A report in the Wall Street Journal today focuses on how even the affluent are reining in their spending, but what I found most intriguing was that the well-cultivated American habit of shopping as self validation appears to be undergoing a sea change.
From the Wall Street Journal:
The twin currents of an economic downturn and rising concern about the environment are merging in a shift in consumer psychology. After a decade of conspicuous consumption, many middle- and upper-income Americans are no longer comfortable showing off $300 Gucci sunglasses and $8,000 Hermes Birkin bags. They are developing a distaste for extravagance that promises to affect spending on everything from cars and travel to electronics, fashion and household goods — and to last at least as long as the recession.
“Our retail and manufacturing clients are seeing almost an aversion to consumption,” says Todd Lavieri, chief executive of Archstone Consulting, which tracks retail spending patterns. “In previous downturns [such as in 1991 and 2001], we have often seen shopping as therapy.” Now, with credit conditions so tight, Mr. Lavieri says, “people aren’t shopping to feel better. They actually are not shopping to feel better.”…..
Over the past year, some affluent Americans have simply “given up the fight to keep up with the Joneses,” says Pamela Danziger, president of Unity Marketing, a research firm in Stevens, Pa., while others have decided that “spending money on luxury is a poor use of resources in a climate of high gas prices and rising carbon footprint.”
Ms. Danziger is already seeing a significant change in behavior. In a Unity Marketing survey of 1,200 affluent consumers in early October, more than half of the respondents, whose average annual household income was about $210,000, said they had shopped less frequently in the past year and were cutting spending by shopping at outlet stores or at sales.
At a panel last week, Peter Boneparth, who was chief executive of Jones Apparel Group Inc. when it owned the upscale Barneys New York chain, said, “The luxury business is in for a really hard time” and that it would be “the slowest to recover.” Mr. Boneparth said the global financial crisis had triggered a fundamental change in wealthy consumers’ psychology and that “it’s no longer chic to be spending” as in the past.
The shift began even before the credit markets broke down and the stock market plunged. Many Americans had already begun to question their “freewheeling consumption” and move toward “a culture of responsibility,” says J. Walker Smith, president of global trends researcher Yankelovich, a unit of the Futures Company. For many, he says, environmental concerns were an important factor in this shift.
Environmental consciousness has often been associated with added expenses such as solar panels and organic food. But Wendy Liebmann, chief executive of consulting firm WSL Strategic Retail, has noticed that the economic downturn is accelerating mainstream acceptance of the thriftier behaviors of the green movement, like cutting out bottled water and growing vegetables….
Lindsay Lefevere, a 31-year-old book editor in Carmel, Ind., has been economizing by cutting out weekly shopping trips to Target and daily coffees at Starbucks. Ms. Lefevere, long an avid recycler and crockpot user, has now begun canning apple butter and cherries for holiday gifts, recycling household items as wrapping paper and consolidating her errands to conserve gas. The economic crisis “is definitely making me more conscious about the environment,” she says.
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Another interesting data point from this most excellent site full of great data points. Another dot to connect. I’m not sure exactly how it DOES connect, but my first reaction is a hearty laugh and a warm feeling. I shall feel no grief if someone manufacturing or selling $8,000 purses is forced to go find real work.
In Bangkok, I bought my girlfriend a “Hermes” handbag at a street market- for $14. The only person who might be able to tell the difference between hers and the real thing would be the woman who actually paid $8,000 for her purse – if she looked really closely. I’m sure she would be outraged at my girlfriend’s “fake” bag, but then, who cares about the opinion of a woman who is deranged enough to spend $8,000 on a purse?
It was a good year, so I gave the other $7,986 to Doctors Without Borders, which should keep a few hundred children alive who would otherwise be dead.
Maybe the silver lining in the dark recssionary clouds will be that some of our consumerist lunacy becomes replaced by actual human values.
Here’s a picky picky data point, possibly salient:
This has been the year of the saga of the kitchen timer.
In the old days, kitchen timers were made in Ohio. I bought a kitchen timer (from Ohio), and it worked. It was so reliable it was boring. Nothing fancy, just boring but reliable. Time passed, ye olde timer gave up its ghost. Twas sad, but eventually the time came to find its replacement.
Yikes! I swear I’ve bought 6 in the last year and a half. I can’t find an American made kitchen timer. They are all from China. And they don’t work. Some of the ‘design features’ have been hilarious – the current one has a magnet behind its clip, so the magnet is completely ineffective, and it has the strange feature of beeping every 5 minutes.
Basically, this is what happened: production went offshore, and the merchandise became such cr*p that there is no point in buying it anymore. By the way, one of the timers that I bought this year came from a top of the line kitchen store and cost nearly $30. Same story as the others.
A good chunk of my failing appetite for consumer goods is the result of this trend. (A similar thing happened with kitchen rugs, all now from China, with the ‘feature’ that they dissolve in the wash – 4 so far this year.) Plus I get the feeling that the corporations have manipulated me into supporting Chinese instead of American labor. That doesn’t inspire me to shop, frankly.
…has been economizing by cutting out weekly shopping trips to Target…
If people need to ‘economize’ by not going to Target, of all places, then you things must be pretty bad. What next, Walmart?
But I do think we are about to see just how much a significant portion of general spending depended on home equity withdrawals.
Anecdotal. I just bought a Jeep Cherokee last Friday. Other cars I looked at: BMW X5, Mercedes GL, Ford Explorer – Ford Flex (well, I was there anyway). I have already taken the dealer insignia off of the Jeep as I would prefer that it had “no identifying marks”.
I’m with you on the hand-bag thing. I was in Chang Mai once where a woman returned to our hotel positively gushing about the 3 handbags she had bought for less than $100. My wife and I had been with the hill tribes sleeping on bamboo mats. And I wear a North Face parka which I bought in Shanghai for $27. [yes I know I paid too much]
This is just a natural part of the business cycle. When times are good, we all party. When times are not, we all pull back waiting for when times are good again so we can go back and party. It’s also human nature. The pullback this time will just be more stunning because of the magnitude of the party and how it was financed. And, btw, everyone should have seen the auto disaster movie in the making when it was announced that leasing and financing was reigned in. I’ve said a million times, who the heck can afford a 35K vehicle on a median salary without creative financing?
And I’d agree with some of the consumption memes except for the posts that still reflect some sort of idea of virtue in consumption. It doesn’t matter if you buy a 27$ jacket or a 2700$ jacket…if you take some sort of pride in your purchase, then you find virtue in consumption. Don’t pat yourself on the back about it. It is what it is and there is no virtue there. Just consumption. And that’s neither good nor bad.
“…but what I found most intriguing was that the well-cultivated American habit of shopping as self validation appears to be undergoing a sea change….”
Oh, but what will you do? If the American habit of shopping as self-validation undergoes its sea change, won’t this affect the elitist habit of sneering at Americans as self-validation?
Talk about a well-cultivated habit.
Since you are so interested in psychological issues, what’s the flip-side to the “shopping as self-validation” phenomenon in a non-American society? Is there no sense of “quiet desperation” in their daily lives? If so, are there any “self-validating” impulses…or is self-validation simply an American issue?
If self-validation is “made in America”, what of the societies where there is no “self-validation”? Might the individuals in these societies then not deal with the frustration of daily living in other ways that are equally “intriguing”? Could the rampant alcoholism of Eastern European and Russian males be related? {And no, this is not a myth.} How about the pent up rage in the Middle East? [I know…this pent up rage is ALL about America–and it has NOTHING to do with the pent up sexual frustration and the culture/religion’s subjugation of women.]
And finally….since the others are throwing in anecdotals, I’ll throw in one more anecdotal of my own— and again, I stress—it’s purely anecdotal:
While you were in Thailand, did you ponder that two biggest industries in Thailand are the sale of sex and knock-off counterfeits? {Eliminate them, and the tourism in Thailand shrinks to the point that it would be on par with Vietnam.} What does this say about that society’s lack of a “sense of self”…as the society sanctions the rest of the world coming to its shores in search of the perverted, fleeting and disgusting validation with Thailand’s own women and children?
The long descent of mankind has begun. The financial crisis is a mere sideshow. At present no renewable energy system has the potential to generate more than a tiny fraction of the power now being generated by fossil fuels.
In short, the end of oil signals the end of civilization, as we know it.
1) ENERGY IS the capacity to do work (no energy = no work). Thus, the global economy is 100 percent dependent on energy — it always has been, and it always will be.
2) THE FIRST LAW OF THERMODYNAMICS tells us that neither capital nor labor nor technology can “create” energy. Instead, available energy must be spent to transform existing matter (e.g., oil), or to divert an existing energy flow (e.g., wind) into more available energy. There are no exceptions to the thermodynamic laws!
3) THE SECOND LAW OF THERMODYNAMICS tells us that energy is wasted at every step in the economic process. The engines that actually do the work in our economy (so-called “heat engines”; e.g., diesel engines) waste more than 50 percent of the energy contained in their fuel.
4) ENERGY “RESOURCES” MUST produce more energy than they consume, otherwise they are called “sinks” (this is known as the “net energy” principle). About 735 joules of energy is required to lift 15 kg of oil 5 meters out of the ground just to overcome gravity — and the higher the lift, the greater the energy requirements. The most concentrated and most accessible oil is produced first; thereafter, more and more energy is required to find and produce oil. At some point, more energy is spent finding and producing oil than the energy recovered — and the “resource” has become a “sink”.
There is an enormous difference between the net energy of the “highly-concentrated” fossil fuel that power modern industrial society, and the “dilute” alternative energy we will be forced to depend upon as fossil fuel resources become sinks.
No so-called “renewable” energy system has the potential to generate more than a tiny fraction of the power now being generated by fossil fuels!
The notion of “retail therapy” is not “ending”.
It has ended. It’s over. Forget about it. Adapt to the new reality. Throw away the inferior anchors.
Recall Ohmae’s words about the “extreme sacrifice” the American people are going to make.
Matt Dubuque
But in fact, the ISM manufacturing survey for October 2008, just published, shows that "Apparel, Leather & Allied Products is the only industry reporting increased new orders during October", and this was also one of the only two industries showing actual production growth.
It's also curious that, so far as I know, the services sector in the USA has not yet suffered significantly from the recession.
So I'm not sure that "affluent Americans have simply given up the fight to keep up with the Joneses". More likely that they are postponing big ticket replacements (new kitchen, new car) while still trying to keep up appearances (clothing, social life, schools, etc). We'll know it's a depression when people have to take their kids out of that expensive school/college.
“who the heck can afford a 35K vehicle on a median salary without creative financing”
Excellent point and all that really matters bottom line. The idea that suddenly American’s are saving more and shopping less based on psychology needs is pure B.S. The debt ratio’s tell the tale and the American consumer is way overboard in debt with housing and auto leading the way.
What all this says is that we are watching a declining standard of living based on low wage growth that has finally caught up with the masses but notice how the media does frame’s the issue in terms of overdebt consumers or low wage growth going forward will be the most interesting aspect.
Anon @8:28
An introductory thermodynamics course should be made compulsory for 1st year Economics courses.
Somehow all this talk is reminiscent of the immediate aftermath of 9/11, when pundits solemnly proclaimed the “end of irony”, and that we would all come together in purposeful harmony. How long did that last?
The 1970s energy crisis ushered in the permanent end of gas guzzlers and wasteful energy use. Wait… no it didn’t.
The Depression of the 1930s marked the end of the frivolity and decadence of the roaring Twenties. For a time…
The imploding of the dot-com bubble taught people to… who are we kidding? It didn’t teach us a damn thing.
Every era has its own zeitgest, its own fads and fashions. I think we will see status-seeking and one-upmanship in the form of “conspicuous frugality”. For a time anyway. You can’t change human nature.
PS, my idea of “retail therapy” is shopping for bargain emerging-market stocks.
“About 735 joules of energy is required to lift 15 kg of oil 5 meters out of the ground just to overcome gravity”
Anon @ 8:28, I’m not sure what point you’re trying to make. You do realize that 735 joules is equivalent to less than one-fifth of one food Calorie (and most of us consume at least 2000 food Calories per day)? And 15kg of crude oil is about one-tenth of a barrel of oil, or about 4 gallons, which will become 2.5 gallons of gasoline and some additional amount of jet fuel and heating oil. A 15-kg (30 lb) car could travel pretty far on 2.5 gallons of gas, actually.
I’m no expert, but I doubt very much that overcoming gravity per se is a significant factor in the cost of extracting crude oil from the ground. If that was true, my fat and bloated carcass riding up and down elevators daily in a skyscraper would be a major contributor to the energy crisis.
I’m no expert, but I doubt very much that overcoming gravity per se is a significant factor in the cost of extracting crude oil from the ground.
Yes.
The energy content of crude oil is about 45 megajoules per kilogram.
It takes 10 joules of energy to lift a kilogram one meter.
The anon at 08:28 is a doomer; we can start to take him seriously the day he kills himself.
I’m sorry. I’m waiting for my aunt, who, although not rich, is a shopaholic, to throw the towel in. Until she does, I’m not buying it.
Of course, I buy hardly anything as a matter of course.
Don the libertarian Democrat
The peak oil guy above was annoying in his self-righteous tone, but (essentially) correct in his facts. Everyone who hasn’t read Richard Heinberg’s ‘The Party’s Over,” needs to buy it TODAY. Buying this one book is true retail therapy, in that it contains information vital to our survival. You can’t eat a Hermes purse. Our fundamental economic model is fatally flawed because it’s based on premises that are delusional.
anon @ 12:23: The peak oil guy above was annoying in his self-righteous tone, but (essentially) correct in his facts.
I guess the issue is one of relevance, not correctness. For example, 1+2=3. Are we now doomed? More to the point, the guy at 08:28 said (among other things) “No so-called “renewable” energy system has the potential to generate more than a tiny fraction of the power now being generated by fossil fuels!”
Technically true, but a straw-man, since only the crazy would attempt to scale up wind, solar, etc, systems to industrial levels. There are much more concentrated, and essentially infinite, sources of energy that will scale.
Richard Heinberg’s ‘The Party’s Over,”
Heinberg is a hardcore doomer; he has people to scare into buying his books. You would do much better to read up on liquid fluoride thorium reactors (LFTR) and other nuclear options. Perusing a copy of Olah’s “The Methanol Economy” would also be well advised.
“You would do much better to read up on liquid fluoride thorium reactors (LFTR) and other nuclear options.”
Cool, let’s make the planet a radioactive wasteland for centuries to come, so that 10% of the world’s population can maintain its lifestyle!
@ MDF
Delusional optimism doesn’t lead you to being correct.
Methanol involves taking harvestable forests, growing patterns, and annual per acre yields from tree farms (there goes the paper and lumber industries) and generously using the BTU content of wood as a fuel instead of using the diminished BTU content of the methanol conversion, this quick and dirty analysis determined that wood could sustain at most 7% of US electricity demand.
Yes 7%.
It was dd much more than 8:28 that struck me as more than a bit off beam. Some people take any observation about American society that is anything other than effusively positive as anti-American.
Not only was the hostility unwarranted, dd’s anger renders him unable to read or reason. Neither Yves nor the article said that retail therapy was an exclusively American phenomenon. And shopping as we have to the point where the country is over its head in debt IS pathological. The post didn’t say that, but overconsuming to the point where you put your safety at risk (consumers are now cutting back on prescriptions because they cannot afford them) says something is amiss, big time.
The comparison to Thaliand is also deranged. Poor people do what they need to survive, including selling their children. I know women in the US who had held white collar jobs who briefly turned to prostitution to make ends meet when their industry went into the toilet. and they could not find work of any kind. The fact that you conflate what people do to survive when their backs are to the wall with SHOPPING, something that people do with discretionary time and money, is a staggering leap of illogic.
And Asians do not have our moral hangups about sex. Middle class Japanese girls turn tricks for pocket money and think nothing of it. Of course, they can exercise much greater control over who they choose to service than Thai girls in brothels, but the point is that sex work is not held in as low esteem there as here. But some Thai sex workers are de facto slaves, that is a separate issue. Of course, you have girls here who are kept on drug habits by their pimps that puts them in much the same position, but we don’t like to think we have de facto slavery here.
anon @ 16:57: Yes 7%.
At the risk of offending our host — who rightfully doesn’t like snarly commentary here — I’ll simply say that until you read and understand Olah (et al), you are simply talking out of your butt on this subject.
Honestly.
anon @ 16:56: Cool, let’s make the planet a radioactive wasteland for centuries to come, so that 10% of the world’s population can maintain its lifestyle!
May I ask you do at least a small amount of research? Wikipedia has a semi-reasonable article on molten salt reactors (and other approaches). Lots of references you can check.
Three points.
1) I’m with anon-10:20. This sounds to me like rationalizing. i.e. the American consumer is now being forced to stop consuming due to contracting credit and stagnant wages, and he/she is rationalizing this with some newfound appreciation for the environmental costs of their previous habits. In other words, “I’m not bankrupt, I’m just being environmentally conscious.” As soon as the credit spigots open again (if they ever), the American consumer will start spending again.
2) The decline in luxury goods is due to a number of factors, including the economic conditions. But another important factor is that “luxury” goods once meant quality of manufacture, durability, etc. Now, “luxury” is a marketing term. Luxury brands fell prey to the marketing guys from the 80s on, who basically said that there’s much “brand value” locked up in luxury brands, and that they can exploit that value by selling cheap goods under luxury brands. This has worked so far, but as it dawns on people that the Armani jeans, Levi’s jeans, and Walmart house brand jeans are all made by the same factory in China with different labels affixed to them, people have started to rightly question the value of luxury goods and the emptiness of the marketing behind luxury brands.
3) WRT dd’s post. Everyone seeks self-validation. America (not uniquely, but I’m an American and so I’m most familiar with American culture) seeks self-validation through consumption. There are plenty of other ways to gain self-respect, e.g. through the work you do, your relationships with other people, your own personal goals, etc. It’s very amusing to find marketing efforts, for example, that promote people to essentially identify themselves as “I’m a Barney’s girl” or “I’m a BMW guy”. That your identity is composed almost entirely of the sum-total of brands that you consume. While other cultures may have similarly superficial measures of self-validation, that doesn’t excuse Americans from developing this habit which is now destroying their economic health.
At any rate, I’m not so sanguine that conspicuous consumption and the ills of our attachment to it are forever gone. Just forcibly halted by external factors for now.
All foreign friends and relatives, from Australia to UK, have never failed to marvel at American consumerism when they visit. Just a simple visit to a big mall on any weekend would be enough to convince these foreigners that America would continue to buy everything and anything the world produces. Whether they are buying $8000 LV or $14 Thai-made bags, Americans would still be buying come what may.