While economic data tells one story, other currents may flow beneath the surface. For example, the day after Lehman Brothers collapsed, one of the fanciest department stores in Manhattan enjoyed its best-ever day of sales. “The bankers’ wives rushed out to shop before their husbands cancelled the credit cards,” says a senior executive from that store.
Public data for American retail sales in November painted a bleak picture. Overall, same-store sales fell by 2.7% from the previous year. Many performed much worse, with chains like Target, JC Penney, Macy’s and Gap and Abercrombie & Fitch down deep in double digits. Only Wal-Mart, a discount store, was busy eating lunch, with a 3.4% increase, as shoppers nimbly adjusted downmarket, foregoing brand names for bargain prices.
The American shopping season traditionally kicks off the day after Thanksgiving, known misleadingly as Black Friday. No, is it not a day of atonement, but the traditional start of the season when retailers go into the black. Stores open before dawn, with the most dedicated shoppers lining up or sleeping on the pavement outside. This year, in a tragic incident, a Wal-Mart temporary security guard was trampled to death by a crowd that charged the doors before 5am.
This year, the National Retail Federation estimated 73.6m people shopped in stores and online on Black Friday, followed by a further 56.9m on the Saturday. The Federation predicts overall holiday sales will exceed last year’s by 2.2%, which would not be shabby. Ubiquitous promotions initially boosted traffic, which has since petered out.
With Thanksgiving late this year, the season has also been lopped by five days, which will be sorely missed. But there are hints that, although shopping may have become taboo, quiet consumption is going on behind the scenes. Cyber Monday follows Black Friday, when the online purchasing crowd gets real. That day, spending jumped 15% to $846m (GBP 572m), the second heaviest online buying spree ever. Someone is secretly splashing out.
Do not give socks:
Flat panel televisions have been the must-have item, according to Ed Farrell, a director at Consumer Reports National Research Center, a non-profit group that conducts research to protect consumers. Nearly a quarter of respondents pooled by his organisation said they planned to buy one, 9% up from last year. Note that 40% already had one set in their home…so some families are treating themselves. True, smaller screens ($500-$1100) are rising in popularity.
Consumer Reports Holiday Shopping Poll discovered that 76% of Americans planned to cut back on holiday spending, with 59% giving fewer gifts, especially to “secondary” recipients, like more distant family and friends, or tips to service providers (there, that was honest).
That same poll found that clothing promises to be the hottest category (69%), although the least welcome. Men (47%) complained that they were disappointed to find clothes under the tree, above all the socks they detest. Both men and women especially hanker after electronics, defying sexist stereotyping. Farrell reassures me that pets will not suffer, in fact more givers plan to cut back on their spouses than on their dogs and cats. In another touch of honesty, nearly a third of those surveyed admitted to re-gifting, which is up 25% from 2006. Men are less candid about re-gifting, or perhaps they are just less devious.
Carla Morelli, who runs a bill-paying service near Washington DC for busy, well-heeled types, sees exactly where the money is flowing. “My clients aren’t slowing down on entertainment,” she reports. “They still serve the same quality wines and go to the same restaurants.”
In the nation’s capital, where government is the big employer, jobs are less at risk than on Wall Street. Morelli says her clients’ attitude manly depends on their longer-term assessment of the economic decline. Those who are looking beyond eight months, are waiting out the crunch with “thoughtful restraint”, rather than “knee-jerk” cutbacks.
Love, hate and the dollar
“Everyone has an individual relationship with money,” says Lauren Hackett at Consumer Reports. “It comes down to what you have versus what you want versus what you need.” In her office, some co-workers bring a sandwich to work every day, but think nothing of spending $500 on the perfect handbag.
The country is divided, between those who are out of work and those who are anxious about uncertainty, pelted with media reports of dire economic conditions. The litany of hardship stories makes it seem especially crass to spend lavishly on frivolous luxuries, and conspicuous consumption is no longer chic. Rich Spitzer publisher of TrendPointers, focuses on shifting sentiment indicators, as a guide to consumer behaviour. He says that the public is demonstrating a lack of embarrassment about not spending. “It helps that people can attribute blame to external forces, and questionable dealings, so they themselves don’t feel at fault.”
People will not give up what they perceive as important. Researchers from Canaccord Adams, which puts out a monthly equity report on health, wellness and lifestyle trends, observes that sales trends remained “robust” in the vitamin, supplement and natural organic channels, at least though October. Only Whole Foods, the premium mass market supplier has been struggling.
Beauty, too, remains a perennial holdout. Lipstick sales typically defy recessions, as a token of small comfort. On a more expensive scale, some cosmetic expenses appear to buck the trend. Vic Lazzaro runs BridgeHealth International from Denver, a medical tourism firm that organises for patients to have surgeries performed in cheaper locations, such as Costa Rica.
To his surprise he has seen no slackening in demand for cosmetic or elective dental procedures. Although prices are modest by American standards, they still command non-trivial tags: a facelift will run you $5750, liposuction $3500 and a tummy tuck $5350, and that’s before recuperation and travel expenses. Lazarro explains, “people are still willing to invest in themselves, to look younger and more vibrant in the job market or just to feel good in difficult times.” Besides, no one need know if you splurge on getting tucked in Costa Rica.