Study: Recession May Wane but Wal-Mart Retains Advantage

Consumer intentions to cut spending in the recession are at least growing less severe, the Trend Tracker Study conducted by the Gordman Group consultancy indicated, but any benefits from that development will continue to boost retailers most closely identified with low prices, and particularly Wal-Mart.

In the study, 80 percent of respondents said the economy has influenced where they shop, with 54 percent noting that they plan to spend more money at Wal-Mart. The next biggest beneficiary was Internet retail where 27 percent planned to spend more followed by Target at 25 percent. When comparing who will spend more and less at major retailers, Wal-Mart still comes out ahead even though 22 percent of respondents said they plan to spend less with it. The 32 point spread is the biggest positive number among major retailers. Next highest is again Internet sales, with a positive six point spread. The only other major retailers to rate positive spreads were Target and Dollar Tree, at four points. Costco and Big Lots were flat.

Food isn’t all that’s driving positive trends for Wal-Mart as 60 percent of its customers reported spending the same amount or more on apparel and home furnishings in the past year. In contrast, only 57 percent of Target shoppers said they spent the same or more in the categories and the proportion is lower at other major retailers.

According to the Trend Tracker Study, 90 percent of consumer report that the recession has impacted their spending. Yet, frugality seems to be easing a bit. While 45 percent said they spent less over the past three months, only 31 percent say they plan to make cuts in the three months upcoming. Not only that, but a Gordman study conducted in the fourth quarter of 2008 had 69 percent of consumers declaring an intention to spend less. Taken together, the studies suggest spending declines are bottoming out and that at least some retailers are in line to benefit as recovery takes hold.

Gordman Group president Bob Gordman said:

It appears that consumers have established a new spending base and will increase or decrease from there. The good news is that it appears that precipitous drops are less likely to occur. Based on visiting almost every major retailer over the past week, it looks to me like some retailers are focused on what has made them successful and have well planned inventories to do business, some are groping and are not sure what to do and others have pulled inventories back dramatically and will have reduced sales and potentially improved profits.

Retailers who have been effective in promoting their strengths and bringing operations in line with the economic downturn, rather than those who have had to make severe adjustments, are in the best position to make gains in a recovery, Gordman said. He rated as among the most proficient Wal-Mart, Buckle, Aeropostale, Hot Topic, Gymboree, Jos. A Bank, Lululemon and Amazon. Even though the largest proportion of respondents in the survey identified price as their most compelling reason to choose a retailer, Gordman pointed out that, as the proportion was 21 percent, other considerations continue to play in consumer minds, which could be one reason that retailers who have effectively played to their strengths have enjoyed relative success in the recession. He added:

They have simply executed their strategies well. Some are price oriented, while others are not. Some of the ones who have adjusted like Macy’s, Target, Nordstrom, Talbots are not doing very well.