US Consumers Tighten Their Belts

The latest Consumer Intentions and Actions (CIA) survey from BIGresearch finds US consumer confidence falling, with shoppers picking budget brands, planning lower holiday spends, and using their cars less. However, although consumers are spending less on everyday goods, purchase intentions for cars, computers and major home improvements are on the rise.

The survey finds that just 33.5% of consumers are confident or very confident about the chances for a strong economy. This is a decrease of almost 11 points from last month, and the lowest reading since early 2003.

Fewer than a fifth (19.7%) say fluctuating gas prices have had no major impact on their spending, while 60.2% say they are driving less. Rising gas prices and increases in heating costs are also affecting retail spending. More than a third (34.7%) plan to spend less on Christmas gifts than they did last year (compared to 27.9% in 2004), another third (33.7%) plan to spend the same (vs 40.8% last year), while only 6.3% intend to spend more (down from 7.6% in '04). 21.7% say it's too early to know.

According to the BIGresearch Diffusion Index (based on the number of consumers who say they will spend less, subtracted from those who intend to spend more), almost all the main retail categories are down this month, compared with both last month, and last year. The exception is Toys and Games, which remains flat.

Retail Merchandise Categories - 90 Day Outlook

However, purchase intentions for high-priced durableshave increased, compared with both last month and last year. 10.4% plan to buy a vehicle in the next 6 months, up from 9.6% in August and 9.6% in 2004. Also on the rise are plans to buy computers, home appliances, major home improvement, stereo equipment, TV, DVD/VCRs, and vacation travel. However, with one-third of consumers planning to spend less on gifts, they may well be opting for budget models.

Consumers are certainly becoming more money-conscious about basic purchases, according to BIG. More than one in five (22.7%) now say they only buy clothing that is on sale (up from 19.3% last month), and budget-friendly Wal-Mart remains top of the list of stores for clothing. 16.7% shop there most often for women's clothes, followed by JC Penney and Kohl's (5.4% each), Target (2.5%) and Macy's (2.1%). Similarly for men's clothing, 19% shop most often at Wal-Mart, followed by JC Penney (7%), Kohl's (5.5%), Sears (3.6%), and Target (2.9%).

Most say discount stores are also their first choice for buying baby-related products. The most popular retailers are Wal-Mart (43.6% shop there most often), followed by Target (7.6%) and Babies R Us (1.9%). Almost three in four cite price (69.5%), followed by location (53.3%), selection (48.9%), quality (25.1%), and a good selection of brands (23.0%) as the motivation for their choice of store.

In the sporting goods/exercise equipment category, 14.1% shop at Wal-Mart most often, beating Dick's Sporting Goods (5.3%), Sports Authority (3.2%), Sears (2.6%), and Big 5 Sporting Goods (2.4%). BIG's Consumer Migrations Index (CMI) for September focuses on sporting goods, measuring stores' new customers and those who have stopped shopping there in the past year. Dick's Sporting Goods saw 5.0% leaving but 9.2% coming in - meaning a CMI rating of +4.2. Wal-Mart is also on the positive side with a score of +0.8, while Sears and Sports Authority are losing ground. High prices are the main reason for switching stores (18.5% said so), followed by inconvenient location (14.8%), poor selection (10.1%), lack of knowledgeable salespeople (6.8%), and poor customer service (6.3%).

BIGresearch's Consumer Intentions & Actions Survey monitors more than 8,000 consumers each month. The company is online at www.bigresearch.com

BIGresearch has teamed with T. Scott Gross to write When Customers Talk, a book based on the insights and feedback of 100,000 retail customers. Details are online at www.whencustomerstalk.com.

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas, 2024- by Nick Thomas, unless otherwise stated.

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