Bay Area Consumers Poised to Make Merry; Deloitte & Touche Consumer/Retailer Holiday Mood Survey Indicates a Holly Jolly Spending Season.

SAN FRANCISCO--(BUSINESS WIRE)--Nov. 19, 1998--The tremors felt on Wall Street and global economic gyrations haven't rattled Bay Area consumers. According to the 13th annual Consumer/Retailer "Mood Survey: Retail Holiday Outlook" - conducted by Deloitte & Touche in conjunction with the National Retail Federation (NRF) - money spent for holiday gifts in the Bay Area will be among the highest in the nation.

The survey found that Bay Area consumers expect to spend $1042 on holiday presents this year, several hundred more than their neighbors to the south - Los Angeles residents are expected to spend $735. Only consumers in the northeast region will be outspending the Bay area at $1128. The average for the nation is $814.

What's behind the spending?

There are several possibilities that may be contributing to the holiday goodwill. The survey found that that 89% of Bay Area residents feel secure in their jobs through 1999, and their outlook on the economy is generally positive - 62% felt the economy would either improve or remain the same.

"Although there has been global upheaval recently, the average domestic consumer is more concerned about issues closer to home," said Rick Fiedelman, partner in charge of Deloitte & Touche's Consumer Businesses practice. "And the domestic consumer is seeing the Fed taking action by cutting interest rates, the unemployment rate remaining under 5%, and Wall Street regaining much of the ground it lost. These factors help support, in our minds, the survey results," said Fiedelman.

What will consumers buy?

Consistent with last year, apparel, toys, and CDs/tapes/videos are on Bay Area residents' "must-buy" list. The following graph details their buying intentions: (Graphs are available in a Smart News Release(TM) on Business Wire's Home Page at www.businesswire.com)

A trend that is continuing from last year is the non-traditional gift. In 1997, 37% of those surveyed were giving gifts that were non-traditional in nature, such as restaurant gift certificates, spa gift certificates, or vouchers for lessons or services. That number is holding steady for 1998.

Where will they shop?

Traditional department stores, such as Macy's or Nordstrom, are the most popular with Bay Area consumers. Discount department stores, such as Wal-Mart or K-Mart, follow right behind in popularity. This is a slight change from last year, when the positions were reversed. In fact, Bay Area consumers are bucking a national trend of buying at discount departments, as shown in the chart below. (Graphs are available in a Smart News Release(TM) on Business Wire's Home Page at www.businesswire.com)

Perhaps one explanation for the reversal can be tied to the expectation that Bay Area consumers will be spending more than their national counterparts, but not necessarily spending more for a greater amount of people. The average number of presents being bought by Bay Area shoppers is 19, well below the national average of 25. Also, 69% of those surveyed will be buying for the same number of, or fewer, people this year, possibly freeing up more money to be spent at traditional, versus discount, department stores.

What do consumers look for in a store?

The survey results suggest that, while Bay Area consumers will be outspending their national counterparts, they will want choice and value for their money. The top five factors that are important to them when deciding where to shop are:

1. Large selections of merchandise

2. Everyday low prices

3. Better quality merchandise

4. Price promotions/sales

5. Ease of checkout

National retailer responses, however, show that retailers have a somewhat different opinion of what brings in customers. Their top five factors are:

1. Customer service levels

2. Better quality merchandise

3. Large selections of merchandise

4. Store atmosphere

5. Price promotions/sales

Who needs bricks and mortar? Shopping on the Internet

Other survey results show that there is a higher percentage of Internet users in the Bay Area, not surprising in the land of silicon chips and high-tech startups.

-- Bay Area: 51%

-- Los Angeles: 41%

-- Nation: 30%

Not only are Bay Area consumers browsing on the Internet, they're purchasing as well. Of those using the Internet, 74% made purchases, and the average total of expenditures for the past 12 months was $931.

"More and more consumers are able to purchase items over the Internet," said Steve Riordan, a partner in Deloitte & Touche's Management Solutions and Services group and head of that group's Center of Excellence. "Even with new user-friendly Internet access features, personal computers continue to decline in retail pricing. As a result, access to the Internet is leaping beyond the domain of the intellectual elite and into the hands of the mass market," said Riordan.

And now, a word from the retailer

In a departure from last year, retailers are pessimistic about the economy. In 1997, 70% of retailers predicted the economy would improve. This year, 78% of those polled predict the economy will worsen. In spite of this gloomy outlook, retailers predict an 11% increase in total sales this holiday season.

According to Jack Russi, a partner in Deloitte & Touche's Consumer Business practice, "Retailers as a whole tend to be overly optimistic when it comes to predicting holiday sales. Even in the worst of times, I can't think of a year when they didn't predict healthy increases in sales. Despite some apparent disagreements between consumers and retailers on the direction of the economy, I believe retailers can expect comparable store sales to move into the 4-6% range on average. Of course the leading retailers, especially those with strong brands, will do better."

About the Survey

The Mood Survey, which is designed to measure consumer and retailer expectations about the holidays, is conducted by Deloitte & Touche in the fall of every year. In October 1998, retailers were faxed a questionnaire that was completed by 50 respondents who represented a broad sampling of executives from large and small retailers in general merchandise, apparel, home furnishings and other retail categories.

The Deloitte & Touche poll of 1,000 consumers, comprising a representative sample of the population, was conducted by an independent research company via a mail survey that was sent out in late September, with the final returns received by October 26. The consumer poll has a margin of error of plus or minus 3 percent.

About Deloitte & Touche

The Global Consumer Business Practice of Deloitte & Touche is the profession's largest practice dedicated exclusively to serving the needs of retailers and consumer products companies.

Deloitte & Touche, one of the nation's leading professional services firms, provides accounting and auditing, tax, and management consulting services through 23,000 people in more than 100 U.S. cities. Deloitte & Touche is part of Deloitte & Touche Tohmatsu, a global leader in professional services with over 72,000 people in offices in more than 125 countries. Deloitte & Touche refers to Deloitte & Touche LLP, Deloitte Consulting, and related entities.

About the NRF

The National Retail Federation is the world's largest retail trade association with membership that includes the leading department, specialty, discount, mass merchandise and independent stores, as well as 32 national and 50 state associations. NRF members represent an industry that encompasses over 1.4 million U.S. retail establishments, employs more than 20 million people representing 1 in every 5 workers, and had sales of nearly $2.6 trillion in 1997. NRF's members operate stores in more than 50 nations.

About the Survey

An executive summary of this survey can be obtained by calling Melissa Takade, Marketing Services, Deloitte & Touche, at 415-247-4532.