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.