Transcript Document
Post-Recession Retailing How to Prepare for Tomorrow’s Shoppers Today Lois Huff Sr. Vice President Retail Forward, Inc. 614-355-4011 [email protected] A New Retail World How did we get here? What is happening now? What will happen come the recovery? 2 Key Shopper Spending Drivers Began to Unravel in 2007 Top Line Income - Hurt by increasing job cuts Open To Spend - Reduced by rising fuel and food prices - Hindered by rising credit crunch Long-Term Wealth - Reduced by housing depreciation, stagnation - Devastated by plunging stock market Overall Confidence - Reduced by all of the above - Further inflamed by media fuel 3 The First Shopper Tipping Point: Feb-Mar 2008 Shaky job situation for down market Rising food and fuel prices for all Troublesome housing market Many felt worse off about investments Perceptions Compared with Last Year Much/Somewhat Better Off No Change Much/Somewhat Worse Off Feb 2008 Mar 2008 Feb 2008 Mar 2008 Feb 2008 Mar 2008 Job security 24% 23% 59% 60% 17% 17% Household income level 38% 38% 40% 39% 23% 24% Credit card debt level 28% 29% 49% 50% 23% 21% Monthly mortgage/car payments 22% 22% 64% 64% 14% 15% Worth of HH investments 25% 25% 52% 49% 23% 27% Value of home 29% 29% 52% 49% 19% 22% Highlighting/bolding indicates significant differences between column percentages Source: Retail Forward ShopperScape™, February and March 2008 4 The Result: Sharply Curbed Short-Term Spending Plans Plan to Spend SOMEWHAT LESS at Retail Stores During Coming Month Compared With Last Year 40% 28% Feb-08 Mar-08 Highlighting/bolding indicates significant differences between column percentages Source: Retail Forward ShopperScape™, February and March 2008 5 The Second Shopper Tipping Point: Fall 2008 Plunging stock market Emergency Economic Stabilization Act of 2008 Destabilized shopper sentiment Percentage of shoppers planning to cut back on holiday spending shot up from 37% to 52% post bailout 6 The Result: Retail Enters a Holiday Abyss Quarterly Retail Sales: Key Holiday Retail Channels (percent change year-to-year) 20% 15% 10% 5% 0% -5% -10% 19681971197419771980198319861989199219951998200120042007 Source: U.S. Census Bureau 7 Shoppers Are Out of Gas All shoppers are impacting retail sales But some are doing so more than others 8 Majority Have Changed Their Behavior > 50% across all generational and income segments altered shopping behavior Gap between downand up-market shoppers widens with age Middle market more aligned with down market Percentage of Segments Changing Behavior Due to Economic Downturn 100% 90% Down Market (< $22,500) 80% 70% Middle Market ($22,500 to $84,999) 60% 50% Up Market ($85,000+) 40% 30% 20% 10% 0% Gen Y Gen X Baby Boomers Seniors Source: Retail Forward ShopperScape™, Aug. 2008 9 But Retail Spending Pullback Came In Waves Both income and lifestage are highly correlated with spending Seniors with lower incomes curbed spending first But seniors with high incomes were last to cut spending and change shopping behavior 10 Gen Y: Less Impact and Less Recovery “Power” Intention to Spend Less in Coming Month 80% 70% 60% GenY Down Market GenY Middle Market 50% 40% 30% 20% 10% GenY Up Market 0% Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar08 08 08 08 08 08 08 08 08 08 08 09 09 09 18 to 27 year olds Spending patterns less driven by wealth (housing equity, stock market) Less likely to have tempered their spending in general Future intentions shaped by tighter credit vs. dampened desires Source: Retail Forward ShopperScape™, Feb. 2008 Mar. 2009 11 Gen X: Critical to Retail Decline and Recovery Intentions to Spend Less in Coming Month 28 to 44 years old 80% 70% Critical lifestage with big impact on retailers’ health 60% GenX Middle Market GenX Down Market 50% 40% 30% 20% Highly reactive to shopper tipping points GenX Up Market 10% 0% Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar08 08 08 08 08 08 08 08 08 08 08 09 09 09 Gen X up-market shopper key to watch for positive signs Source: Retail Forward ShopperScape™, Feb. 2008 Mar. 2009 12 Baby Boomers: More Restrained Reactions Age 45 to 63 Reactive to shopper tipping points Pronounced spike following October passage of the “bailout” Less severe pullback post passage of economic stimulus package Intention to Spend Less in Coming Month 80% 70% Baby Boomers Down Market Baby Boomers Middle Market 60% 50% 40% 30% 20% Baby Boomers Up Market 10% 0% Source: Retail Forward ShopperScape™, Feb. 2008 Mar. 2009 Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar08 08 08 08 08 08 08 08 08 08 08 09 09 09 13 Seniors: Sharp Drops, But Polarized Reactions Intentions to Spend Less in Coming Month Age 63+ 80% Pronounced spikes in March, June and October 2008 and March 2009 Seniors Middle Market Seniors Down Market 70% 60% 50% 40% 30% More polarized attitudinally based on income 20% 10% 0% Seniors Up Market Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar08 08 08 08 08 08 08 08 08 08 08 09 09 09 Up-market seniors most likely not to change shopping behavior Source: Retail Forward ShopperScape™, Feb. 2008 Mar. 2009 14 Shopping Behavior Didn’t Change Overnight Gradual consolidation of stores visited Average Number of Retailers Shopped during Past 4 Weeks by Broad Channel Segments 6.0 5.5 Linear FDM Less in food/drug/mass channels than in homegoods or softgoods FDM 5.0 Softgoods 4.5 Linear Softgoods 4.0 Linear Homegoods Homegoods 3.5 3.0 Linear Other 2.5 Other 2.0 Source: Retail Forward ShopperScape™, Dec. 2007 Dec- Feb- Apr- Jun- Aug- Oct- Dec- Feb- 07 08 08 08 08 08 08 09 Mar. 2009 07 08 08 08 08 08 08 09 15 Store Shopping Downtrend Outpaced Online Average Number of Stores and Web Sites Shopped during Past 4 Weeks 14 Linear Average # of Stores Shopped Average # of Stores Shopped 12 10 8 Average # of Web Sites Shopped 6 4 2 Linear Average # of Web Sites Shopped 0 Dec07 Feb08 Apr08 Jun08 Aug08 Oct08 Source: Retail Forward ShopperScape™, Dec. 2007 Dec08 Feb09 Mar. 2009 16 Limiting Spending Across Categories Using common tactics to limit spending - Shopping less often - Postponing purchases - Reining in impulse buying Often switching to cash or equivalent Most Common Tactics for Limiting Spending Spending less overall Shopping less often Buy fewer items on impulse Buying only replacement/replenishment items Buying only items can afford to pay with cash Sticking to a list Performing maintenance myself Waiting longer to perform home maintenance Clothing/ Outdoor Grocery/ accessories/ Indoor home home food shoes improvement improvement shopping shopping* shopping** shopping** 31% 39% 39% 36% 38% 48% 34% 23% 26% 42% 40% 23% 38% 34% 38% 43% 40% 33% 31% * Only female shoppers surveyed ** Shoppers participating in indoor/outdoor projects Source: Retail Forward ShopperScape™, February, March and April 2009 17 Seeking Deals To Avoid Trading Down Using ads to determine where to shop and consolidating shopping at stores offering best value Grocery shoppers combining variety of approaches – coupons, ads, multiple item buying, stockpiling In apparel, monitoring favorite store’s clearance Most Common Deal-Seeking Tactics Regularly monitoring favorite store clearance Using ads to determine where shop Shopping off-price stores Consolidating shopping where get best value Using coupons more often Using ads to determine what buy Buying multiple items at a time Stockpiling sale items Clothing/ Indoor Outdoor Grocery/ accessories/ home home food shoes improvement improvement shopping shopping* shopping** shopping** 30% 26% 24% 37% 37% 17% 22% 17% 25% 23% 36% 32% 33% 33% 30% 30% 21% 21% * Only female shoppers surveyed ** Shoppers participating in indoor/outdoor projects Source: Retail Forward ShopperScape™, February, March and April 2009 18 But Many Are Trading Down To Save Trading down to less expensive versions of products common - More basics than fashion in apparel - Less expensive brands - Less expensive versions in grocery Private brand popularity in grocery and home improvement - Not so much in apparel Most Common Tactics for Trading Down Clothing/ Indoor Grocery/ accessories/ home Outdoor home food shoes improvement improvement shopping shopping* shopping** shopping** Not buying items that seem "too expensive" 47% 36% Buying more basics than fashion items 27% Buying less expensive brands 22% 24% 23% 6% 26% 25% Buying more private/store brands 29% Buying less expensive versions than usual 31% *Only female shoppers surveyed **Shoppers participating in indoor/outdoor projects Source: Retail Forward ShopperScape™, February, March and April 2009 19 Some Categories Are More Vulnerable In apparel, mom sacrifices for the kids Footwear purchasing down Y-T-Y except for men’s shoes Percentage of Shoppers Purchasing Apparel/Shoes/Accessories during Past 4 Weeks Mar-08 Mar-09 Total apparel/shoes/accessories 74% 70% Women's apparel/shoes/accessories 58% 53% Kids' and teens' apparel 33% 31% Men's apparel/shoes 31% 27% Women's shoes 25% 21% Men's shoes 10% 9% Children's shoes 11% 8% Highlighting indicates significant difference between column percentages Source: Retail Forward ShopperScape™, March 2008 and March 2009 20 Some Categories Are More Vulnerable In homegoods, home fashions down most Y-T-Y Home improvement, CE, small appliances also down, not as steeply Percentage of Shoppers Purchasing Homegoods during Past 4 Weeks Mar-08 Home improvement/ 33% hardware/l&g Mar-09 31% Home fashions 37% 30% Consumer electronics 18% 15% Small appliances 12% 9% Highlighting indicates significant difference between column percentages Source: Retail Forward ShopperScape™, March 2008 and March 2009 21 Cutting Back On Leisure… Leisure-related categories down with books and greeting cards bearing heavy hits Percentage of Shoppers Purchasing Leisure Products during Past 4 Weeks Mar-08 Mar-09 Books 33% 28% Greeting cards 32% 27% Craft/hobby supplies 17% 15% Toys/dolls/non-elect/video games 11% 8% Sporting goods 6% 5% Highlighting indicates significant difference between column percentages Source: Retail Forward ShopperScape™, March 2008 and March 2009 22 … And On Looking Good Personal care purchasing also down more than OTC and a little more than color cosmetics Percentage of Shoppers Purchasing HBC during Past 4 Weeks Mar-08 Mar-09 Personal care products 60% 55% Non-prescription drugs 46% 45% Color cosmetics 27% 24% Highlighting indicates significant difference between column percentages Source: Retail Forward ShopperScape™, March 2008 and March 2009 23 Cleanliness and Pets Are Even Suffering Household cleaning slides Percentage of Shoppers Purchasing Non-grocery Products during Past 4 Weeks Even pets not recession proof Mar-08 Mar-09 Household cleaning products 67% 64% Household paper goods 62% 59% Pet food 47% 43% Pet supplies 25% 22% Office/school supplies 25% 21% Auto supplies 16% 12% Highlighting indicates significant difference between column percentages Source: Retail Forward ShopperScape™, March 2008 and March 2009 24 But Shoppers Still Have To Eat … And Want To Drink In groceries, several discretionary categories down But salty snacks, beer, wine and liquor hold their own Percentage of Shoppers Purchasing Grocery Products during Past 4 Weeks Meat/seafood Dairy Produce Bread/bakery Frozen foods Dry or canned groceries Salty snacks Carbonated beverages Non-carbonated beverage Sweet snacks Candy/gum Delicatessen Beer Cigarettes and tobacco Wine Liquor Mar-08 80% 80% 80% 79% 78% 76% 67% 65% 61% 60% 56% 34% 24% 23% 22% 15% Mar-09 80% 80% 80% 78% 76% 74% 68% 63% 58% 57% 49% 33% 24% 21% 21% 15% Highlighting indicates significant difference between column percentages Source: Retail Forward ShopperScape™, March 2008 and March 2009 25 Home textiles/home furnishings retailers Upscale department stores ShopperShare YTY Indices Shoe retailers Traditional department stores Consumer electronics retailers Books/music specialty stores Office supply retailers Craft/hobby retailers Adult apparel specialty stores Sporting goods retailers Value department stores Discount stores Home improvement/hardware 120 Drug stores/pharmacies Warehouse clubs Supercenters Liquor/wine stores Supermarkets Small-format value retailers Food/Drug/Mass Channels Less Negatively Affected Y-T-Y shopper share indices show most FDM channels about on par with last year Key Dollar stores up Food/drug/mass Home textiles and home furnishings struggling most Softgoods Apparel-related LOTs weak Homegoods Leisure 100 80 60 40 20 0 Source: Retail Forward ShopperScape™, March 2008 and March 2009 26 When Will the Recovery Happen? The Most Likely Scenario Approach long-term ave. growth Forecast Q1 ‘10 Q3 ‘08 Q4 ‘09 Q4 ‘08 Q3 ‘09 Q1 ‘09 Rebound 2010 Period of flat-to-negative growth The Best Case Scenario Approach long-term ave. growth Forecast Q3 ‘08 Q2 ‘09 Q4 ‘08 Q3 ‘09 Q4 ‘09 Q1 ‘10 Q1 ‘09 Rebound 2009 Quicker signs of rebound The Worst Case Scenario Forecast Q3 ‘08 Q4 ‘08 Q1 ‘09 Q1 ‘10 Rebound 2011 or later Extended period of flat-to-negative growth 27 Recovery Driven By Different Shoppers Older segments have most housing, equity wealth, spending potential Median Household Wealth of Baby Boomers 2004 and 2009F Led way out of past two downturns - Early 90s -- accumulating - Dot.com bust -- in prime earning years $315,400 - 49% $172,400 Wealth has been wiped out and are closer to retirement - - 45% $159,800 $94,200 Boomers will have less to spend once able to retire 45 - 54 Path out more dependent on younger cohorts 55 - 64 2004 2009F Note: Median household wealth represents wealth of a household with a person between 45-54 and 55-64; 2009 figures are projections Source: Center for Economic and Policy Research 28 Resulting Period of Sluggish Demand Retail Sales by Channel (percent change year-over-year, not seasonally adjusted) 10% Forecast 8% 6% Non-auto less gasoline 4% FDM2 2% 0% 2003 Homegoods 1 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 -2% -4% Softgoods 3 -6% 1 Homegoods includes Building Materials/Home Improvement stores, Nonstore, Furniture/Home Furnishings Stores, Consumer Electronics Stores, Jewelry Stores, Sporting Goods Stores, Book Stores and Office Supply Stores 2 FDM includes Supermarket, Eating & Drinking Places, Discount Department Stores, Warehouse Clubs, Supercenters, Drug Stores and Small Format Value Retailers 3 Softgoods includes Apparel Stores, Shoe Stores and Conventional/National Department Stores Sources: Retail Forward and U.S. Department of Commerce 29 Shoppers Will Continue to Deleverage $$$ Shifts out of Retail Consumer Debt Service Ratio Getting fiscal house in order - Debt paydown - Slower debt accumulation - Less home buying (% disposable income) 16 15 14 13 12 Anticipated decline in consumer debt ratio for several years 11 2 Flat Quarters and Dropping 10 9 8 Sources: Federal Reserve Board and TNS Retail Forward 30 But Shoppers Will Also Be Less Stressed Not Back to the Future … but Better than Today Food inflation tapers a bit … but not to historical levels Fuel inflation returns … but not to early 2008 levels Wealth recovery will be underway - Housing prices - Stock market - Income Food Price Index (percent change year-over-year) 5.4% 4.6% 3.8% 2000 2001 3.8% 3.1% 3.0% 2.3% 3.7% 1.9% 1.9% 2002 2003 2004 2.3% 2.3% 2005 2006 2007 2008F 2009F 2010F 2011F 3.2% 3.2% 2012F 2013F Sources: U.S. Department of Commerce and TNS Retail Forward 31 Big Ticket Will Be Traumatized What You Make Is What You Spend “WYMI-WYS” dominates … Housing Housing-related “Designer” luxury Financing-reliant 32 Shoppers Will Recover Via The LIFO Method Some shoppers less likely to change behaviors than others Extent to which Behaviors Changed this Past Year Seniors Up Market Grocery Shopping Senior up-market shoppers less likely to have changed behavior, especially in groceries Apparel Shopping Senior Senior Up Up All Market All Market Female Female Shoppers Shoppers Shoppers Shoppers Significantly 13% 3% 30% 11% Somewhat 34% 20% 33% 34% A little bit 28% 26% 23% 20% Not at all 25% 52% 14% 35% Highlighting indicates significant differences between column percentages Source: Retail Forward ShopperScape™ February and March 2009 33 Shoppers Will Recover Via The LIFO Method Gen X up-market shoppers slower to change but now have pulled back Extent to which Behaviors Changed this Past Year Gen X Up Market Grocery Shopping Apparel Shopping Gen X Up Gen X Up All Market All Market Female Female Shoppers Shoppers Shoppers Shoppers Significantly 13% 11% 30% 26% Somewhat 34% 30% 33% 33% A little bit 28% 31% 23% 25% Not at all 25% 28% 14% 16% Highlighting indicates significant differences between column percentages Source: Retail Forward ShopperScape™ February and March 2009 34 Gen X Up-market Segment Made Significant Cutbacks Year-to-Year Spending Changes on Home Furnishings and Casual Apparel Exception: home furnishings up vs. other, even up-market, segments Apparel showed sharpest declines Qtr 1 2008 Qtr 1 2009 Percentage Change Q:1 2008 Q:1 2009 Spent on home furnishings past 3 mos. All Shoppers $147 $113 -23% Up Market Shoppers $265 $196 -26% Gen X Up Market Shoppers $221 $276 25% Spent on casual apparel past 3 mos.* All Shoppers $137 $113 -18% Up Market Shoppers $214 $169 -21% Gen X Up Market Shoppers $244 $189 -23% Source: Retail Forward ShopperScape™, Quarter 1 2008 and Quarter 1 2009 35 Gen X Up-market Segment Cutback More in HBC Than Groceries But not as bad as apparel Year-to-Year Spending Changes on Groceries and HBC Qtr 1 2008 Qtr 1 2009 Pct. Chg Q:1 2008 Q:1 2009 All Shoppers $104 $102 -2% Up Market Shoppers $131 $123 -6% Gen X Up Market Shoppers $132 $127 -4% All Shoppers $35 $33 -7% Up Market Shoppers $45 $42 -6% Gen X Up Market Shoppers $48 $43 -12% Spent on groceries past week Spent on HBC past month Source: Retail Forward ShopperScape™, Quarter 1 2008 and Quarter 1 2009 36 Gen X Up-market Segment Key To Watch For Post-recession Spending LIFO cohort key segment to watch emerge from recession Percentage of Shoppers Planning to Spend Much/Somewhat More Vs. Last Year 25% Gen X Up Market 20% 15% 10% All Shoppers 5% Source: Retail Forward ShopperScape™, Feb. 2008 Mar-09 Feb-09 Jan-09 Dec-08 Nov-08 Oct-08 Sep-08 Aug-08 Jul-08 Jun-08 May-08 Apr-08 Mar-08 Feb-08 0% Mar. 2009 37 Gen X Up-market Segment Behaviors That Will Stick For a While Grocery and Food - Curbed dining out habits - Moved to more private labels - Clipped more coupons - Motivated by specials Apparel - Large pull back on spending and shopping - Off price shift – brands at value prices - Monitor clearance and sale racks Source: Retail Forward ShopperScape™, Feb. 2008 Mar. 2009 38 Some Lasting Changes In Overall Behaviors Will Persist For Years Due To Job Market Top turnaround driver - Job security/HHI Others drivers: - Fear - Mindset shifts - Stock market - Personal health - Housing market - Credit Reasons Why Shoppers Plan to Spend Less Shoppers planning to spend less at retailers Percentage of total shoppers 51% Retail pick up most likely depends on change in: My HH’s current financial situation 43% Income/job market Concerns about how the recession will affect me/my HH in the future 40% Attitude about economy Trying to simplify my HH’s lifestyle 28% Mindset Cut back in household income 27% Income/job market Decline in worth of investments 16% Stock market Job loss of a household member 12% Income/job market Health concerns/illness in the HH 7% Family member health Decline in value of home 7% Housing market Cannot get affordable credit 3% Credit market Other (specify) 6% Source: Retail Forward ShopperScape™, April 2009 39 Limits On Spending Will Be Lasting Clothing, accessories Extremely Likely to Retain Limiting Spending Tactics and shoe retailers will feel effects longer Outdoor Clothing/ Indoor home home - Less spending accessories/ improveimproveGrocery shoes ment ment - Less frequent shopping shopping* shopping** shopping** shopping Spending less overall 10% 17% 7% 7% - Less impulse Shopping less often 16% purchasing Buy fewer items on More sticking to lists impulse Buying only replacement/ replenishment items More DIY than BIFM Less appetite for credit card debt Less ability to accumulate debt 17% 17% 5% 12% 9% 8% 13% 14% 12% 15% 12% 6% 5% Buying only items can afford to pay with cash Sticking to a list Performing maintenance myself Waiting longer to perform home maintenance 13% * Only female shoppers surveyed ** Shoppers participating in indoor/outdoor projects Source: Retail Forward ShopperScape™, February, March and April 2009 40 Bargain Hunting And Pre-shopping Continues Grocery shoppers will continue to use ads, coupons, and multiple item or stockpiling behaviors Apparel buyers will continue to hit the clearance racks—with possible disappointment Increased use of circulars and coupon clipping results in greater preshopping influence Extremely Likely to Retain Deal-Seeking Tactics Grocery/ food shopping Regularly monitoring favorite store clearance Using ads to determine where shop Shopping off-price stores Consolidating shopping where get best value Using coupons more often Using ads to determine what buy Buying multiple items at a time Stockpiling sale items 12% 10% 18% 14% 14% 14% Clothing/ accessories/ shoes shopping* 19% 14% 9% 8% Indoor home Outdoor home improvement improvement shopping** shopping** 14% 13% 9% 7% 12% 12% 8% 7% * Only female shoppers surveyed ** Shoppers participating in indoor/outdoor projects Source: Retail Forward ShopperScape™, February, March and April 2009 41 Most Will Return To Previous Store Choice Sets Only about one in ten shoppers to continue to narrow store choices to get the best value Extremely Likely to Retain Deal-Seeking Tactics Grocery/ food shopping Regularly monitoring favorite store clearance Using ads to determine where shop Shopping off-price stores Consolidating shopping where get best value Using coupons more often Using ads to determine what buy Buying multiple items at a time Stockpiling sale items * Only female shoppers surveyed ** Shoppers participating in indoor/outdoor projects Source: Retail Forward ShopperScape™, February, March and April 2009 12% 10% 18% 14% 14% 14% Clothing/ accessories/ shoes shopping* 19% 14% 9% 8% Indoor home Outdoor home improvement improvement shopping** shopping** 14% 13% 9% 7% 12% 12% 8% 7% 42 Luxury And Gourmet Markets Will Contract Aspirational shoppers who previously bought luxury and gourmet products pulling back Swarovskiencrusted toilet - $75,000 Moderate brands gain Grocery shoppers shift to more private brands and less expensive formulations sticks for many Extremely Likely to Retain Trading Down Tactics Not buying items that seem "too expensive" Buying more basics than fashion items Buying less expensive brands Buying more private/store brands Buying less expensive versions than usual * Only female shoppers surveyed ** Shoppers participating in indoor/outdoor projects Source: Retail Forward ShopperScape™, February, March and April 2009 Grocery/ food shopping 19% 12% 11% Clothing/ accessories/ shoes shopping* 20% 12% 10% 3% Indoor Outdoor home home improve- improvement ment shopping shopping 7% 8% 7% 7% 43 Cutting Labor More Risky Than Cutting Inventory Retailer cutbacks to conserve cash led to: - Cutting labor - Cutting inventory Labor cuts more likely to affect shoppers negatively Inventory cuts more likely to affect apparel Percentage of Shoppers Very Much/Somewhat Reducing Spending as a Result of Retailer Cutbacks Fewer open checkout registers Less knowledgeable salespeople on the floor to answer questions Fewer salespeople on the floor to answer questions Limited apparel selections Limited home improvement products selections Fewer unique products Fewer premium products Limited consumer electronics or appliances selections Limited home furnishings selections 52% 51% 47% 38% 34% 33% 31% 31% 29% Source: Retail Forward ShopperScape™, April 2009 44 Even When Former Shoppers Return, They’ll Be Re-Wired Some temperate spending for awhile Some trained only to shop “on deal” Some trading down will stick with new patterns Some losing so much ground, shopping behaviors permanently changed Most will return to favorite pre-recession stores But prepare to welcome back previous -- but transformed – customers 45 Some Retailers Will Fare Better Than Others Views about service only somewhat related to intention to shop more when economy improves Top 5 most improved are FDM players, Amazon Top 5 most likely to shop more post-recession also (different) FDM players and Amazon Publix and Amazon in Top 5 in both categories Source: Retail Forward ShopperScape™, March and April 2009 Retailers Ranked on Customer Service and Future Shopping Intent by Past 4 Week Shoppers Customer Service Intention to Shop Improved from More When Last Year Economy Improves Publix Kroger Walgreens Amazon.com Albertson's Barnes & Noble SuperTarget Walmart Nbrhd Market Kohl's Bed Bath & Beyond Lowe's CVS/pharmacy Costco Safeway JCPenney Sam's Club Best Buy Target Macy's The Home Depot Walmart Walmart Supercenter Sears 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 2 18 20 1 19 11 13 4 6 14 10 21 3 22 16 7 17 9 15 12 5 8 23 46 An Uneven Recovery at Retail E-commerce, clubs, supercenters positioned to benefit most Modest growth for most specialists, food/drug Mass merchants continue to suffer Estimated Compound Annual Sales Growth Rate, 2008–2013 15.0% 7.9% 4.7% CE/ E-commerce Clubs and Super- Appliance Stores centers 4.4% Apparel and Shoe Stores 4.3% Drug Stores 3.6% Building/ Hardware Stores 3.3% 2.8% 2.2% SuperHome Furniture markets Furnishings Stores Stores Discount Dept. Department Stores Stores -0.1% -0.9% Sources: U.S. Department of Commerce and Retail Forward 47 Some Sectors Will Fare Better Than Others Food, drug, mass channels Least affected by recession Supercenters and warehouse clubs fare best, lead the recovery Discount department stores and grocery stores suffer most, recover more slowly Necessities will remain strong DIY will remain strong Good value will remain a requirement - Exposure of new generation to much better PB than in the past 48 Some Sectors Will Fare Better Than Others Homegoods channels Ongoing stress -- slow housing market recovery, focus on big ticket/credit reliant purchases Cash-based, lower ticket will return first, do better Major project, big ticket suffers more, recovers more slowly Big ticket will remain replacement or trade down due to credit constraints - Not “aspirational” or emotional/desires Ability to DIY, not DIFM 49 Some Sectors Will Fare Better Than Others Softgoods channels Hardest hit retail sector, with longest recovery Non-essentials will suffer most “Good enough” products will do well “New luxuries” and “investment dressing” will replace conspicuous consumption 50 Companies Responding to Accelerated Section 2 - Looking Ahead: OpportunitiesMindset Will Fare Better Shifts In Consumer Accelerating Shifts… Connectivity, digital social networks - Build, leverage communities - Create channel agnostic presence Desire for customization/ personalization Requirements for price transparency Affordable green / values shopping - Not just organics - Sustainable, fair practice - Responsible, trusted 51 Identify New Messages for New Needs Repositioning required Luxury: “new luxury” for affluents; affordable luxury for middle-income households Discretionary/non-necessities: investments, experiences, memories, emotional value 52 Focus on Relevant “Value” Relevant to my budget - Give me value for the money - “Good enough” trumps best Relevant to my interests and lifestyle - Products and services I want and value Relevant to my personal priorities - Produced, packaged and sold consistent with my values 53 Identify and Solve a New Problem Address relevant problems: less money to invest in wardrobe Huge launch for new Tide Total Care line Positioned as a more budget-friendly alternative to dry cleaning - Protects “newness” of clothes Tie-in with Ann Taylor Loft in store, web site, cobranded takeaways, Facebook Tide POP displays at Target with fabric samples 54 Rethink “Competition” Brands under attack by non-brands: - Bottled water by tap water - Clothes dryers by clothes lines - Household cleaners by “water and vinegar” - Cars by bikes and walking - Eating out by cooking Product solutions vs. services - Buy the replacement - Identify new profitable niches *Global Shades of Green, TNS 55 Leverage All Touchpoints Every person, every interaction is an opportunity Wireless Shoppers Spending by Channels Shopped (Index Values) Modest demand requires more vigilant preparation - Seamless - Channel agnostic - Simplified - Personalized - Community Average of all Shoppers Offline Only Online Only Multi-Channel 90 92 94 96 Plan Spending 98 100 102 104 106 Phone Cost Source: TNS Compete 56 Corporate Responsibility Will Matter More The Buck Stops… Whom Do You Hold Responsible for Recalled Chinese Products Being Sold to U.S. Consumers*? Don't blame anyone U.S. trade policymakers Chinese-government inspectors U.S. retailers buying from companies that import goods from China U.S. retailers directly importing goods from China 10% 27% 38% 40% 42% U.S.-government inspectors 45% Chinese manufacturers 46% U.S. manufacturers using Chinese manufacturers for production 56% *Among shoppers who are aware of a recall Source: Retail Forward ShopperScape™, September 2007 57 Trust Will Be The New Currency Anticipating and authentically responding to shopper values Regaining … and retaining … shopper trust Requires greater self-governance amid global complexities 58 Unprecedented Era Requires Unprecedented Action This era is unique Creating a new breed of consumers with unique behaviors, priorities and values Understanding those changes and adjusting now is a strategy for longterm growth and positioning 59 Thank You! Email questions or comments to: [email protected] 60