African-Americans and Hispanics were instrumental in driving retail sales during the 2003 holiday season, according to the 2003 National Shopping Behavior Study by Meridian Inc. In announcing the results of the study, Meridian noted that the retail industry has experienced dramatic changes during the last decade, and the holiday 2003 period was no exception. It cited department stores as the industry channel experiencing the most dramatic change.
A strategic marketing communications agency based in Troy, Mich., Meridian has conducted the shopping behavior study annually for the past four years. The current study shows that holiday 2003 sales were driven by four specific groups of consumers: adults age 18-34, males, African-Americans and Hispanics. It also shows that 11 percent of Caucasians, 15 percent of Hispanics and 18 percent of African-Americans reported spending the most at a department store. African-American and Hispanic consumers now account for 25 percent to 30 percent of department store sales, data from the study show.
The consumer groups supporting department stores are changing in more ways than ethnic makeup, Meridian says. In the four-year history of the study, for example, the percentage of consumers naming department stores as the place they spent the most has declined to 11 percent from 15 percent. The most affluent consumers are the least satisfied. They continue to spend less in department stores because they can’t find what they want, the report says. Instead, they are moving to mid-line retailers like Kohl’s and J.C. Penney’s for their basic apparel and home furnishings, and to catalogs and the Internet to find the items they want. Price is becoming the primary reason customers shop at department stores. Price has increased as the major driver of patronage to 38 percent this year from 23 percent in 2000.
The significant changes in the shopping behavior of African-American and Hispanic consumer groups and their purchasing motivations will require department store management to make meaningful changes to their assortments and strategies to effectively accommodate their new customers, Meridian says. “Based upon our experience with other retailers, those changes will need to include size scales, product fit, color palettes and a more ‘purchase for self’ assortment during the holiday season,” the firm says. “Department store management’s other challenge will be how to profitably grow business as a price-driven retailer. The high-cost model of the past is not a solid and logical foundation for a retailer who has adopted a highly promotional, price-driven advertising strategy,” it says.
Other findings from the study include:
• Having what the customer wants continues to grow as the major driver for attracting or losing customers. Selection was named as the major reason consumers switch stores. Compared to price, at 17 percent, selection has increased to 43 percent in 2003 from 35 percent in 2000.
• Spending on gifts varies by ethnic group. Caucasians report spending 72 percent of their holiday budget on gifts, while African-American and Hispanic consumers report spending 62 percent and 52 percent, respectively.
• Looking at the population in total, consumers with incomes under $50,000 are moving share of wallet from mass merchants to mid-line stores like Penney’s and Kohl’s; consumers with incomes of from $50,000 to $75,000 are moving from department stores to mid-line and specialty stores; and consumers with incomes of more than $75,000 are moving to catalogs, Internet and specialty stores.