Studying Shopper Behavior
Retailers that are gaining share-of-wallet are doing so by being in-stock with the right merchandise for their customers. That’s one of the key insights contained in the 2007 National Shopping Behavior Study by audit, tax and advisory firm KPMG LLP, the U.S. member firm of KPMG International. The survey found that mass retailers continued to hold onto the most “wallet share,” and it confirmed that consumer money was tighter during the past holiday season, as buyers shifted their spending toward the Internet and power retailers.
Indeed, just 30% of the survey respondents said they spent more on gifts compared with the preceding holiday season. That was below findings from similar surveys from 2003 to 2006, when an average 36% of consumers reported an increase in their spending compared to the year prior.
Additionally, the survey found that environmental concerns and global manufacturing issues had a greater affect on consumer-spending decisions in 2007, with a vast majority of respondents expressing a willingness to pay more for eco-friendly gifts and taking note of the country where items were made.
“When consumers had the opportunity, they purchased gifts to fit their social conscience,” said John Ritten-house, a KPMG retail managing director and national leader for Operations Risk Management. “The ‘green-quotient’ and a product’s country of origin have become important reputational concerns for shoppers, due mainly to recent publicity on the environment and manufacturing issues in emerging markets.”
Some 88% of the survey respondents, Rittenhouse added, were very concerned about the environment. In other eco findings, 74% indicated they buy environmentally friendly products (with 60% willing to pay more for such items,) and 55% said they make a special effort to patronize retailers with a “green” reputation.
In addition, 40% of consumers said they checked the country of origin on potential gifts, with 31% using such information to decide against a purchase. While 79% of those decisions not to buy an item involved products from China, toys were involved more than half of the time.
Mark Larson, KPMG’s global leader for the retail sector, said the survey also demonstrated that well-stocked stores with a customer-friendly return policy continue to attract business. He noted that 76% of shoppers said their spending decisions were influenced most when a store had the item they expected, while 58% cited a store’s return policy as influential. By contrast, 47% said newspaper ads affected where they shopped, and 43% said a coupon figured into the decision, according to the survey.
“Even though price remains the most significant driver to attract customers initially, busy shoppers told us they went to the retailer where experience told them they could get what they wanted,” said Larson, underscoring factors regarding reputation as important for boosting traffic and sales. “Shoppers will first visit stores that they know are usually well-stocked year-in and year-out. That confidence in filling a need comes from years of building customer relationships. But miss that expectation—even just once—and it easily sours an often fragile customer loyalty.”
In addition, the study examined the product attributes that influence shopping behavior. It found that apparel shopping was driven by fit, followed by style, price and color concerns. Brand and designer name were significantly less important.
Shoppers spent the most money in mass retailers, with some 28% of respondents who shopped in stores saying they spent the most in mass outlets, (Wal-Mart, Target and other similar stores), while 14% said they spent more at power retailers (Toys “R” Us and Best Buy, etc.), 12% said specialty stores (such as Gap and RadioShack), 10% said midline stores (such as Kohl’s, J.C. Penney and Sears). Only 8% said they spent the most at department stores.
The Internet and power retailers grabbed more of “wallet share”—four points and seven points, respectively—according to the survey. (Wallet share denotes whether consumers are spending a larger or smaller portion of their holiday shopping budgets, where they are making purchases, and why.) Other changes in their wallet share include: specialty stores, catalogs (such as Gap, Disney) and warehouse retailers (such as Costco, BJ’s) gained one point each, while mass merchants dropped two points, and department stores and off-price (TJX, Old Navy and other similar stores) retailers each lost one point of wallet share.
As for retailers’ heavily publicized rush to jump-start the 2007 holiday season by advertising heavily and lowering prices, even before Thanksgiving such efforts had little influence over when consumers began their shopping, according to the survey.
“The KPMG survey respondents said they shopped basically at the same time they do every year, and sales or early promotions did little to change their patterns,” Rittenhouse said.
Lampert, the Eli Manning of retail?
HOFFMAN ESTATES, Ill. The New York Giants triumph over the highly favored New England Patriots in the Super Bowl earlier this month, has become an example of coming from the bottom to win it all. Sears Holdings chairman Edward Lampert is one of the latest to use the Giants win, even going as far to compare himself, and the leaders of his company, to quarterback Eli Manning.
The Giants analogy, and Eli Manning comparison, is applied mainly to the company’s Kmart division. In a letter to investors, posted on the Sears Holdings investor relations Web site, Lampert said during Kmart’s bankruptcy in 2002, the unit was “like an undrafted free agent who nobody thought had a chance to play in the big leagues.” Lampert went on to say, “Like Eli Manning, we know what it’s like to be underestimated and questioned, but we intend to keep working on our game to achieve our full potential.”
Sears Holdings reported net income of $426 million, or $3.17 per diluted share, for the fourth quarter ended Feb. 2, compared with net income of $811 million, or $5.27 per diluted share, for the fourth quarter ended Feb. 3, 2007. For the fiscal year ended Feb. 2, 2008, net income was $826 million, or $5.70 per diluted share compared with net income of $1.5 billion, or $9.58 per diluted share, for the fiscal year ended Feb. 3, 2007.
Circuit City investor seeks to replace board
RICHMOND, Va. Circuit City Stores today acknowledged that it has received two proposals from shareholder Wattles Capital Management regarding its board of directors. Wattles holds approximately 6.5% of the outstanding shares of the company’s common stock.
Circuit City reported that Wattles proposed the idea of replacing the company’s Circuit City 12-member board of directors with its own nominees. Circuit City said its board of directors will review carefully the shareholder’s proposals and the qualifications of the nominees in accordance with its fiduciary duties, mindful that the proposal would give the shareholder absolute control of the entire board, which would be disproportionate to its relative ownership of the company’s shares.