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September Consumer Outlook: Weaker Job Prospects Signal Slower Spending

COLUMBUS, September 11, 2006 - The retail spending pace should moderate slightly in September, according to Retail Forward's Future Spending Index. The index edged down to 92.7 this month from the 93.2 reading in August (Figure 1)

"Consumers appear to be in a holding pattern as they weigh the impact on their wallets of the recent slowdown in job growth," said Steve Spiwak, an economist with Retail Forward. "Down Market households, in particular, have become more pessimistic about job prospects and whether their incomes will be strong enough to service growing credit card debts.

This month's ShopperScape™ results also show that apparel, accessories, beauty care and home furnishings retailers have the highest penetration of online and catalog shoppers among retailers with a multi-channel offer that spans those shopping modes as well as brick-and-mortar stores.

Other results indicate that Wal-Mart wins the retailing popularity contest hands-down. In terms of shopping experience and value, Wal-Mart ranks higher than arch-competitor Target

Down Market Bears Brunt of Pullback

Down Market households are poised to downshift spending the most in September. In contrast, Up and Middle Market households are expected to increase spending somewhat, in part because of the lagging effects of home buying.

• The Future Spending Index for Down Market households (incomes of $22,500 or less) clocked in at 92.0 in September, down from 101.5 in August. The combined impact of job and income concerns and elevated credit card debts are sending more Down Market shoppers to the retail sidelines this month
• The index for Up Market households (incomes $75,000 or greater) held nearly steady in September with an 89.3 reading, compared with 89.0 the month before. Slightly better income growth compared with last year and a pick up in home buying were enough to offset rising concerns about debt burdens and weaker investment performance
• Recent home buying propped up the index for Middle Market households (incomes of $22,500 to $75,000), which rose to 96.0 in September from 94.2 in August. Households in this segment also reported better investment worth compared with a year ago, helping to offset the negative impact of heightened job and income worries

Online Shopping Up for Down Market Shopper

Overall, slightly fewer shoppers report they shopped online in August compared to April. Up Market online shopping has remained steady since April while fewer Middle Market Shoppers have turned towards cyberspace for their shopping needs. On the other hand, there has been an increase in online shopping activity among Down Market Shoppers, likely due in part to rising Internet access and the disproportionate impact of high gas prices on this income segment.

• Overall, more than two-thirds (67%) of all shoppers have shopped for products online in the past 6 months, down a bit from April's level (Figure 2).

• Up Market Shoppers are the most likely to shop for products online. More than three-quarters (78%) report that they have shopped for products online in the past 6 months.
• Conversely, Down Market Shoppers are still the least likely to shop for products online; however, only the Down Market has seen an increase in online shopping activity since April, 2006.

Specialty Retailers Dominate Three-Channel Shopping

Brick and mortar shopping continues to dominate retailing despite the rise of the Internet. However, through ShopperScape™, Retail Forward demonstrates how the penetration of the Internet and catalog shopping channels fares against in-store shopping for key retailers with presence in all three channels.

• Sephora proves to have the greatest share of shoppers who also shop their website. More than half (51%) of Sephora's recent shoppers have shopped sephora.com, close to the 63% who have shopped in-store (Figure 3a).

• Lane Bryant, J. Crew and Coach each attract more than 4 out of 10 of their shoppers to their respective websites. Crate & Barrel rounds out the top 5, with 39% of their past 4 week shoppers going online to the Crate & Barrel website.
• Among the top 5 retailer catalogs shopped, Chico's is the only retailer who has more people shopping their catalog than their website. More than one-quarter (27%) of recent Chico's customers shop the retailer's catalog (Figure 3b).

• Close to one-quarter (23%) of all Pottery Barn past-four-week shoppers have shopped the retailer's catalog. J. Crew (21%) and Crate & Barrel (20%) follow close behind.

Wal-Mart Supercenter Tops in Shopping Experience and Value

Once again, Wal-Mart Supercenter takes center stage when it comes to consumer preference. Among past 4 week shoppers of the retailer, shoppers are particularly fond of Wal-Mart Supercenter for best overall shopping experience and value

• Among its past 4 week shoppers, Wal-Mart Supercenter (35%) had the largest percentage of shoppers giving the store credit for providing the best overall shopping experience (Figure 4).
  

  
  
  
  

• Twenty-eight percent of past 4 week Meijer Shoppers reported that Meijer had the best overall shopping experience while one-quarter (25%) of past 4 week Target/Target Greatland shoppers feel that Target/Target Greatland offers the best overall shopping experience.
• Wal-Mart Supercenter is also cited among its past 4 week shoppers as the retailer with the best value for the merchandise. More than 4 out of 10 past 4 week Wal-Mart Supercenter Shoppers feel Wal-Mart Supercenter offers the best value for the merchandise (Figure 5).




• More than one-third (34%) of past 4 week shoppers at Costco think the warehouse club offers the best value for the merchandise.

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About the Retail Forward ShopperScape™
The Retail Forward ShopperScape™ survey is conducted each month with a sample of 4,000 U.S. primary household shoppers. The monthly survey is conducted online among a nationally representative sample of households. This month's survey was conducted during the last week of August 2006. Results from the survey are available to members of the Retail Forward Intelligence System™ as well as through individual reports available for purchase. For more information on ShopperScape™, the Retail Forward Intelligence System™ or the ShopperScape™ Wal-Mart Panel, contact Kathy Clarke (kclarke@retailforward.com ») or visit the company's web site at www.retailforward.com ».

Retail Forward, Inc. (www.retailforward.com ») is a global management consulting and market research firm specializing in retail intelligence and strategies. The company's syndicated research and executive development program known as the Retail Forward Intelligence System™, provides members with an authoritative perspective on the retail and consumer products industries.