Shoppers are taking back control, at least over those areas of their lives in which control is possible.
This story first appeared in the July 15, 2008 issue of WWD. Subscribe Today.
Battling soaring prices at the gas pump and supermarket, all while trying to make mortgage payments, consumers want more power over their paychecks.
The WWD “Where America Shops” consumer survey of more than 2,000 women revealed that 32 percent of shoppers spent less than $50 on clothing and accessories for themselves in the past six months.
Consumer confidence fell to a 16-year low in June, according to the Conference Board’s monthly index. The WWD survey showed 20 percent of respondents said they felt less secure about their job or the main job in their household compared to a year ago, while 14 percent said they felt more secure. Sixty-six percent said they felt “about the same.”
The plight of middle-income shoppers is good news for discount retailers like Wal-Mart, but could become a problem for pricier channels such as department stores, specialty stores, and the Internet — all of which skew toward higher-income shoppers — and even supermarkets.
According to WWD’s survey, 63 percent said they regularly shop at discounters, up from 59 percent in 2007, while 40 percent frequently go to off-pricers, up from 36 percent last year.
“Everyone is changing their behavior, whether they need to or not,” said Irma Zandl, principal at the Zandl Group, a private fashion consulting firm based in New York. “It is something in the air. People don’t feel comfortable spending and there is a pride in being frugal. Shoppers all along the spectrum are trading down.”
About half of shoppers in the WWD poll admit they are spending less on clothes and accessories as the result of rising food and gas prices. In order to offset these expenses, 38 percent are shopping at less expensive stores, while another 28 percent are spending less at the same stores; 34 percent said their shopping habits have not changed.
As a result, discount retailers like Target have become the most popular destinations when it comes to purchasing casual and weekend wear, clothes for work, active sportswear and athletic apparel.
And almost half of shoppers said they would sacrifice buying clothes for themselves in order to fill their tanks (47 percent) and 52 percent would cut out clothes to put food on the table.
According to WWD’s survey, 60 percent shop for apparel or accessories once a month or less, while 24 percent shop less than once every two months.
Another consumer poll, the “How America Shops” 2008 survey conducted by WSL Strategic Retail, concurs that most women are sticking to stores that enable them to stretch their monthly household income and are conducting more research before making big purchases.
The majority of Americans surveyed are trying to control “the little things” in their lives because they recognize they can’t control the big ones. In fact, 60 percent of the women and 54 percent of the men agreed with the statement, “I can’t control gas prices and mortgage payments, so I’m watching what I spend on little things.”
Among the 1,643 consumers in the WSL survey, price is one of the most important store qualities considered when consumers decide where to shop, with 64 percent of women and 59 percent of men saying, “It’s important for me to get the lowest prices on most of the things I buy.” And 58 percent of men and 56 percent of women checked off the statement, “Before I buy something now, I ask myself, ‘Is this a smart use of my money?'” WSL’s sample had household incomes ranging up from $12,000.
In the WWD poll, 37 percent of consumers — who had a minimum HHI of $35,000 — picked price as the most important store quality, up three points from the 2007 survey.
Among the findings of the WSL survey was a perceived drift in the status of what was once popularly known as the middle class. “Creating more disorder is a middle class that isn’t middle anymore,” the report’s conclusion read in part. “The economic indicators for most shoppers are dismal. Never has there been such a gap between the haves and those who have less.”
Lower- and middle-class women “still have the aspirations that they nurtured in the Nineties, but they are learning to manage them down because they simply have to.”
Of the 17 leading indicator categories tracked by WSL, the only two areas in which women are spending more are food, which is now more expensive, and pet supplies. Hair care, skin care, over-the-counter medications, clothing, beer, wine and liquor, greeting cards and books are holding on because they meet the value criteria of being important to more shoppers. But small home appliances, home decor, fashion accessories, fragrances, electronics, computers and cosmetics are losing the most shoppers, either because they are perceived as less essential, not meeting value standards or just not interesting enough to overcome shoppers’ prudent mind-set.
“Shoppers aren’t even browsing because they do not want to be tempted to make purchases with money they don’t have,” Zandl said. “This eliminates a majority of impulse shopping.”
WWD found that strip malls — typically home to lower-priced retailers — and mail order, whether by Internet or catalogue, showed gains of 2 and 3 percent, respectively, as preferred places to shop. Traditional malls and downtown shopping areas declined by 5 and 1 percent, respectively.
But women don’t seem depressed about trading down. In WWD’s survey, 84 percent of shoppers said they do not feel dissatisfied going to less-expensive stores, and are actually finding items they like.
“People have become extremely savvy about shopping,” Zandl said. “There is no sense of urgency and they are saying that they can wait for items to go on sale. There is no one dictating that they have to have a certain designer or style.”
But despite cutting back on discretionary spending, 54 percent expect to spend the same amount in the second half of the year as they did in the first half, while 28 percent said they’d spend less. Just 18 percent said they intended to spend more, according to WWD.
And gas prices are having only a modest overall impact on the average number of shopping trips women make — down from 3.9 in 2006 to 3.6 in 2008. However, that average among women is really a combination of a sharp drop among lower- and upper-middle-income women and a slight increase among higher-income women. Gas prices are not a major proportion of the disposable income of more affluent women, said WSL.
Compared with 2006, the number of shopping trips rose among women in the $100,000-and-up household income group (to 4.6 from 4.4) as well as in the range of $40,000 to under $75,000 (to 3.5 from 3.4). All other HHI segments registered decreases, but the largest decline was among the second most affluent group, those with an HHI of $75,000 to under $100,000 (to 3.7 from 4.4).
Some retailers, such as department and drugstores, have even been able to recapture market share during the downturn.
WSL said that the number of customers who reported shopping in department stores within the last 90 days rose 54 percent this year compared with 47 percent in 2006, and climbed to the number-four slot from number seven.
Similarly, in the WWD survey, 35 percent said they shop most often in department stores; 68 percent said they shopped the channel regularly. Discounters came in second with 23 percent saying they shopped there most often, and 63 percent saying they shopped there regularly.
This might sound like a contradiction, but Zandl pointed out that department stores are receiving a boost predominantly from customers looking for sales.