BigResearch: Consumer Confidence Declines – Still Better Than 2002.

Those who are very confident/confident in economy for 2003 declined slightly in January from December’s 43.9% to 37.0%. This is still an improvement over readings from August – November 2002. Consumers appear to be a little more optimistic than they were in the 4th quarter. Respondents also hoping for a more positive employment environment, as layoff predictions improve slightly. This month’s figures (December in parenthesis): “more layoffs” 47.0% (47.3%); “same” 40.2% (40.5%); “fewer” 12.8% (12.2%).

A Spike in energy process could hold back consumer spending. When asked if heating and cooling bills increased by 50% or if gasoline hits $2 a gallon, over 40% of consumers said they would spend less on other goods and services. Here are top 3 responses for increase in heating bills – 1. Adjust thermostat 67.6% 2. Spend less on other goods and services 43.2% 3. Increase insulation 23.3%. Top 3 for increase in gasoline prices – 1. Take fewer driving vacations 46.0% 2. Spend less on other goods and services 45.2% 3. Buy more fuel-efficient car 19.0%. Retailers need to keep an eye on energy price increases, they will influence consumer spending.

International issues concerning Iraq and North Korea continue to create uncertainty about when the U.S. economy will get back to normal. Those who say “under 6 months” declined from 10.7% in December to 7.1%, hitting a new all-time low. (Previous low: September 2002 – 7.7%). “Over 6 months” increased from 71.0% in December to 73.7%. Predictably, worry about political and national security issues also increased in January to 28.8% (v. 25.8% in December).

“Pay down debt” continues to be #1 financial step (44.6% say so), but “decrease overall spending” is making a run at the top spot. 38.8% intend to do so, a new high since January 2002 (37.5%). As holiday bills pile up, it looks as if consumers plan to decrease spending in order to make payments. Remainder of the top 5 financial plans are flat from December: increase savings, pay with cash more often, buy/sell stocks.

Looks like finance incentives and interest rates are motivating increases in purchase intentions over the next 6 months for following durables: car/truck, furniture, housing. Vacation travel intentions also rose in anticipation of spring break and early summer vacations. Categories that declined: computers, home appliances, jewelry/watch, TV/VCR/DVD; unchanged: major home improvements, RV/Boat, stereo equipment.

Sales are becoming increasingly important for clothing-buyers. “Only buy on sale” increased to 24.9% (v. 21.2% in December); “usually buy on sale” declined to 64.4% (v. 67.4% in December); “sales not important” decreased to 10.8% (v. 11.4% in December), a new low. This is a reversal of January 2002’s figures: “sales not important” – 21.3%; “usually buy on sale” – 64.0%, “only buy on sale” – 14.7%. Fashion labels also valued less, with 30.9% saying they are important, the lowest since March 2002 (29.0%). Look for bargain-hunting to continue into spring. The pressure’s now on retailers to “read” their customers and entice them into buying with the types of offers and merchandise customers want.

Media disconnect… When asked about which media were most important for determining apparel and accessories purchases, word of mouth was #1 as 56.9% of consumers felt it was very important/important. #2 was in store promotion at 47.9% and read article on product #3 with 46.2%. TV/Cable is at 33.0%… Makes one wonder why percentage of dollars allocated for TV are growing so fast, seems like more emphasis on sales promotion or public relation activities need to be given more thought.

WalMart tops for Health and Beauty Aids…but it’s a dogfight for #2. The BIGresearch breakout for Top 5 HBA Stores where consumers say they shop most often by region is (national figures in parenthesis):

Northeast – 1. WalMart(1), 2. CVS(3), 3. Rite Aid(5), 4. Walgreen (2), 5. Target (4);

Midwest – 1. WalMart (1), 2. Walgreen (2), 3. Target (4), 4. CVS (3), 5. Kmart (6);

South – 1. WalMart (1), 2. Walgreen (2), 3. CVS (3), 4. Eckerd (7), 5. Target (4);

West – 1. WalMart(1), 2. Rite Aid (5), 3. Target (4), 4. Walgreen (2), 5. Costco (8).

Top reasons to buy Health and Beauty Aids at a particular store: 1. Price (69.9% say so), 2. Location (55.8%), 3. Selection (49.7%), 4. Quality (24.8%), 5. Service (16.8%)…it’s all about the better bargain!

90-Day Outlook… uncertain consumers keeping powder dry… Conditions not favorable for most categories in Q1, according to the BIGresearch diffusion index. (Those who say they will spend less subtracted from those who say the will spend more).

On the lighter side…When it comes to cereal, consumers are either becoming more health-conscious, or they’re just trying to avoid the dentist.

In addition to Frosted Flakes slipping from #3 to #4, sugar-charged bestseller Lucky Charms slid to #5 to #11 this month. Healthier alternatives oatmeal rose from #4 to #3, and Special K leaped from #12 to #5, maybe a result of New Year’s fitness resolutions.

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