Changewave Research: Consumer Summer Spending Survey

ChangeWave Research: Consumer Summer Spending Survey

ChangeWave Research Report:

Consumer Summer Spending Survey

Consumer Spending Up – Led By Home Repairs/Improvements;

Consumer Electronics Surprisingly Tepid; Auto Spending Weak

Overview

In our May 2004 Consumer Electronics Survey the outlook for consumer electronics appeared robust – led by increased spending on digital cameras, cell phones & laptops. As a follow-up, we recently surveyed Alliance members on their consumer summer spending patterns – including Consumer Electronics products and services. The survey was conducted August 3 – 12, 2004, and a total of 1,004 members participated.

(A) Overall Spending Patterns

· Consumer Spending Up – Next 90 Days. Twenty-nine percent (29%) of respondents say they intend to increase their spending over the next 90 days, while 19% intend to decrease their spending – pointing to a net improvement in overall consumer spending over the next three months.

· More Spending This Summer than Last. In another positive sign, 40% of respondents say they will be spending more this summer than last, while only 21% say they will be spending less. This is considerably improved from a year ago, when 30% said they would be spending more money on consumer items and 26% less.

(B) Consumer Items and Services

· Household Repairs/Improvements Tops the List of Consumer Spending Items. Forty-one percent (41%) of respondents say they will be spending more money on Household Repairs/Improvements this summer than last, while only 15% say they will be spending less (Net Difference Score = +26) – making Household Repairs/ Improvements the top Consumer spending item in this survey by a wide margin.

· Auto Purchasing Declines. Only 9% of respondents report they will be spending more on Automobile Purchases this summer, while 29% say they will be spending less (Net Difference Score = -20) – making Automobile Purchases the weakest spending category in the survey.

· Consumer Electronics Spending Surprisingly Tepid. While 30% of respondents do report they will spend more on Consumer Electronics this summer than last, a surprisingly high 27% report they will spend less (Net Difference Score = +3). This is the weakest showing for Consumer Electronics spending in the past 18 months.

· Home Entertainment Shopping Preferences Down Slightly. Notably, 4-of-5 shopping categories for home entertainment products fell since our previous survey. While Big Box Specialty Stores (67%) continues to be the favorite category, it’s down 4 pts from previously, while Online Shopping (37%) has fallen 7 pts. Discount Stores (39%) was the only category to rise since our previous survey, up 5 pts.

· Consumer Electronics Items – Winners and Losers. Cell Phones (With and Without a Camera) (19%) and Digital Cameras (15%) were the items respondents report they are most likely to buy for themselves or for someone else during the next 90 days, followed by Laptops (12%) and Desktop Computers (10%). On the down side, PVR/DVRs (Stand Alone, Satellite, and Cable) performed the worst of any of the categories surveyed.

· Items With the Most Momentum. In another measure of strength, Cell Phones (With and Without Camera) showed the most momentum since our previous survey, followed by Hybrid PDAs, Desktop Computers and Laptops. At the other end of the spectrum, purchase plans have fallen most for PDAs and for DVD-R Player/Recorders for both the Home and Living Room.

· Home Entertainment Services Most Likely to Gain. Pure VoIP Service (Percentage Gain = 350%), Satellite Radio Service (100%) and HD Television (100%) look to be the biggest gainers among consumer entertainment services for the next 6 months.

· Best Buy Still Leads. Fifty percent (50%) of respondents and their families prefer to shop at Best Buy for Home Entertainment and Networking Products. Although still the top shopping choice, this is a 1-point decline for Best Buy from our previous survey.

· Camera Cell Phones Increasing. A majority (89%) of respondents own a cell phone, but only 13% currently own one with a camera. However, 25% plan on upgrading or buying a cell phone within the next six months, and among this group, more than a third (9% of all respondents) plan on buying a cell phone with a camera.

· Slowdown in Digital Camera Upgrades. Better than two-thirds of respondents (69%) currently own a digital camera. Another 15% do not, but plan on purchasing one in the next six months. Among digital camera owners, 13% report they plan on upgrading within the next 6 months – a 6-percentage point decrease from the results of our November 2003 Holiday Spending survey.

· High Interest for SanDisk Memory Stick Initiative. Twenty-six percent (26%) of current digital camera owners say they would be interested in using memory sticks to store photos, while 46% say they are not interested in using memory sticks for this purpose. The survey results show surprisingly high consumer interest for this type of picture storage approach – particularly if the price of memory sticks drops to $5-$10.

Bottom Line: The survey results point to a net improvement in consumer spending over the next 90 days, with Household Repairs/Improvements at the very top of the list and Auto Purchasing appearing the weakest of any category. Surprisingly, Consumer Electronics spending appears flat to moderate – with the big winners being Cell Phones (all types), Digital Cameras, Laptops Desktops, VoIP, Satellite Radio and HDTV.

The ChangeWave Alliance is a group of 4,600 highly qualified business, technology, and medical professionals in leading companies of select industries—credentialed professionals who spend their everyday lives working on the frontline of technological change. ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, and converts the information into proprietary quantitative and qualitative reports.

Helping You Profit From A Rapidly Changing World ™

www.ChangeWave.com

Table of Contents

Summary of Key Findings 4

The Findings 5

(A) Overall Spending Patterns 5

(B) Consumer Items and Services 6

(D) Digital Cameras 13

ChangeWave Research Methodology 16

About ChangeWave Research 17

I. Summary of Key Findings

Introduction

The survey report focuses on 4 key areas:

(A) Overall Spending Patterns

(B) Consumer Items and Services

(D) Digital Cameras

II. The Findings

(A) Overall Spending Patterns

(1) Question Asked: Thinking about your overall spending patterns over the next 90 days, including the "Back to School" season, would you say you intend to increase your spending, decrease your spending, or will your overall spending remain the same compared to the previous 90 days?

Increased Spending Over Next 90 Days / 29%
Decreased Spending Over Next 90 Days / 19%
Spending Will Remain the Same Over Next 90 Days / 51%
Don't Know / 1%

Consumer Spending Up – Next 90 Days. Twenty-nine percent (29%) of respondents say they intend to increase their spending over the next 90 days, while 19% intend to decrease their spending – pointing to a net improvement in overall consumer spending over the next three months.

(1A) Question Asked: What about compared to last summer? Would you say your overall spending this summer (including the "Back to School" season) will be more than last summer, less than last summer, or the same as last summer?*

Current Survey
Aug ‘04 / Previous Survey
Jul ‘03
More Spending Than Last Summer / 40% / 30%
Less Spending Than Last Summer / 21% / 26%
Spending Will Remain the Same as Last Summer / 38% / 43%
Don't Know / 1% / 1%

* The question in the Jul. ’03 survey was “Will you be spending less money on consumer items, more money, or the same amount of money on consumer items this summer as you did last summer?”

More Spending This Summer than Last. In another positive sign, 40% of respondents say they will be spending more this summer than last, while only 21% say they will be spending less. This is considerably improved from a year ago, when 30% said they would be spending more money on consumer items and 26% less.

(B) Consumer Items and Services

(2A) Question Asked: Which of the following consumer items will you be spending more money on this summer (including the "Back to School" season) than last summer? (Check All That Apply)

Household Repairs/Improvements / 41%
Travel/Vacation / 36%
Consumer Electronics / 30%
Durable Goods for the Home / 21%
Restaurants/Everyday Entertainment / 18%
Children's Services (e.g. camp, education, lessons, other activities) / 18%
Other Services (e.g. adult education, health and fitness activities) / 12%
Automobile Purchase / 9%
Other / 3%

(2B) Question Asked: And which of the following consumer items will you be spending less money on this summer (including the "Back to School" season) than last summer? (Check All That Apply)

Automobile Purchase / 29%
Consumer Electronics / 27%
Travel/Vacation / 26%
Restaurants/Everyday Entertainment / 24%
Durable Goods for the Home / 23%
Household Repairs/Improvements / 15%
Other Services (e.g. adult education, health and fitness activities) / 11%
Children's Services (e.g. camp, education, lessons, other activities) / 10%
Other / 0%

Net Difference Score – August 2004

Spending More Money This Summer / Spending Less Money This Summer / Net
Difference
Score
Household Repairs/Improvements / 41% / 15% / +26
Travel/Vacation / 36% / 26% / +10
Children's Services (e.g. camp, education, lessons, other activities) / 18% / 10% / +8
Consumer Electronics / 30% / 27% / +3
Other Services (e.g. adult education, health and fitness activities) / 12% / 11% / +1
Durable Goods for the Home / 21% / 23% / -2
Restaurants/Everyday Entertainment / 18% / 24% / -6
Automobile Purchase / 9% / 29% / -20

Household Repairs/Improvements Tops the List of Consumer Spending Items. Forty-one percent (41%) of respondents say they will be spending more money on Household Repairs/Improvements this summer than last, while only 15% say they will be spending less (Net Difference Score = +26) – making Household Repairs/Improvements the top Consumer spending item in this survey by a wide margin. Travel/Vacation (Net Difference Score = +10) comes in second with regards to consumer spending this summer, ahead of Children’s Services (Net Difference Score = +8).

Auto Purchasing Declines. Only 9% of respondents report they will be spending more on Automobile Purchases this summer, while 29% say they will be spending less (Net Difference Score = -20) – making Automobile Purchases the weakest spending category in the survey.

Consumer Electronics Spending Surprisingly Tepid. While 30% of respondents do report they will spend more on Consumer Electronics this summer than last, a surprisingly high 27% report they will spend less (Net Difference Score = +3). This is the weakest showing for Consumer Electronics spending in the past 18 months.

(3) Question Asked: Which of the following items do you plan on buying for yourself or for someone else during the next 90 days including the "Back to School" season? (Check All That Apply)

Current Survey
Aug ‘04
Digital Cameras / 15%
Cell Phones Without a Camera / 12%
Laptop Computers / 12%
Desktop Computers / 10%
Cell Phones With a Camera / 7%
LCD Flat Panel Televisions / 6%
Regular DVD Players / 5%
MP3/Digital Music Players/Other Music Players / 5%
IPOD / 4%
Satellite Radio / 3%
DVD-R Players/Recorders for Home Computer / 3%
Plasma Flat Panel Televisions / 3%
Satellite TV / 3%
"Hybrid" PDAs (Multi-Communication) / 3%
GPS (Global Positioning System) Devices / 3%
DVD-R Players/Recorders for Living Room / 3%
Portable DVD Players / 2%
DLP-Based Televisions / 2%
PDAs / 2%
Video Game Consoles / 1%
Cable Box with PVRs/DVRs / 1%
Satellite Box with PVR/DVR / 1%
Stand Alone PVR/DVR / 1%
Don't Know / 19%

Consumer Electronics Items – Winners and Losers. Cell Phones (With and Without a Camera) (19%) and Digital Cameras (15%) were the items respondents report they are most likely to buy for themselves or for someone else during the next 90 days, followed by Laptops (12%) and Desktop Computers (10%). On the down side, PVR/DVRs (Stand Alone, Satellite, and Cable) performed the worst of any of the categories surveyed.

Momentum. Since the time horizon for the current survey (90 days) is only half that of our previous survey (180 days), it is impossible to make a direct comparison with previous results. However, the following chart enables you to see the relative percentage for each category of the current survey vs. the previous survey. In this analysis, those categories in which the current survey results are equal to or greater than 50% of the previous survey results reflect the relatively strongest growth curves.

Current Survey
Aug ‘04 / Previous Survey
May ‘04* / Current Survey Relative to Previous Survey*
Cell Phones (With or Without Camera) / 19% / 24% / 79%
"Hybrid" PDAs (Multi-Communication) / 3% / 5% / 60%
Desktop Computers / 10% / 17% / 59%
Laptop Computers / 12% / 23% / 52%
Digital Cameras / 15% / 30% / 50%
Plasma Flat Panel Televisions / 3% / 6% / 50%
Video Game Consoles / 1% / 2% / 50%
MP3/Digital Music Players/Other Music Players / 5% / 11% / 45%
Satellite Radio / 3% / 7% / 43%
GPS (Global Positioning System) Devices / 3% / 7% / 43%
Regular DVD Players / 5% / 12% / 42%
LCD Flat Panel Televisions / 6% / 15% / 40%
DLP-Based Televisions / 2% / 5% / 40%
Satellite TV / 3% / 8% / 38%
DVD-R Players/Recorders for Home Computer / 3% / 10% / 30%
DVD-R Players/Recorders for Living Room / 3% / 10% / 30%
PDAs / 2% / 7% / 29%
Portable DVD Players / 2% / NA / NA
IPOD / 4% / NA / NA
Cable Box with PVRs/DVRs / 1% / NA / NA
Satellite Box with PVR/DVR / 1% / NA / NA
Stand Alone PVR/DVR / 1% / NA / NA

*Please note that in the current survey the time horizon was 90 days, whereas in the May 2004 survey it was 180 days.