ChangeWave Research: Consumer Spending and Shopping

ChangeWave Research Report:

Consumer Spending and Shopping Trends

Dip in Consumer Spending Growth Rate

Overview

During the week of August 1-8, 2007 we surveyed Alliance members on their consumer spending and shopping patterns for the next 90 days. A total of 3,665 members participated.

Bottom Line: The current results show a dip in the consumer spending growth rate compared to the relatively strong findings of our previous survey in June. A total of 40% of respondents say they’ll spend more over the next 90 days compared to a year ago – down 3-pts from our previous survey. Another 23% say they’ll spend less – 1-pt worse than previously.

Importantly, the spending growth rate looks slightly better than at the same point last summer (August 2006) when only 38% said they’d be spending more and 23% less.

Not unexpectedly, the biggest decline in spending growth is occurring in households earning Less Than $50,000 per year – where only 33% say they’ll spend more over the next 90 days, a significant drop from 44% previously.

Most Important Reasons for Spending Less. Among those who say they’re spending less than last year, better than one-in-two (55%) say it’s due to the Cost of Living and Inflation. Also ranked as a top reason is Improving Personal Finances (52%).

In one of the surprises of the survey, just 11% of this group say Mortgage/Home Equity Costs is an important reason for why they are spending less. This flies in the face of the accepted wisdom on the Street that the current credit crunch is taking a significant bite out consumer spending.

Slight Increase in Spending on Durable Goods. While there have been few changes of note in consumer spending plans since our previous survey in June, spending on consumer Durable Goods for the Home has registered a notable 4-pt improvement.

Consumer Electronics Spending. The percentage of respondents who say they’ll spend more on Consumer Electronics (24%) is down 2-pts since June, although the percentage spending less (30%) is 1-pt better. We note that consumer electronics spending is down slightly compared to June, but it’s still a net 4-pts better than a year ago in August 2006.

LED Lighting. We also asked respondents several questions about the use of LED lighting for the home. Better than one-in-two (54%) say they’re Very Willing to try LED lights in their home once they become available – up 2-pts from our previous survey in September 2006. Another 38% say they are Somewhat Willing.

Still, price remains the most important factor. If the cost per bulb were $5 or less, two-in-three (65%) say they’d consider replacing all of their household light bulbs with LED lights.

Summary of Key Findings

The ChangeWave Alliance is a group of 10,000 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 3

The Findings 4

(A) Overall Consumer Spending 4

(B) Other Findings 8

ChangeWave Research Methodology 10

About ChangeWave Research 11


I. The Findings

Introduction

During the week of August 1 – 8, 2007 we surveyed Alliance members on their consumer spending and shopping patterns for the next 90 days. A total of 3,665 members participated.

(A) Overall Consumer Spending

(1) Question Asked: What about compared to this time a year ago? Would you say your overall spending over the next 90 days will be more than last year, less than last year, or the same as last year? (n=3,665)

Current Survey Aug ‘07 / Previous
Survey
Jun ‘07 / Previous
Survey
Mar ‘07 / Previous
Survey
Aug ‘06
More Spending Than Last Year / 40% / 43% / 37% / 38%
Less Spending Than Last Year / 23% / 22% / 23% / 23%
Spending Will Remain the Same as Last Year / 36% / 33% / 39% / 38%
Don't Know / 1% / 1% / 1% / 1%

Dip in Spending Growth. The current results show a dip in the consumer spending growth rate compared to the relatively strong findings of our previous survey in June. A total of 40% of respondents say they’ll spend more over the next 90 days compared to a year ago – down 3-pts from our previous survey. Another 23% say they’ll spend less – 1-pt worse than previously.

Importantly, the spending growth rate looks slightly better than at the same point last summer (August 2006) when only 38% said they’d be spending more and 23% less.


Current Survey (Aug 2007) – Breakdown by Income Levels

Total / Less
Than
$50,000 / $50,001-$100,000 / $100,001-
$150,000 / Greater
Than
$150,000
More Spending Than Last Year / 40% / 33% / 37% / 40% / 44%
Less Spending Than Last Year / 23% / 32% / 27% / 21% / 20%
Spending Will Remain the Same as Last Year / 36% / 34% / 35% / 38% / 35%

Previous Survey (Jun 2007) – Breakdown by Income Levels

Total / Less
Than
$50,000 / $50,001-$100,000 / $100,001-
$150,000 / Greater
Than
$150,000
More Spending Than Last Year / 43% / 44% / 40% / 42% / 46%
Less Spending Than Last Year / 22% / 23% / 27% / 23% / 18%
Spending Will Remain the Same as Last Year / 33% / 33% / 32% / 34% / 34%

Not unexpectedly, the biggest decline in spending growth is occurring in households earning Less Than $50,000 per year – where only 33% say they’ll spend more over the next 90 days, a significant drop from 44% previously.

(1A) Question Asked: For those who will be spending less than last year, what are the most important reasons why? (Choose No More Than Three) (n=402)

Reasons for Less Spending (Aug 2007)

Total
Cost of Living/Inflation / 55%
Improving Personal Finances / 52%
Big Ticket Purchases/Expenses / 38%
Mortgage/Home Equity Costs / 11%
Other / 9%

Most Important Reasons for Spending Less. Among those who say they’re spending less than last year, better than one-in-two (55%) say it is due to the Cost of Living and Inflation. Also ranked as a top reason is Improving Personal Finances (52%).

In one of the surprises of the survey, just 11% of this group say Mortgage/Home Equity Costs is an important reason for why they are spending less. This flies in the face of the accepted wisdom on the Street that the current credit crunch is taking a significant bite out of consumer spending.


A Further Breakdown By Category

Cost of Living/Inflation (55%)
Reduced Income / 24%
Inflation/Increase in Cost of Living / 24%
Higher Energy Costs / 22%
Medical Expenses / 9%
Improving Personal Finances (52%)
Reducing Debt / 30%
Saving More Money / 20%
Investing More Money / 16%
Big Ticket Purchases/Expenses (38%)
Recent Purchase of Big Ticket Items / 14%
Home Improvements / 14%
Education Expenses / 10%
Purchased New Home / 5%
Mortgage/Home Equity Costs (11%)
Mortgage Payment Increased / 8%
Home Equity Loan Payment Increased / 4%
Other / 9%

(2A) Question Asked: Which of the following consumer items will you be spending more money on over the next 90 days than last year? (Check All That Apply) (n=3,665)

Current Survey Aug ‘07 / Previous Survey Jun ‘07 / Previous Survey
May ‘07 / Previous Survey Mar ‘07 / Previous
Survey
Aug ‘06
Household Repairs/Improvements / 39% / 42% / 47% / 44% / 40%
Travel/Vacation / 37% / 46% / 45% / 39% / 35%
Consumer Electronics / 24% / 26% / 28% / 28% / 23%
Durable Goods for the Home / 17% / 16% / 18% / 19% / 18%
Restaurants/Everyday Entertainment / 16% / 20% / 18% / 18% / 16%
Children's Services (e.g. camp, education, lessons, other activities) / 14% / 15% / 15% / 13% / 18%
Automobile Purchase / 9% / 10% / 10% / 9% / 9%
Other Services (e.g. adult education, health and fitness activities) / 8% / 7% / 9% / 9% / 10%


(2B) Question Asked: And which of the following consumer items will you be spending less money on over the next 90 days than last year? (Check All That Apply) (n=3,665)

Current Survey Aug ‘07 / Previous Survey Jun ‘07 / Previous Survey
May ‘07 / Previous Survey Mar ‘07 / Previous
Survey
Aug ‘06
Consumer Electronics / 30% / 31% / 31% / 32% / 33%
Travel/Vacation / 25% / 22% / 20% / 22% / 27%
Restaurants/Everyday Entertainment / 24% / 22% / 21% / 22% / 28%
Durable Goods for the Home / 23% / 26% / 24% / 24% / 25%
Automobile Purchase / 23% / 25% / 26% / 25% / 24%
Household Repairs/Improvements / 15% / 17% / 15% / 16% / 18%
Other Services (e.g. adult education, health and fitness activities) / 10% / 12% / 12% / 11% / 11%
Children's Services (e.g. camp, education, lessons, other activities) / 9% / 11% / 11% / 10% / 9%

Change in Net Difference Score – Current Survey (August 2007) vs. Previous Survey (June 2007)

Current
Survey
Net
Difference
Score
(Aug ‘07) / Previous
Survey
Net
Difference
Score
(Jun ‘07) / Change in
Net
Difference
Score
Durable Goods for the Home / -6 / -10 / +4
Automobile Purchase / -14 / -15 / +1
Consumer Electronics / -6 / -5 / -1
Household Repairs/Improvements / +24 / +25 / -1
Restaurants/Everyday Entertainment / -8 / -2 / -6
Travel/Vacation / +12 / +24 / -12

Slight Increase in Spending on Durable Goods. While there have been few changes of note in consumer spending plans since our previous survey in June, spending on consumer Durable Goods for the Home has registered a notable 4-pt improvement.

Consumer Electronics Spending. The percentage of respondents who say they’ll spend more on Consumer Electronics (24%) is down 2-pts since June, although the percentage spending less (30%) is 1-pt better. We note that consumer electronics spending is down slightly compared to June, but it’s still a net 4-pts better than a year ago in August 2006.

Seasonal Slowdown in Travel/Vacation and Restaurant Spending. While the spending scores are lower for Travel/Vacation and Restaurants/Everyday Entertainment going forward, that is due to normal seasonal variations. If you compare these findings with our August 2006 survey results, spending is actually up slightly for each of these categories (Change in Net Difference Score =+4 for each).

(B) Other Findings

Energy efficiency is on the minds of many of us these days. We asked respondents several questions about use of fluorescent and LED lighting for the home.

(3) Question Asked: Currently, what percentage of the total lights in your home would you say are fluorescent lights? (n=1,954)

(3A) Question Asked: And looking ahead, what percentage of the total lights in your home do you think will be fluorescent lights one year from now? (n=1,954)

Florescent Lighting in Home
Percentage
of Total Lights
in Home
Currently / Percentage of
Total Lights
in Home
One Year
From Now
None / 10% / 7%
1-10% / 31% / 17%
11-20% / 17% / 15%
21-30% / 9% / 10%
31-40% / 6% / 8%
41-50% / 6% / 7%
51-60% / 4% / 6%
61-70% / 4% / 4%
71-80% / 4% / 7%
81-90% / 4% / 6%
91-100% / 5% / 9%
Don't Know / 1% / 5%
No Answer / 1% / 0%

Consensus Estimates of Florescent Lights in the Home

Percentage of Total Lights Currently: 27.6%

Percentage of Total Lights One Year From Now: 38.3%

Home Florescent Lighting. In a consensus estimate, respondents estimate 28% of the total lights in their home are currently fluorescent lights. Looking ahead, their consensus estimate is 38% one year from now.

(4) Question Asked: There has been a lot written about the efficiency of LED lighting. LED lights can last 30,000 hours and are extremely energy efficient, but the cost is much greater than traditional incandescent light bulbs and they are not yet bright enough to be used for general household lighting. When they become available for general household lighting, how willing will you be to try new LED lights for your home? (n=1,954)

Current Survey Aug ‘07 / Previous
Survey
Sep ‘06 / Previous
Survey
Mar ‘06
Very Willing / 54% / 52% / 47%
Somewhat Willing / 38% / 38% / 40%
Unwilling / 3% / 3% / 4%
Don't Know / 5% / 7% / 9%
No Answer / 0% / 0% / 0%

(4A) Question Asked: At what price point would you consider replacing all of your household light bulbs with LED lights? (n=1,954)

Current
Survey
Aug ‘07 / Previous
Survey
Sep ‘06 / Previous
Survey
Mar ‘06
Less than $1 per bulb / 11% / 11% / 11%
Between $1 and $5 per bulb / 54% / 50% / 55%
Between $5 and $10 per bulb / 20% / 19% / 18%
Between $10 and $20 per bulb / 3% / 3% / 3%
More than $20 per bulb / 1% / 0% / 0%
Am not willing to replace with LED light bulbs / 1% / 2% / 2%
Don't Know / 10% / 13% / 10%
Other / 1% / 1% / 1%
No Answer / 0% / 1% / 0%

LED Lighting. Better than one-in-two (54%) say they’re Very Willing to try LED lights in their home once they become available – up 2-pts from our previous survey in September 2006. Another 38% say they are Somewhat Willing.

Still, price remains the most important factor. If the cost was $5 or less, two-in-three (65%) say they would consider replacing all of their household light bulbs with LED lights.

II. ChangeWave Research Methodology

This report presents the findings of a recent ChangeWave survey on consumer spending patterns. The survey was conducted between August 1 – 8, 2007. A total of 3,665 Alliance members participated in the survey.