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A Nemo blog. Dealing with uncommon cents.

A few years ago, a nonprofit group called the Center for a New American Dream conducted a poll in which 81% of respondents felt that Americans were too focused on shopping and spending, while 88% agreed that our nation was too materialistic. And, this year, consumer spending declined for the first time since 1991.

In his Consumed article for the Times Magazine, Rob Walker discusses how consumer spending is finally slowing down. The recent decline has many people assuming that there is a direct relation to a new focus on personal values. Some observers feel that since people are buying less, they must be searching for a deeper meaning in life beyond the spoils of material goods.

Instead, Walker argues that it’s way too convenient to conclude that consumers have suddenly morphed into thoughtful, frugal shoppers with redefined values. He conveniently points out that at the same time spending shrunk, access to easy credit also evaporated. Home equity loans and the barrage of low interest credit cards have dramatically decreased; could this be partially responsible for the decline?

While it’s true that more consumers are bargain hunting, they’re still buying stuff. And, if they seem to be spending less, it’s probably related to fear over the volatile market, not because they’ve shifted into a more frugal mindset.

Instead of frequenting the usual high-end haunts of Saks and Bergdorf’s, shoppers are now hitting invitation-only events, private showrooms and even soirees in their friend’s houses to get their shopping fixes. People don’t want to be spotted in public buying mounds of luxury goods during these harsh economic times; they’d much prefer to be stealth about it.

Besides just shopping without the glaring eyes and guilt, women are also loving the influx of invitation-only events because they’re getting a chance to gossip and catch up with friends while spending money. A trick of many of these multi-day events is to donate a small percentage of proceeds to a charity organization, which further encourages spending without the guilt.

Even more discreet shoppers have turned their attention to the web, scouring Ebay and other high-end sites for discounted designer deals. Even with the gloomy economic outlook, there’s no doubt that major shopping is still taking place. It’s just that this time around, the goal is to not be seen or heard.

Photo courtesy of The NY Times

According to the NY Times, even luxury goods are not exempt from the faltering economy. High-end Fifth Avenue department stores including Bergdorf Goodman are luring in shoppers with enticingly deep discounts. Customers are now digging though designer handbags on tables with prices slashed upwards of 40%. The New Yorker’s Patricia Marx has even remarked that “Sixty percent off is the new black.”

Surprisingly, established luxury retailer Saks dug even deeper than its competitors, dropping the prices of much of its fall fashion up to 70 percent. Customers were so shocked that they assumed that many of the price tags were misprints.

A just released MasterCard Advisors report lists luxury goods sales as being of nearly 25% off this year when compared with last. The era revolving around the endless drive towards high-end consumption appears to be drying up fast.

The NY Times raises the question that everyone is pondering: With such deep discounts on luxury goods, consumers are left wondering what the astronomical mark-ups were in the past. And, now that they’ve witnessed these bargain basement prices, will they be willing to pay full price ever again?

Credit card offers, which were once a dime a dozen are quickly evaporating. Due in part to the nation’s financial crisis, big lenders including Citigroup, Bank of America, American Express and Target are scaling up their requirements for applicants. In the meantime, current cardholders are being hit with shrinking credit scores as their limits are reduced, sometimes without notice.

Even cardholders in good standing may still may be afflicted. Many American Express cardholders have noticed a jump of up to 3% on their interest rates.

Card issuers are aware that their pool of eligible customers is rapidly evaporating. According to research analyst Lisa Hronek, “People are completely maxed out with mortgages, home equity lines and credit card debt.” With the lure of quick credit gone, consumers are unable to keep transferring balances from one low interest card to the next.

There is one upside to the credit crunch, though. The overwhelming amount of junk mail for credit card offers should begin slowing to just a trickle.

Riding the wave of consumer interest and awareness of healthy and organic foods Whole Foods, the up-market grocery chain, rapidly spread into middle and upper class neighborhoods around the country. Consumers with plenty of discretionary income to spend flocked to its stores and it soon earned itself the sobriquet Whole Paycheck, a phrase the companies executives would like to now remove from common parlance.

With the economy in the dumpster people are now reigning in on discretionary spending and to make matters worse for Whole Foods, consumer interest in organic food appears to be leveling off after several years of double-digit growth, according to the Hartman Group, a market research firm specializing in health and wellness. [Found on NYT]

With Whole Foods stock off 70% since 2006 is this a company that has stumbled like another former leader in the discretionary spending market, Starbucks? The cost of fuel and the high rise in food prices are definitely hurting the consumers pocketbook now they are turning their backs on high-priced grocery chains like Whole Foods.

This is not to say that consumers who are heavily committed to organic foods and are happy to pay a premium for them will stop buying organic. More likely it’s those customers who were attracted to the “idea” of organic, pulled in by savvy marketing from companies who never used the term organic to describe their produce, who will steer away from high-priced organic foods and go back to regular produce at cheaper grocery chains. As everyone jumped on the organic band wagon sales soared but now it is consumers economic woes that are dictating where their groceries monies will be spent. The trend appears to be that meat, produce and dairy that is organic continues to sell but products such as breakfast bars or cereals and other similar food categories labeled organic are now less important to shoppers.

Whole Foods problems do appear to mirror those of Starbucks‘ – they were both once Wall Street darlings whose stocks soared for years, but with aggressive strategies for expansion by building more stores rapidly both chains were unable to maintain their margins and Wall Street punished them. They also relied heavily on customers paying a premium for what they saw as a premium product and that only works in times of prosperity not in an economic downturn.

There is also the hyper-local aspect of consumer habits these days. Farmers Markets and even cooperative shares in small organic farms are becoming very popular these days. These markets and farms offer consumers access to locally grown organic produce at the right price and also the feelgood aspect of supporting their local communities. Think local, eat local may be a phrase that becomes popular but it won’t help a national chain like Whole Foods. Whole Paycheck may very well haunt them and their shareholders.

Related Post: Starbucks Fires Head of Entertainment Division

A slumping economy has caught much of the apparel industry off guard and faltering under an increasingly volitile wave that can be attributed to the deflation of pricing on mainstream American labels, increased manufacturing costs and savvier consumers who are putting more thought into their purchases.

While the price of gas, utilities and groceries has skyrocketed, discretionary (non-essential) spending has been hit hard. “Fast fashion” retailers have fared okay so far in this lackluster market, but eventually, something has got to give.

Many of the staples in mainstream American apparel (Levi’s jeans, Lacoste polos) have actually decreased in price, even when adjusted for inflation due in part to the trend of moving manufacturing to countries with cheaper labor costs. But with the dollar losing steam, those rates have jumped. “As far as bottom costs go, we’re there. I think we’ve exploited all the countries on earth for people who really want to work for nothing,” said Bud Konheim, the chief executive office of Nicole Miller (NYTimes.com).

In many social circles, it is now hip to focus on individuality with regards to fashion and making thoughtful purchases. Instead of purchasing a gaudy, logo-driven article that is instantly recognizable (and quickly dated), people are leaning towards rare, more unique items. “Everything we pick up today has to pass a test,” said Candace Corlett, the president of WSL Strategic Retail, a consulting group. And, with so many options nowadays, who can blame consumers for taking their time to make a purchase? Unfortunately, the NY Times mentions that this is causing many fashion executives to feel the pressure on their bottom lines. Bud Konheim laments that “We as a business cannot afford to have a customer take a second look and ask, ‘Do I need this?’ That is the kiss of death. We’re finished, because nobody really needs anything we make as a total industry.”

Not everyone is faring badly in the tough American economy. Tom Wallace, President of trend forecasting company Label Networks lists a handful of brands including American Apparel, H&M and Uniqlo that are weathering the storm surprisingly well. This may be because of their ability to deliver consistently on-trend clothing in basic shapes at reasonable prices that are easily mixed in with what consumers already own.

To be fair, the recession isn’t hitting everyone. The International Herald Tribune says that “While American buyers are keeping an uncharacteristically low profile, with a beady eye on the miserable dollar exchange rate, other parts of the world are rejoicing in burgeoning markets and have no thought of recession.”

To cope with the lagging economy, luxury fashion houses are surviving the downturn by pushing accessories including jewelry, shoes and handbags more heavily. While shoppers might pass up high priced trendy clothing, they will still drop money on items they can use regularly.

As the U.S. recession deepens, it will be interesting to see what creative tactics brands will employ to stay relevant when consumers are more concerned with basic needs. With rock bottom prices already the norm in the nation’s collective consciousness, the sinking of many labels will be inevitable.