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Budget Shopper - US - October 2008

SCOPE AND THEMES
What you need to know
Definition
Data sources
Consumer survey data
Abbreviations and terms
Abbreviations
Terms
EXECUTIVE SUMMARY
The bottom line: Budget shopping applies to all consumers
Retailers must recognize and embrace consumer budgeting necessity
Younger shoppers gravitate to different retailers, with different rationales
Foodservice loss is grocery store gain, tempered by discounter pressure
Wal-Mart the ultimate discounter
Mass merchandisers need to find a niche
Drug stores feel the impact of competitive prescription programs
Club stores enjoy healthy growth, benefit from affluent customer base
Department store sales falter
Electronics stores float on sales of consumer “necessities”
Internet stores a bright light
Clothing sales shift to discounters and thrift stores
Price sensitivity is more evident for food than for hygiene/personal care
INSIGHTS AND OPPORTUNITIES
Key points
Private label can beat out brand names – across all categories
Is smaller better?
Use the internet as much as possible
e-coupons
FAST FORWARD TRENDS
 TREND 1: REBUILDING TRUST
What’s it about?
What we’ve seen
How to apply it
 TREND 2: OVER-OPTIONED CONSUMERS
What’s it about?
What we’ve seen
How to apply it
MARKET DRIVERS
The bottom line
Figure 1: Year-over-year budgeting trends, July 2008
The culprits
Rising energy and food costs
Figure 2: Consumer Price Index, key consumer items, January 2006-August 2008*
Figure 3: Average gas price, First week of October, 2004-08
A nation deep in debt
Figure 4: Consumer credit outstanding, dollar change, 2007-08
Figure 5: Consumer credit outstanding, percentage change, 2007-08
Figure 6: Debt service ratio and financial obligations ratio, 2004-08
Discounters hold the trump card
Back to school an early indicator of holiday shopping patterns
YEAR-OVER-YEAR BUDGETING TRENDS
Key points
Budgeting becoming more of a necessity for most
Figure 7: Year-over-year budgeting trends, by gender, July 2008
Figure 8: Year-over-year budgeting trends, by age, July 2008
Figure 9: Year-over-year budgeting trends, by HH income, July 2008
Figure 10: Year-over-year budgeting trends, by presence of children, July 2008
Gas, food and utility bills driving need for budgeting
Figure 11: Reasons for budgeting more money, by gender, July 2008
Figure 12: Reasons for budgeting more money, by age, July 2008
Figure 13: Reasons for budgeting more money, by HH income, July 2008
CREATING THE BUDGET AND ASSESSING SALES
Key points
Coupon use is on the rebound
Figure 14: Budget creation and sales assessment factors, by gender, July 2008
Figure 15: Budget creation and sales assessment factors, by age, July 2008
Figure 16: Budget creation and sales assessment factors, by HH income, July 2008
Figure 17: Budget creation and sales assessment factors, by presence of children, July 2008
WHERE CONSUMERS SHOP
Key points
Grocery stores lead, but consumers seek out competitive pricing
Figure 18: Where consumers shop, by age, July 2008
Figure 19: Where consumers shop, by HH income, July 2008
GROCERY STORE BUDGETING BEHAVIORS
Key points
Kroger: The largest grocer grows sales, woos the budget shopper
Whole Foods fights its “whole paycheck” image
Trader Joe’s—“Your neighborhood grocery store”
Meijer’s—more than just a grocery store
Grocery threatened by discounters but gains the restaurant crowd
Grocery store budgeting habits toe the mainstream line
Figure 20: Grocery shopping budgeting behaviors, by gender, July 2008
Figure 21: Grocery shopping budgeting behaviors, by age, July 2008
WAL-MART BUDGETING BEHAVIORS
Key points
Deep discounts and cross-merchandising drive success for Wal-Mart
The distinct Wal-Mart demographic profile
Ongoing efforts to be budget-friendly
Sale items and cheap products trump coupon use at Wal-Mart
Figure 22: Wal-Mart budgeting behaviors, by gender, July 2008
Figure 23: Wal-Mart budgeting behaviors, by age, July 2008
MASS MERCHANDISER BUDGETING BEHAVIORS
Key points
Target appeals to more affluent consumers
Big Lots—not the typical Mass Merchandiser
Most Mass shoppers are drawn to sales
Figure 24: Mass merchandisers budgeting behaviors, by gender, July 2008
Figure 25: Mass merchandisers budgeting behaviors, by age, July 2008
Figure 26: Mass merchandisers budgeting behaviors, by HH income, July 2008
DOLLAR STORE BUDGETING BEHAVIORS
Key points
Dollar General benefits from increased traffic
Dollar Tree courting the budget shopper
Dollar store shoppers expect to find good deals
Figure 27: Dollar store budgeting behaviors, by HH income, July 2008
Figure 28: Dollar store budgeting behaviors, by HH income, July 2008
DRUG STORE BUDGETING BEHAVIORS
Key points
Walgreens continues to grow its presence
Rite Aid facing post-Eckerd acquisition struggles
Promoting sales can prevent attrition to one-stop shopping alternatives
Figure 29: Drug store budgeting behaviors, by gender, July 2008
Figure 30: Drug store budgeting behaviors, by age, July 2008
CLUB STORE BUDGETING BEHAVIORS
Key points
Costco’s “Lucky Twelve” rides on affluent consumers
Sam’s Club has more diverse appeal
Club stores win with bulk and affluent consumers
Figure 31: Club stores budgeting behaviors, by gender, July 2008
Figure 32: Club stores budgeting behaviors, by household income, July 2008
DEPARTMENT STORE BUDGETING BEHAVIORS
Key points
JCPenney—not giving up without a fight
Nordstrom’s luxury not enough
Sales are necessary to lure customers to department stores
Figure 33: Factors affecting spending behavior, August 2008
Figure 34: Department store budgeting behaviors, by gender, July 2008
Figure 35: Department store budgeting behaviors, by age, July 2008
Figure 36: Department store budgeting behaviors, by HH income, July 2008
ELECTRONICS STORE BUDGETING BEHAVIORS
Key points
Best Buy banks on mobile phones and no-interest lures
RadioShack sales swing up
Coupons and sale items can encourage traffic at electronics stores
Figure 37: Electronics store budgeting behaviors, by age, July 2008
Figure 38: Electronics store budgeting behaviors, by HH income, July 2008
INTERNET STORE BUDGETING BEHAVIORS
Key points
Amazon appeals with diverse products supported by customer reviews
Overstock.com the one-stop shop for budget finds
Advantages abound for budget shoppers on the internet
Bring the deals up front and center
Figure 39: Internet store budgeting behaviors, by age, July 2008
Figure 40: Internet store budgeting behaviors, by HH income, July 2008
BUDGET SHOPPING FOR CLOTHING
Key points
Clothing shoppers are trading-down to deep discounters and thrift stores
Clothing shoppers willing to spend time to find bargains
Figure 41: Budget shopping for clothing, by gender, July 2008
Figure 42: Budget shopping for clothing, by age, July 2008
Figure 43: Budget shopping for clothing, by presence of children, July 2008
BUDGET SHOPPING FOR FOOD AT HOME
Key points
Rising food prices drive consumers to seek out less costly options
Figure 44: Budget shopping for food at home, by age, July 2008
Store brand usage
Figure 45: food at home: store brand usage, by age, July 2008
Figure 46: Food at home: store brand usage, by presence of children, July 2008
BUDGET SHOPPING FOR HYGIENE/PERSONAL CARE
Key points
Shoppers less likely to seek out deals on hygiene/personal care
Figure 47: Budget shopping for hygiene/personal care items, by gender, July 2008
Figure 48: Budget shopping for hygiene/personal care items, by presence of children, July 2008
Store brand usage
Figure 49: hygiene/personal care items: store brand usage, by age, July 2008
SPENDING EXTRA MONEY
Key points
Debt a rising concern
Potential for restaurants and the holiday season
Figure 50: Where consumers spend their “extra” money, July 2008
ADVERTISING
Helping “staycationers” make the most of summer
Drawing budget shoppers away from the competition
Restaurants roll out LTOs
Applebee’s
Figure 51: Applebee’s three-course classics, 2007
Chili’s
Figure 52: Chili’s: spice up your weekend, 2007
Olive Garden
Figure 53: Olive Garden sauce and pasta combos, 2007
Wendy’s
Figure 54: Wendy’s stack attack, 2007
Automobiles push mileage advantages and low financing
BMW
Figure 55: BMW deals, 2007
Chevrolet
Figure 56: Chevy Tahoe and gasoline, 2007
Figure 57: Chevrolet Red Tag Event, 2007
Ford
Figure 58: Ford quality and gas mileage, 2007
Retail outlets tout savings, savings, savings
Macy’s
Figure 59: Macy’s Easter sale, 2007
Figure 60: Macy’s Fourth of July sale, 2007
Figure 61: Macy’s one day sale, 2007
Wal-Mart
Figure 62: Wal-Mart targets female shopper, 2007
Electronics
Figure 63: Dell Vostro, 2007
Figure 64: Dell Vostro II, 2007
CUSTOM CONSUMER GROUPS: HOW KIDS COME INTO PLAY
Figure 65: Year-over-year budgeting trends, by presence of children, July 2008
Moms are most likely to use coupons
Figure 66: Budget creation and sales assessment factors, by presence of children, July 2008
Figure 67: Where consumers shop, by age, July 2008
Figure 68: Wal-Mart budgeting behaviors, by age, July 2008
Figure 69: Internet store budgeting behaviors, by HH income, July 2008
Figure 70: Where consumers spend their “extra” money, July 2008
APPENDIX: OTHER USEFUL CONSUMER TABLES
Figure 71: Shopping habits, February 2007-March 2008
APPENDIX: TRADE ASSOCIATIONS

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