6%                       How much do you plan to spend on holiday gifts this year? *             November 2005 November 2006     Average amount planning to spend $669 $650     * For shoppers buying holiday gifts. Source: Retail Forward ShopperScape™. At this point in the season shoppers have completed almost one-quarter (23%) of their holiday shopping—about the same amount as last year at this time (Figure 3). Figure 3 What percent, if any, of your household's planned holiday gift spending have you actually spent so far?*   November 2005 November 2006 Y-T-Y Percentage Point Difference Average percent spent so far 21% 23% +2 * For shoppers buying holiday gifts. Source: Retail Forward ShopperScape™. Responses to plans for holiday shopping during Thanksgiving weekend underscored consumers' hesitations about joining the holiday shopping fray and retailers' needs to entice shoppers into participating. About half of shoppers (52%) did not plan to shop at retailers' stores during the weekend and another quarter (27%) hadn't made up their minds (Figure 4). Even more shoppers hadn't decided (39%) whether they were going to shop online during the weekend. Figure 4 Are you planning to go holiday shopping in stores during the weekend following Thanksgiving?*   All Shoppers Yes 19% No 52% Don't know yet 27% I am not doing any holiday shopping 1% Are you planning to shop for holiday gifts online during the weekend following Thanksgiving?*   All Shoppers Yes 19% No 41% Don't know yet 39% I am not doing any holiday shopping 1% * For shoppers buying holiday gifts. Source: Retail Forward ShopperScape™. Gift Cards Vie with Apparel for Top Billing Gift cards will vie with clothing and accessories or shoes for the most-popular type of gift purchase. Fifty-one percent of shoppers plan to purchase gift cards or gift certificates this year—a little below last year's 55% (Figure 5). Fewer shoppers (51%) plan to buy clothing, clothing accessories or shoes this year than last (64%). Other popular categories include toys/dolls/games, books and pre-recorded media. Figure 5 What types of gifts do you plan to buy this holiday season?*   November 2005 November 2006 Y-T-Y Percentage Point Difference Clothing, clothing accessories or shoes 64% 51% -13 Gift Card(s)/Gift Certificate(s) 55% 51% -4 Toys/Dolls/Games (not video games) 47% 41% -6 Books 43% 36% -7 Pre-recorded music or video tapes, CDs or DVDs 41% 32% -9 Personal care or beauty items 27% 23% -4 Video games, video gaming systems or related accessories 26% 20% -6 Consumer electronics or personal computer-related accessories 19% 17% -2 Home décor or home-related furnishings 22% 17% -5 Sporting goods or leisure items 16% 13% -3 Fine Jewelry 12% 10% -2 Other 11% 20% +9 I don't know yet NA 16% NA * For shoppers buying holiday gifts. Source: Retail Forward ShopperScape™. Gift card purchasers will check more gift recipients off shopping lists this year by buying more gift cards on average. Gift card buyers plan to make almost seven gift card purchases on average—up from an average of four gift card purchases last year (Figure 6). Gift card buyers will spend an average of $164 on gift cards. With more than half (51%) of holiday shoppers buying gift cards, that could amount to 13% of holiday shopping dollars accounted for by gift cards. Figure 6 How many holiday gift cards will you purchase this year? *   November 2005 November 2006 Y-T-Y Percentage Point Difference Average number of gift cards planning to purchase 4.1 6.8 2.7 How much do you plan to spend on holiday gift cards this year? *                                November 2006   All Shoppers Buying Gift Cards Down Market Middle Market Up Market Average amount planning to spend on gift cards $164 $78 $144 $217 *For shoppers planning to purchase gift card(s)/gift certificate(s) this holiday season. Source: Retail Forward ShopperScape™. POINT OF VIEW Retail Perspectives: Home Centers for the Holidays: More Christmas Cheer amid the Room-Temperature Lumber "The Home Depot and Lowe's are facing challenging times. The sharp housing market slowdown has caused shoppers to pull back on home improvement expenditures following blistering growth in recent years. Recent trends indicate that housing pressures will continue into 2007. This fact of life in the home improvement sector has motivated the companies to heighten efforts to find other ways to mine growth. For example, both retailers have increased their focus on Christmas and other seasonal opportunities throughout the year to beef-up sales and offset the impact of housing market fluctuations. The Home Depot in particular is investing heavily to add an expanded lineup of holiday displays and new gift-giving merchandise. Lowe's is refining its holiday offer to boost incremental revenue. And both companies are working to build awareness with Christmas-focused TV campaigns. The moves make sense for both retailers. They have relatively affluent customer bases and high monthly shopper traffic according to Retail Forward consumer research, which provide a strong opportunity to sell higher-margin merchandise. But they face a touch challenge in luring holiday shoppers away from Wal-Mart, Target and other retailers whose performance depends to a much greather extent on the holidays." Nick McCoy, Senior Consultant, Retail Forward, Inc. For more information on Retail Forward's reports or the Retail Forward Intelligence System™ call Kathy Clarke at 614-355-4009 or email her 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. Two Easton Oval Suite 500 Columbus, Ohio 43219 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.