Numbers DO Lie. Why Americans Are Being More Careful With Their Money.
Earlier this year, Apple made some surprising news. The tech giant whose consistently steady profits have made it one of the most successful stocks for investors shocked much of the business world when it reported a slump in revenue due to a decline in the sale of iPhones. A company’s finance reporting is usually news relegated to the business section of news outlets, but because of the sheer ubiquity of Apple gadgets around the world, the fact the company was experiencing such an anomaly (the first such occurrence in 13 years) made front-page appearances all over the media. A similar trend is taking place in the world of fashion. Economists and others are confounded as to why big-name department stores like Macy’s, Neiman Marcus, and Sak’s Fifth Avenue are taking serious hits while Americans are reportedly enjoying a better economic landscape than they’ve had in many years.
In a sprawling and expository report, the Business of Fashion’s Lauren Sherman takes a deep dive into the quagmire affecting the fashion-retail market in the United States. “Why Americans Aren’t Shopping” seeks to explore the juxtaposition of an economy where “[u]nemployment is down, gas is cheap and interest rates remain low,” with American retail that is still suffering. With unemployment at the low rate of 5%, a $.50 decrease in the average price of gas from a year ago, a .4% increase in disposable income, and an upswing in the housing market, all signs point to a healthy, robust retail market but upon closer examination, something surprising is happening. According to Sherman, “store sales at Saks Fifth Avenue were down 1.2 percent in the quarter ending January 31, 2016. For the Neiman Marcus Group, comparable store sales were down 2.4 percent during that same period. Gap Inc.’s comps were down 5 percent year-over-year for the quarter ending April 2016. And Macy’s weak first-quarter 2016 report — which included a 5.6 percent drop in comps — sent ripples through the stock market, as the S&P 500 dropped for a third week in a row, with apparel stocks falling to a three-month low.”
So what gives? In a nutshell, this quandary can be summed up with the following: “retail as we know it is forever altered.” And while the quasi-apocalyptic language may seem extreme, it very well could be the truth. Factors reportedly at play are everything from the weather (“[t]he majority of the US experienced an unseasonably warm winter and an unseasonably cool spring, meaning many retailers have already begun marking down their warm-weather product long before the peak of swimsuit season”), election politics (“[w]hile retail is traditionally soft in an election year, the presence of a polarizing candidate like Donald Trump has intensified the effect”), the Great Recession (“a lot of people have post-traumatic stress disorder when it comes to spending”), consumer expectations (“thanks to season-end fire sales, near-continual markdowns and an increase in off-price retail channels, consumers expect virtually everything to eventually go on sale”), and consumer behavior (“[a] certain set of consumers — perhaps those with more expendable income — are wedded to buying fewer items of higher quality, turned off by conspicuous consumption”).
While all of these are important and real influences on the strange dichotomy of a sagging retail market in a time of economic health, there is one major player not named. In the words of Sherman, “[t]he breakdown of the economy happened to coincide with the rise of digital commerce, which has not only allowed consumers to easily comparison shop, but also encourages them to be more brand agnostic.” So, while we may have more discretionary income in our wallets, the overwhelming ease with which we can source the web for bargains and better deals makes us pickier, not more spendthrift. The seeming death of brand loyalty is also contribution to a shifting market. For example, online advertising and paid-for search-engine results translate into consumers’ ability to see and buy likeminded brands and products so that brand-name dress available at Macy’s has to compete with the more affordable version on sites like Modcloth.
One area that seems to be unaffected by this trend is streetwear, particularly with brands like Supreme. While brands like Sean John could potentially suffer greatly if shoppers aren’t hitting department stores, other brands like Stussy, Bathing Ape, Billionaire Boys Club, Bianca Chandon (as well as partnerships like Nas’ recent foray into Ghostbusters-inspired fashion and the seemingly endless success of footwear lines) seem to be protected from these declines. Is this a testament to the loyalty of Hip-Hop consumers, or an example of life imitating art in a genre that is often driven by unabashed materialism?