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Welcome to the ShopperScape™ Newsletter June 2008

• Look for shoppers to use further cost-cutting measures to offset rising gasoline and food prices.
• Expect shoppers to move beyond coupon-clipping to buying more private brand and opening price point versions of items on their shopping lists. 
• Anticipate that most shoppers will take a pragmatic view regarding shopping as they perceive they are getting “less for more”—and in need of stretching their shrinking dollars further.
• Watch for shoppers to trade down—not only in terms of buying less expensive items where they typically shop for consumables but also in terms of shopping in more value-oriented venues.  Expect dollar stores and extreme value grocers to benefit.
• Don’t count on too many shoppers to go on spending sprees for big ticket items with their tax rebates.   Most are using their rebates just to make ends meet or pay off debt.
• Think gift cards vs. the traditional tie for Father’s Day.

Higher Gasoline and Food Costs Continue to Curb Shopper Appetites

During the last four months, the percentages of shoppers saying they plan to spend much less or somewhat less than they did last year have increased steadily (Figure 1).

• The shift from future intention to spend about the same to future intention to spend less was most pronounced between February and March.
• Almost half of shoppers in May said they planned to spend less in June 2008 than they did in June 2007—markedly higher than February’s 28%.

Figure 1

Compared to this time last year, in the next month do you plan to…?

Source: Source: TNS Retail Forward ShopperScape™

As the price of gasoline rises, shoppers are curbing their spending elsewhere (Figure 2).

• Although Down Market shoppers are most vulnerable to rising gasoline prices, Middle Market and, to a lesser extent, Up Market shoppers are feeling pain at the pump too.  Four-fifths of Middle Market and two-thirds of Up Market shoppers say they have changed their spending habits due to rising gasoline prices.

Figure 2

How has the increase in gas prices affected your overall spending?

*Highlighting under all shoppers indicates significant difference between percentages in July 2007 and May 2008; highlighting under income markets indicates significantly higher percentages between the income segments and the all shoppers percentages in May 2008.
** Source: U.S. Regular All Formulations Retail Gasoline Prices, Energy Information Administration
Source: TNS Retail Forward ShopperScape™

Food prices, which have climbed steadily during the course of several months, spiked even higher in April resulting in increased focus by shoppers on saving money at the grocery store (Figure 3).

• Comparing February’s results with May’s shows no increase in the percentages of shoppers who are cutting back on “just too expensive” items, dining out or clipping coupons—common strategies for saving money on food.  This suggests that shoppers who employ those methods had already done so by February.
• What has changed significantly between February and May is the percentage of shoppers who are trading down to less expensive versions of the products on their shopping lists—increasing from 33% to 40%.

Figure 3

How are rising food prices affecting your household spending?    Are you ... ?

*Highlighting under all shoppers indicates significant difference between percentages in February 2008 and May 2008; highlighting under income markets indicates significantly higher percentages between the income segments and the all shoppers percentages in May 2008.
Source: TNS Retail Forward ShopperScape™

The combination of rising food prices and higher gasoline prices has negatively affected shoppers’ views about whether they are getting as much “bang for their buck” as they did last year (Figure 4). 

• Almost nine out of 10 shoppers think they are now getting less for their money compared with last year vs. about two-thirds of shoppers last September.

Figure 4

Given current changes in prices, do you think you are getting…?

Source: TNS Retail Forward ShopperScape™

In the wake of rising food prices, one-fifth of all shoppers are changing the stores where they shop for groceries and other consumable goods (Figure 5).

• One-quarter of Down Market shoppers are changing stores to find better deals.

Figure 5

Overall, have you changed the stores you shop for groceries and other household essentials given the current economic conditions?

Highlighting indicates a significant difference between individual segment and all shoppers.
Source: TNS Retail Forward ShopperScape™

As a result, a few channels are gaining shoppers, some are losing shoppers and some are holding their own (Figure 6).

• Formats benefiting from the economic downturn are dollar stores and extreme value grocers such as Save-A-Lot and ALDI.
• Formats with the biggest losses are convenience stores and drug stores followed by specialty food stores and health/natural food stores.
• Wal-Mart Supercenter is holding its own, but discount stores—especially Target and Kmart—are being shopped less often compared with a year ago, according to shoppers.

Figure 6

Given the current economic conditions, which of the following store formats/retailers are you shopping more often, about the same or less often compared to a year ago for your grocery shopping?*