Analysis by The Boston Consulting Group Shows Consumer Mood and Online Holiday Shopping Intentions Are on the Rise
Despite Shaky Economy and World Events, BCG/Harris Interactive Study Finds
`Confident` Consumers Outnumber `Distressed` Consumers by More Than Two to One
BOSTON, Nov. 26 -- Consumers have been buffeted by the
worsening economic climate in the U.S., coupled with the tragic events of
September 11 and the subsequent war in Afghanistan, but a new study of online
consumer attitudes from The Boston Consulting Group (BCG) and Harris
Interactive found that a surprising number of shoppers entered the holiday
season with a "confident" frame of mind. Fully 37 percent of the shoppers in
the survey were "confident," while only 15 percent fell into the "distressed"
category. The research found the remaining 48 percent of respondents to be
"recovering." The research was based on an online survey of 4,546 adults
conducted in November 2001, which was supplemented by one-on-one consumer
interviews.
According to Michael Silverstein, BCG senior vice president and leader of
the firm`s Consumer Practice, "The market is polarizing. Educated, higher
income, employed consumers are planning to spend more, they`re traveling
again, and they`re facing the world with confidence. The less educated, more
economically vulnerable population is still scared. While there`s no question
this is a challenging environment for retailers, the smart ones will
merchandise their stores to serve both segments. It creates the chance to
approach these two segments of consumers with product assortments built to
meet their specific needs and budgets, and in so doing, increase sales."
The Road to Retail Recovery
As expected, the current economic situation and the fallout from
September 11 affected consumers in many different ways. However, a pattern
emerged in the BCG/Harris survey of plans for holiday shopping that suggested
a parallel with the commonly accepted stages of recovery from any significant
trauma-denial, anger, depression, and acceptance. For example, "confident"
consumers appear to have progressed through all stages of the recovery
process, and have emerged stronger; many of them said they plan to spend more
money than they did during last year`s holiday shopping season. Similarly,
"distressed" consumers remain in the early stages of the recovery process;
many of these consumers had lost their jobs or seen family members lose jobs
and they, understandably, have not yet recovered from the blow to their
personal finances.
"Recovering" consumers, which make up the largest segment, present an
intriguing picture. On one hand their planned spending for the holiday season
is almost identical to "distressed" consumers; on the other hand, they are in
many ways similar to "confident" consumers: They are more likely to have a
college degree (36 percent), have a comparatively low rate of unemployment
(5 percent) and earn more than $50,000 per year (50 percent).
"We already have 37 percent of consumers entering the holiday season with
confidence, and we expect the number to grow by the end of the holidays, as
many consumers in the large `recovering` segment complete their recovery
process and return to normal spending levels," said Peter Stanger, BCG vice
president and topic leader for business-to-consumer e-commerce who directed
the study. "We believe confidence is contagious. Consumers look to their
neighbors to set their mood. Consumer confidence is on the rise."
The BCG/Harris study uncovered several other interesting characteristics
of "distressed," "recovering" and "confident" consumers:
* Thirty-three percent of "distressed" consumers had a family member lose
a job this year and 42 percent have seen their overall household income
decrease in 2001.
* Conversely, only 11 percent of "confident" consumers have experienced a
job loss in the household or seen their income level decline.
"Recovering" consumers fall in the middle of this continuum, with
22 percent experiencing a job loss in their families.
* 60 percent of distressed consumers who were planning to travel by air
over the holidays have changed their air travel plans
* Women are more likely than men to be classified as "distressed":
Within the universe of distressed consumers, 60 percent were female;
within the universe of "recovering" consumers, 53 percent were female,
while within the universe of "confident" consumers, 61 percent were
male.
* Consumers classified as "distressed" and "recovering" plan to spend
9% less than the $620 that more confident consumers intend to spend
this holiday season.
* The Internet will be heavily used by most online consumers, but
especially by distressed consumers who will search for the best deal by
comparing prices and brands online.
Consumer Attitudes
In one-on-one interviews, "distressed" consumers responded to questions
about their shopping plans with trepidation:
* "My husband`s company was affected by September 11th. Lots of people
lost their jobs. He kept his but his pay was cut. This year we are
asking our daughters `what do you need` rather than `what do you
want.`"
* "The instability of the stock market has really hurt our income, so
we`ll be spending less this year."
On the other end of the spectrum, "confident" consumers responded more
positively to questions about the economy and their outlook on shopping over
the holidays:
* "Life must go on. The consumer can make or break the economy and I
intend to do my part."
* "My financial situation is much better this year and I want to share
that with my family and friends."
Implications for Retailers
"With 109 million people expected to shop or purchase online this year,
the BCG/Harris research found that many of them -- 56 percent of those
surveyed -- plan to spend the same or more on gifts this holiday season,
despite recent events or the current economic situation," said Lori
Iventosch-James, director of e-Commerce Research for Harris Interactive. "And
the 68 percent of consumers who plan to purchase gifts online, intend to spend
a higher proportion of their holiday budget online (27 percent) compared to
last year (22 percent)."
For retailers, the BCG/Harris research carries several implications.
Among them:
* Based on reactions to the recent economic and international events,
three distinct types of consumers are walking into stores, ordering
from catalogs, and visiting Web sites this holiday season. Retailers
need to adapt the segmentation of their customer base to incorporate
these consumer attitudes and adjust their merchandising and marketing
accordingly. For example, this may require creating an assortment of
pre-packaged, moderately priced basics for the distressed segment, and
balancing this with a selection of more aspirational, exotic gifts to
reach the confident segment.
* Multichannel retailers have a competitive advantage over other
retailers. According to the BCG/Harris survey, the more of a
retailer`s channels consumers visit, the more likely they are to
purchase from that retailer. For example, among the Recovering
segment, 80 percent of prospective clothing purchasers who visited both
a Sears store and the Sears.com Web site said they plan to make a
purchase at Sears. That compares with 61 percent among shoppers who
visited only a Sears store, and 63 percent for shoppers who visited
only the Web site.
* This year more than ever before, simply having a Web site isn`t
sufficient. Consumers continue to gravitate toward retailers with
multichannel offerings that provide a consistent and convenient
cross-channel shopping experience. Indeed, BCG estimates that
consumers who look for a gift at any one company`s Web site end up
purchasing the product from another company`s store or Web site
thirty-five percent of the time.
About BCG
The Boston Consulting Group is a general management consulting firm widely
regarded as the global leader in business strategy. Since 1963, BCG has
worked with companies in every major industry and global market to develop and
implement strategies for competitive success. The firm has 51 offices in
34 countries around the world. More information can be found on the company`s
Web site at http://www.bcg.com .
About Harris Interactive
Harris Interactive (Nasdaq: HPOL) is a worldwide market research and
consulting firm, best known for The Harris Poll(R) and its pioneering use of
the Internet to conduct scientifically accurate market research. Strengthened
by its recent merger with Total Research Corporation, the Company now combines
the power of technology with international expertise in predictive, custom,
strategic research. Headquartered in the United States, with offices in the
United Kingdom, Japan and a global network of local market and opinion
research firms, the Company conducts international research with fluency in
multiple languages. For more information about Harris Interactive, visit
http://www.harrisinteractive.com .
CONTACT:
Lee Graham of The Boston Consulting Group
+1-212-333-4983
graham.lee@bcg.com
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