Judith Russell

About Judith Russell

Judith Russell is a marketing and strategic planning consultant specializing in the apparel industry, and writes for several apparel and retail trade publications, and is editor of ApparelStrategist.com

The Hidden Message in How Americans Spend

Consumer spending increased by 3.7% in June, the highest 12-month smoothed monthly increase in almost two years, according to data released last week by the Bureau of Economic Analysis.

This year, Americans will spend $12 trillion on stuff, slightly more than the $11.7 trillion they spent on stuff last year.

These gross numbers are pretty meaningless and hard to wrap one’s mind around, but if we look behind the big numbers at what we’re spending our money on, and how some of those expenditures are growing, it’s not only pretty interesting, but can also tell us about how optimistic we’re feeling, about our consumer preferences as a society, and where we might be headed.

When the government tracks consumer spending, it creates two major categories: goods, which are separated into durables like cars and washing machines, and nondurables like clothes and food; and services, such as private school tuition, cab fare, eating in restaurants, and going to the doctor.

What I’d like to do here, though, is to categorize them a little differently.

pyramid2

Abraham Maslow (remember him from Psychology 101?) created the theory of the hierarchy of needs; simply stated that self-actualization is not possible until our basic needs are met. So, using a pyramid as a model, shelter, food and clothing (physiological needs) are the most basic needs at the base.

Fast forward to the top, creativity and artistic pursuits, are defined as self-actualization, or achieving our full potential as human beings. I’m super-simplifying here, but you get the idea. So if we look at trends in consumer spending through a redefined prism of Maslow’s hierarchy, and taking a few liberties with the climb to the top, some interesting patterns emerge. We can start with non-discretionary (need) categories like food, clothing and shelter at the base, and discretionary purchases, (more wants than needs) like restaurant dinners and new cars at the top.

So how have Americans been spending their money? And what’s behind these spending trends?

 

Level 1: Food, Clothing, Shelter (Basic Needs)

For one thing, it looks like the American Dream is alive and well, and home is still where the heart is – at least the heart of non-discretionary spending. As the chart below illustrates, spending on housing, which totaled an annualized $2 trillion as of June 2014 data, has been growing much faster than groceries and apparel, the other two key need categories, whose totals were $900 billion and $367 billion, respectively. Much of this increase has been due to tightened supplies of rental properties and energy costs, which have driven up monthly housing and utility costs, causing people to dedicate a larger share of their wallet to housing costs. Despite rock-bottom interest rates, home purchases have been about as spotty as job market recovery, resulting in an increased demand for homes to rent.

Although food prices have risen for certain categories, like meat and dairy, large supermarket chains are in a tough race for market share, which has kept inflation to a minimum and allowed consumers to take advantage of loss-leader bargains. In both apparel and groceries, showrooming has enabled price transparency across competitive retailers. As the chart shows, although spending on housing rose by 4% last month, slightly ahead of the total spending increase of 3.7%, spending on groceries rose by less than 2% and apparel spending edged up by less than 1%. In other words, Americans are spending more on housing because they have to, and taking advantage of the promotional environment in apparel and food to because they can.

RRSpending1

Level 2: Health and Wellbeing (Safety)

Next, let’s look at how we are spending on keeping ourselves healthy, the next level up on our redefined hierarchy of needs spending pyramid. Consumption of pharmaceuticals has skyrocketed in recent months as millions of formerly uninsured people got coverage under the Affordable Care Act and began to take medications for chronic illness and other conditions, causing windfalls for Big Pharma companies and the major drug store chains. However, spending on medical services and other forms of healthcare has grown by just over 3% as hospitals, clinics and physicians find their ability to bill patients is extremely limited under the new health care legislation. More people are going to doctors, according to CMS, the service that administers Medicare, but total spending is being offset by the declining average cost of a doctor treatment or visit. Maybe the Affordable Care Act is actually keeping health care affordable? Time will tell.

RRSpending2

Level 3: Quality of Life Connections (Belonging)

Next, let’s take a look at some spending categories up a little higher on the hierarchy of values: feel-good “big ticket” items. The auto industry has benefitted greatly in the past year by the unleashing of pent-up demand. During the recession, car sales declined because people decided they would just make do with their old clunkers. Once the economy started to grow again and employment and income started to recover, millions went out en masse and purchased new cars. However, that growth started to slow considerably early last year, as shown by the chart below, and then picked up again starting in February of this year. Although new car sales are strong, at an annualized $98 billion in June, they’re not growing as much as they were in early 2013, though part of that is due to tougher comparisons— that is, they’re being compared to stronger months than they were in early 2013.

Another interesting category in this realm is communication ($276 billion), which includes mobile device (smart phone) contracts, where growth is an annualized 4%, but off from the higher levels seen last year, primarily because the tablet craze has quieted considerably.

And growth in furniture and appliance spending, representing a total of $287 billion, remains sluggish despite the improved stability in the housing market. The lack of consumer interest in the category has been a source of tremendous frustration for retailers in this space. Perhaps a good bit of the softness in spending is due to the extremely competitive and promotional marketplace – prices have been declining for these products, and consumers are taking advantage of the available deals to spend less.

RRSpending3

Level 4: Having Fun (Esteem)

We’re approaching the top of the spending pyramid, where some of the most discretionary of the major consumer purchase categories reside, specifically entertainment. Key categories include recreational activities spending, at $450 billion, products like toys and sporting goods, at $367 billion, and spending on food outside the home, at $746 billion. Of the three, eating out is the only one with accelerating growth. In the hierarchy of needs, it reflects confidence and achievement that consumers have choice to reward themselves with a slightly more expensive option than cooking at home. And the fact that we’re spending moderately on recreation says that we’re having some fun.

RRSpending4

Level 5: Self-Improvement (Self Actualization)

At the pinnacle of all these spending categories are the self-actualized pursuits of spending on education and financial planning. Amazingly, it looks like these areas are growing at above-average rates; we’re actually spending more to improve our ability to succeed in the future. Education spending, at $282 billion, is one of the fastest growing categories in consumer spending (after pharmaceuticals). And not all that surprisingly, given the volatility of the financial markets, spending on financial services is growing quickly as well, at an annualized $890 million according to June 2014 figures. This data would suggest that we are optimistic about the future, interested in self-improvement and searching for, and funding, solutions.

Despite what is happening in the economy or in Washington, people are living their lives and hanging on to their dreams.

RRSpending5

June Retail Sales: A Good News, Bad News Story for Merchants

Last week the US Department of Commerce released its most recent monthly sales and inventory figures for the retail industry. Total sales rose to almost $448 billion in June, up from $422 billion in June of last year, a seasonally adjusted increase of 5.2% on a 12-month smoothed basis (which is not a straight average, but a calculation that takes into account several months of data so that it conveys a more accurate idea of trend). Total retail inventory rose by 3.6% in May, the most recent month for which inventory data are available, and the smallest monthly increase in almost three years, sending the inventory-to-sales ratio edging down for the month.

RR chart Retail Total

Click to See Chart Full-Sized

Whether or not the news was good for you depends largely on what business sector you’re in. If you’re in a well-run business selling automobiles or health and beauty aids, you probably saw your sales grow. If you’re selling food, apparel, electronics, home furnishing or most other discretionary consumer products, then you’re probably having a considerably different experience.

First, the Good News

Automobile and parts dealers enjoyed an 8.3% increase in sales on a 12-month smoothed basis. Though this was the sector’s smallest growth in four months, it outpaced overall retail growth and drove much of the overall gain in retail sales. According to research firm Autodata, Inc., 1.42 million new cars, light trucks and SUVs rolled off car lots in June, putting 2014 on track to be the best year for the auto sector since before the Great Recession. Despite all the recalls and safety concerns at GM and Toyota, US auto retailers are expected to sell 17 million new vehicles this year for the first time since 2006. Auto inventory levels have been declining steadily over the past few months, as dealerships have made much better use of technology to access a bigger “virtual fleet” of cars to sell from without actually having them on the lot.

RR chart Retail Auto

Click to See Chart Full-Sized

Drug stores, pharmacies and other health and personal care product retailers also did gangbusters business in June, benefitting from the surge in consumer spending by both aging Baby Boomers and people signing up for the Affordable Care Act on prescription and over-the-counter medications and other healthcare care products. Sales in the segment, which includes drug store chains such as Walgreen’s and Rite-Aid, beauty stores like Sephora and Ulta, and independent pharmacies and health and beauty aid retailers, rose by a record 8.4%. (Monthly inventory figures are not available for this channel.)

RR chart Retail Health

Click to See Chart Full-Sized

Non-store or pure-play e-commerce retailers (read: Amazon, since they dwarf everyone else in this space), also continued to fire on all cylinders. Sales rose by a 12-month smoothed 8%. The government doesn’t publish inventory figures for this sector, either.

RR chart Retail Nonstore

Click to See Chart Full-Sized

Here’s the Other Side of the Story

Now for the not-so-good news. If you’re selling discretionary consumer goods like apparel, home furnishings, and electronics, or if you’re selling food and beverages, you had a pretty disappointing month.

Department and discount stores were, on average, the most challenged in June. Sales in the channel that include Macy’s, JCPenney, Sears, Walmart, Target and Kohl’s experienced a collective 1.4% drop on a 12-month smoothed basis. And although inventory plunged by 6.4% in May (the most current month available) for the big stores, the unexpectedly slow sales in recent months caused the inventory-to-sales ratio in the channel to rise slightly after falling in each of the previous four months.

RR chart Retail Dept

Click to See Chart Full-Sized

Apparel specialty stores, which include brands like Gap, Men’s Wearhouse, Forever 21, Ann Taylor, Abercrombie and small independent specialty stores, had a somewhat better time of it. Sales growth, despite underperforming the total retail industry, edged into positive territory for the third straight month in June with a 2.8% increase, to $21.3 billion, beating last month’s gain. It was this sector’s highest monthly growth in seven months, helped somewhat by the arrival of more seasonable weather. This space, which contains some clear winners, some beleaguered losers, and some brands that are barely holding their own, continued to fare better than department and discount stores, a trend that is expected to persist, as consumers prefer their easy-to-navigate stores and e-commerce sites chock full of curated merchandise and generally improved service. Specialty store inventories dipped by 1.8% in May, but the inventory to sales ratio, after dropping for three months, edged up in May.

RR chart Retail Spec

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However, and this is a huge however, to generate traffic and sales growth, many department, chain, discount and specialty stores (in fact, almost all of them) have had to resort to super-aggressive price promotions to even get on their customer’s radar. Most retail CEOs have spent the better part of the last few months bemoaning the decline in store traffic (which some have even put at double-digit levels) and cutthroat promotional environment about which one industry analyst said: “40% off is now the price you pay to play” in this business.

These widespread promotions have resulted in some pesky inventory pileups that are giving retail management sleepless nights worrying if all this discounting they’ve had to do isn’t just the beginning of a never-ending downward spiral that is going to beget more discounting in the second quarter. If it is, and if those clearance sales bleed into third quarter, it could result in a disastrous Back-to-School season, and cast a pall over Holiday. And … well, you get the picture. It’s not a pretty one.

Other sectors with fairly lackluster results include food and beverage retailers, whose low growth of 2.5% was blamed on price spikes on beef, dairy and other products that caused consumers to tighten spending wherever possible. To counter this, many of the major supermarket chains have intensified the share wars in some parts of the country, which often results in lower average transaction values.

The combined furniture, home furnishings, and building and garden supplies segment also saw below-average growth in spite of the improving housing market. The biggest gain within this sector was at building supply retailers like Home Depot, Lowe’s, Menard’s and others, where sales rose by a smoothed 4.3%, helped by the long-awaited arrival of seasonable weather in many parts of the country.

What’s the secret to sustainable growth? One key is to get closer to your customers, because they wield more power than ever. Understand them, engage them, connect with them. Too many retailers make the mistake of thinking that retail is just a product business, when in fact it’s a people business. The customer connection is essential to success. Customers can find good product anywhere today. The trick is to get them to find your stores, your brand, and the shopping experience you provide superior to the hundreds of other options out there.

RR chart Retail Table

Click to See Chart Full-Sized

CVS: Blowing Smoke? Or Truly Concerned for our Health?

Judy-CVS_FINAL-imageI resent the fact that I can’t walk down a street in New York City without breathing in a potentially lethal amount of second-hand smoke. So imagine my satisfaction when, on February 5, CVS announced it was going to cease selling tobacco products at its 7,600 stores by October 1.

CVS Loses a Loyal Customer

I became a CVS customer about 30 years ago. I found the stores conveniently located, bright, clean, and easy to shop. The product assortment was excellent and well-priced, and the ExtraCare loyalty program, of which I was a charter member, was terrific. I started shopping there for my prescription and over-the-counter medications, health and beauty aids, and vitamins, eventually expanding to cereal, juice, sundries, holiday candy, and school supplies. As the years went on, I did a greater portion of our family shopping there, and each quarter I would receive a generous coupon of “extra bucks” — free money to spend in the store. [Read more...]

Made in USA: Myth or Reality?

American FlagOn a recent afternoon I was stopped in the mall by a foreign tourist looking for American gifts to take back home. All the clothing and accessories in the stores were made elsewhere, she said, so they weren’t really American.

U.S. consumers are starting to feel the same way. Groups with names like Made in the USA Foundation and Buy American are launching advertising and social media initiatives to encourage Americans to buy domestically made goods. They’re reacting to a groundswell of sentiment that blames the sluggish job market on imported consumer products. Large companies are reportedly looking at their product lines to see whether even a little domestic sourcing is feasible. Several fashion startups are touting the fact that their stuff is made in the USA, and in some cases even successfully using crowdfunding to get their businesses off the ground. [Read more...]

FOMO & the Retail Experience

iStock_000018141330SmallA Nation of Smartphone Junkies

It’s a truism that an overwhelming number of people today are addicted to their electronic devices. According to Pew Research, the cell phone has been the most quickly adopted consumer technology in the history of the world. Over 90% of American adults (97% of the under-35 crowd) own them. It is estimated that by the end of this decade, all but the oldest, youngest, poorest and most technophobic among us will own smart phones.

We use our phones as camera, alarm clock, board game, metronome, magazine, map, bank, GPS tracking device, bank, TV, and more. Mostly, though, we use them for their original purpose: to stay connected. We can reach out to friends and family members instantaneously, and know where our kids are at every moment of the day or night. We can keep up on breaking news while hiking in the Adirondacks. We can watch a revolution unfolding in the city center of a Middle Eastern country thousands of miles away. Increasingly, we can do more than one of these things at a time. [Read more...]

The $2 Trillion American Rip-Off

There’s a growing disparity in the way some economic data have moved since the recession. On the one hand we have employment and income figures, which tell the story of a sluggish U.S. recovery with a long way to go to pre-recession prosperity. On the other hand, healthy retail sales and consumer spending have rebounded to, and even surpassed, pre-recession levels.

According to the Bureau of Labor Statistics, the population of working-age people has grown by more than 5 million since the beginning of 2008. The labor force has increased by only 1.5 million, and the total number of employed has decreased by 2 million, resulting in a steady decline in the labor force participation rate (see Chart 1).

shadow_economy_chart-1That doesn’t jive with the brisk pace of consumer spending (Chart 2), according to Bernard Baumohl, Chief Economist at Princeton, NJ-based forecasting firm The Economic Outlook Group, who noticed the sudden divergence between total personal consumption expenditures and the labor force participation rates that began during the Great Recession.

shadow_economy_chart-2

The stubbornly high unemployment rate makes even less sense in light of retail sales which, according The Department of Commerce, have been growing by 3-5% per month over the last two years on a 12-month smoothed basis, as shown in Chart 3 below. Sales of durable goods have been particularly strong.

shadow_economy_chart-3This is consistent with an unemployment rate much lower than the current rate of 7.3%, according to Baumohl, who noted: “… Not since the government first released retail sales on a monthly basis have we seen retail sales grow at such a vibrant pace with the unemployment rate so high.”

All this has been going on while, according to the Bureau of Labor Statistics, median household income has been on a steady decline (Chart 4).

shadow_economy_chart-4How are all these unemployed consumers with declining incomes able to keep shopping?

As it turns out, being unemployed doesn’t necessarily mean not working. According to research by Professors Richard Cebula of Jacksonville University and Edgar Feige of the University of Wisconsin-Madison, a significant part of the U.S. population participates in the shadow economy, an estimated $2 trillion underground market in the U.S. These folks are doing everything from giving piano lessons to running retail stores. They’re being paid off the books in cash by their employers and/or customers, and either not reporting or underreporting their income.

We’re not just talking about mob bosses or drug dealers here, but about millions of people, some (but by no means all) of them undocumented immigrant workers, with everyday jobs, many in service businesses such as child care, landscaping, and construction. Much of the underreporting of income starts as a way to make ends meet after being laid off, but ends up becoming a lifestyle.

According to Professor Cebula, the underground economy has been around for as long as income tax. Its participants range from hardcore criminals to people whose lousy bookkeeping skills cause them to accidentally underreport their income. His research shows that in the last 10 years, the ratio of unreported and underreported adjusted gross income to reported AGI has ranged between 22% and 24%. Most of the underground income, says Cebula, is earned by people in the lowest income brackets.

To uncover this trend, Cebula and his colleagues simply followed the cash. Despite the proliferation of credit cards, debit cards, smart phone payment apps and bitcoin, currency in circulation with the public totals around $3,000 per capita, hardly the trappings of a cashless society. The Federal Reserve reports almost double-digit increases in currency outstanding over the last few years, to almost $1.2 trillion, compared to $800 billion six years ago (Chart 5).

shadow_economy_chart-5The evidence is everywhere: people pulling out wads of cash in stores to pay for big-ticket items; small stores who “don’t charge you sales tax” if you pay them cash (which means they’re not reporting the revenue to the IRS); soaring demand for prepaid debit cards (which you can buy anonymously and use to pay utility, rent and other bills); the rise in underbanking and nonbanking. According to the FDIC, in 2011 the number of U.S. households with no bank accounts was 8.2%, up from 7.6% in 2009.

Why is the economy’s dirty little secret not getting more air time? Well, for starters, it’s neither politically correct nor expedient to go after the little guy. It makes government look boorish, and after all, many of the people perpetuating this fraud are voters, so politicians have every incentive to turn a blind eye.

A more important factor, however, is that much of the $2 trillion ultimately goes into cash registers, and might have kept the real economy from tanking a few times during the recovery. Which means retailers aren’t exactly unhappy about it.

The U.S. is not the only country experiencing this trend. The shadow economy in Europe will total $3 trillion dollars this year, according to an A.T. Kearney/Visa report. In Italy, where the top personal income tax rate is 45% and tax evasion is practically a national pastime, it represents a massive 21% of GDP.

So is the shadow economy a good thing? Unless you’re a fan of felony tax evasion, of course not. The impact on government revenue is staggering, with an estimated $500 billion in lost federal income tax, money that could close the budget deficit (and possibly even create a surplus), reduce the national debt, help pay for improved infrastructure, and provide public services to people. Many of the people working off the books also collect unemployment or disability, go on Medicaid, and use food stamps, multiplying the fraud.

Of equal concern is the fact that the rapid growth of the underground economy since the recession might be a result of deeper and potentially more damaging trends: an underlying distrust in government; a feeling that regulations are too stringent and complicated; a lack of confidence in financial markets; declining confidence and hope. These feelings weren’t exactly soothed by the most recent government shutdown.

The Economic Outlook Group’s Baumohl feels that although impossible to quantify, the size of the underground economy could be as high as 10% of GDP. If legally accounted for, this $2 trillion would add another 10% to disposable income data in the U.S., and add a whopping 25% to government tax revenue.

Cebula feels that it would be impossible to collect tax on these transactions, however. First, because these transactions leave no paper trail and, in many cases, are done by people that the government doesn’t even know exist, it would be hard to find them. Second, even if uncovered, the taxation would be very short-lived. “In theory, if we were to tax it,” he added, “the behavior would stop, so there would be nothing to tax. And many illegal immigrants would just leave.”

In other words, trying to go after these people wouldn’t necessarily boost tax revenues very much, but would help curtail illegal activity and reduce the illegal immigration problem? Sounds like a step in the right direction.

However, Cebula’s argument fails to take into account the fact that plenty of the underreporting is done by businesses and households who, rather than get caught and pay penalties, might decided to improve their reporting record. That includes the dog groomer or handyman who doesn’t charge you tax if you “make the check out to cash.” He’s not going to turn away business; he’ll just do more of his business on the books. Maybe his prices will go up a bit in the short run, but they’ll eventually settle at what the market will bear, or he’ll find another line of work. So, theoretically, some of the tax gap will be at least partially recouped.

People who work off the books are hurting themselves in both the short and long terms. They’re not paying into Social Security or receiving health benefits. They can’t report abusive employers to authorities. They don’t participate in financial markets to build up investment income nest eggs. This is ultimately a drag on economic growth, which will hurt the retail industry.

The underground economy disfavors law-abiding people and shifts liabilities to future generations. Allowing businesses to get away with cheating makes it harder for legitimate ones to compete. The reduction in workforce participation puts upward pressure on labor costs, and places honest retailers, who collect and remit sales tax and abide by employment laws, at a price disadvantage.

The IRS claims to lack the resources to go after the tax cheats, which only makes the problem worse. When there are fewer police cars on the roads, more people speed. But how could it not be cost-effective to enforce compliance? When such a huge amount of owed taxes is not being paid, it shouldn’t take long for an IRS agent making $60,000 a year to earn the agency back his salary. We can’t afford to not force compliance. If successful, it might eventually lead to lower income tax rates for all which, as we know from history, tends to stimulate economic growth.

We need fewer regulations and red tape for businesses and households who employ people, and better enforcement of (simpler) tax laws. We need politicians to worry less about getting re-elected, and more about increasing government efficiency. And we need a level playing field that rewards success and honesty, punishes criminals, and helps people who really need help. Without these things, neither the free market nor democracy works.

What’s Wrong With This Employment Picture?

Last week’s employment data looked pretty rosy. The economy added 175,000 new jobs in May, according to the Bureau of Labor Statistics, more than many economy-watchers and investors anticipated, but not so many that the Fed might be tempted to tighten credit. Retail jobs comprised a sizable chunk of the increase, a net gain of 28,000, indicating an underlying bullishness on the part of retailers about consumer spending, since May is not typically a big hiring month for stores.

Looking behind the numbers, however, particularly in light of other recent economic data, a murkier picture emerges.

Job Growth is Slow

First, despite May’s jump, overall job growth has been painfully slow for the past year, ranging somewhere between 1.5% and 1.7% per month on a 12-month smoothed basis, as the chart below shows.

Click to enlarge chart

Click to enlarge chart

 The unemployment rate, though close to a four-and-a-half year low, actually increased in May, from 7.5% to 7.6%, as news of the improving job situation caused many of the unemployed who had given up looking to reenter the job-hunting fray.

Click to enlarge chart

Click to enlarge chart

And, as is usually the case this time of year, over a million newly-minted college graduates were thrust kicking and screaming into the real world (or at least back to their old bedroom at Mom and Dad’s). This year’s crop carried record loads of student debt.

New Jobs are Low-Level

Yet another problem is that the jobs that are being created are not exactly the most sought-after, and tend to earn less than those eliminated during the recession, a phenomenon that shows no sign of reversing itself any time soon.

For example, restaurants and bars added a whopping 38,000 jobs in May, evidence that people have finally started to eat out more, usually a sign of an improving economy.  However, these jobs tend to pay less than minimum wage – certainly not enough to eat out very often!

Professional and business services added a lot of jobs, too. But despite the media cacophony about a surge in tech and other math-and-science-related fields, only 5,000 jobs were in computer systems, and another 6,000 in engineering – hardly enough to satisfy the hundreds of thousands of recent IT and engineering graduates. The greatest number of new jobs in the professional services sector – 26,000, to be exact, was in the not-so-lofty temporary office help area.

Last month, one in every six new jobs was in retail. In fact, as the chart above shows, retail job growth has been outpacing that of total employment in the US since late 2012. However, most of these jobs are hourly jobs at the store level, and pay at or slightly above minimum wage.

Sluggish Income Growth

Income growth has been sluggish for the past several months, further evidence of the beating paychecks are taking, which means that the rampant price-and value-consciousness will persist for a while, and will continue to wield a huge influence on consumer behavior and retail strategy.

Click to enlarge chart

Click to enlarge chart

Stagnant Spending

Finally, consumer spending is nothing to get excited about. Although sales of durables like automobiles and furniture have been brisk, spending on nondurables like food, clothing and personal care items has slowed in recent months. Much of the slowdown is due to lower prices on food and gas, but nonetheless threatens to intensify the share wars taking place at retail.

Click to enlarge chart

Click to enlarge chart

It’s probably worthwhile to point out that while all this hiring was taking place, the Dow and S&P each continued their upward climbs, bringing year-to-date stock market gains to over 15% and reinforcing the wealth effect among the high-income folks. This has been fueling growth in luxury retailing and intensifying the polarization between haves and have-nots. How long this will last depends in large part on the financial markets. A big stock market correction could put the brakes on luxury spending.

Who’s Hiring At Retail?

Retailers, anxious to gain whatever share they can in this low-growth market, are making sure they are sufficiently staffed. General merchandise stores, including variety and the very popular dollar stores, have added the most jobs so far this year, at 44,000, as shown in the chart below, almost half the 93,000 new retail jobs. Dollar stores have been expanding their brick-and-mortar footprint faster than other channels.

Department stores have added 22,000 jobs, both in-store to provide improved service, and at the corporate level to fill expanding e-commerce and social media departments. Specialty apparel stores, many of whom are closing underperforming doors, have sustained a net loss of 17,000 jobs so far this year.

Click to enlarge chart

Click to enlarge chart

Amid all the uncertainty, though, the tough job market has been a windfall for retailers in one key way. These companies have access today to some of the most educated, innovative, tech-savvy and creative talent ever. Retailers should identify the high-potential employees early in their careers, and begin grooming them to be the next generation of industry leaders.

Stagnant Paychecks Slow Consumer Spending

iStock_000007732207XSmallLower Prices on Food and Energy Buoy Fashion Products

You know those colorful Vikings in the Capital One credit card commercials who ask “What’s in your wallet?” Well, maybe they’re asking the wrong question.

Forget QE3, the wealth effect from rising stock prices, and fears of sequestration. The key factor in determining consumer spending, that all-important measure that comprises a whopping 70% of GDP growth, is paycheck size. It’s about how much is in consumers’ wallets. And with paychecks essentially stagnant, it could come as no surprise that economic growth is pathetic, too. [Read more...]

Stores Blame Cold Weather, Early Easter for Season’s Slow Start

March2013RetSalesRetailing is a lot like professional sports. Both are highly competitive, both require a combination of talent and luck, and both involve big money.

And sometimes, there’s so much drama taking place off the playing field that it’s hard to remember there’s a real game taking place on it.

No matter how interesting we find all the “what if” questions surrounding JCPenney, or the tussle between Martha and Macy’s, or the Lululemon yoga pant recall, it’s what’s going on at the cash registers in the stores – be they brick-and-mortar or online – that determines the success of the industry and, in turn, the U.S. economy. Consumer spending – people shelling out money for goods and services – accounts for 70% of economic growth, and spending at retail just isn’t growing very quickly these days, for a variety of reasons. [Read more...]

Walmart’s Hire-a-Vet Program: Patriotic Gesture? Or Good for Walmart?

American veterans returning from war have had a history of finding employment at Fortune 10 companies. After the Korean War they got engineering and sales jobs at IBM and Texaco. After Vietnam they became production technicians and manufacturing coordinators at Dupont and Monsanto.

Those returning from Iraq and Afghanistan will be working at Walmart. Now that’s what I call economic progress.

At January’s National Retail Federation Convention in New York, CEO and President Bill Simon announced the Bentonville behemoth’s pledge to hire any returning veteran who wants a job, in a program it will kick off on (when else?) Memorial Day. It will result in 100,000 jobs for returning military personnel over the next five years.

This is a wonderfully patriotic gesture, and a great opportunity for all those returning vets, right? Or is it? [Read more...]

“Paycheck Shock” Reins in January Sales

Bite-In-Pay-CheckMore to Come From The Beltway?

It’s President’s week, so instead of staying in Washington to work out a compromise that would avoid huge mandatory budget cuts, Congress has left town for recess. Little wonder, then, that consumers have been in a less-than-freespending mood of late. Last month, for example, found them more bargain-hungry than ever, particularly after seeing the big bite new taxes took out of their paychecks.

January retail sales rose by a little over 4.4% on a 12-month smoothed basis, to a seasonally adjusted $4.9 trillion. Growth was slightly below that of the prior two months.

Much of the improvement was due to a surge in auto sales. Detroit has benefitted from record numbers of people finally breaking down, so to speak, and replacing their 10-year-old vehicles. Excluding autos, total retail sales increased by only 3.1% in January. [Read more...]

Nervous Consumers Go to the Mattresses

Will Clouds Lift in 2013?

Last month, when the Commerce Department released its report on December 2012 personal income, spending and savings, there was barely a mention of it in the usual financial corners – which didn’t faze me much, since these figures are usually nothing to write home about.

After looking at the numbers, however, I did something uncharacteristic: a double-take.

Personal income rose by a whopping 7%, its biggest monthly jump in six years. Great news for retailers, who were offering tempting Holiday price promotions everywhere you looked, right? [Read more...]