Wallet Wars

iStock_000000409904Consumer behaviorists are mulling a new question: Will they swipe, tap, Tweet or text?

Whichever they choose, consumers, particularly the much sought after Millennials, are looking for new ways to pay. We’re approaching a tipping point where mobile payment systems, or mobile wallets, will move into the mainstream with cash, credit and debit cards becoming as archaic as stone tools.

An article in a recent issue of BCG Perspectives by The Boston Consulting Group put it this way: “Never in the history of the payments industry has there been a time of such disruption and opportunity across regions. Digital technologies will upset the competitive order and the role that payments play both in the operations of businesses and in the daily lives of consumers.” [Read more…]

Dumb and Dumber — A Tale of Cyber Security

hackerIf I were a Sony executive I’d be more concerned about getting punched out by Angelina Jolie for making snide email comments than offending North Korea’s fearless leader, Kim Jong-un. She looks tougher.

Of course, there’s the little matter of some 12,000 CDs filled with internal data from Sony Pictures that the so-called Guardians of Peace threatened to release — a Christmas gift from your friendly neighborhood cyber-terrorists.

But Hollywood, and its ego-fueled denizens, is not cyber-central. By now, every company, large and small, should know that neither data nor email is a whisper but rather a shout that keeps echoing. This latest breach not only reveals a massive gap in cyber security, but a lack of common sense on the part of seasoned business executives who should know better.

Therein lies the tale of data defense dysfunction. [Read more…]

Washington Crossing the Delaware on Black Friday

alpert_washingtonIt all began in Philadelphia, birthplace of innovative and uniquely American ideas and products: Philadelphia Cream Cheese (proof that God exists); Rocky I-V (more proof); and kites flying into lightning storms. Imagine, all this and more emanating from the sparkling urban jewel on the Delaware known affectionately as the City of Brotherly Love, a moniker richly deserved, given the kind and loving sports fans that inhabit this much-maligned metropolis.

Philadelphia was the site of our nation’s first capital and cradle of our revered United States Constitution.  It was here at Independence Hall where George Washington became the first General of the Continental Army, gallantly leading us into freedom from British tyranny. He was elected as our first president, and then moves the nation’s capital south to a city he named after himself. He crossed a roiling and treacherous Potomac River, standing triumphantly in the bow of that overcrowded rowboat, thus rendered in that famous painting he named after himself, Washington Crossing the Delaware on Black Friday. The painting was too big to stow in his little boat; he had a bridge built from New Jersey to New York so he could get the painting to the Met, where it still lives. Guess what he named the bridge?  Unbelievable.

As is obvious in that nautical painting, G-Dubya was taller than everybody else. We know he could not tell a lie: “I just outgrew Philadelphia, it was time to move on.” So G-Dubya moves to the new capitol and takes his football team with him, which he names after a few Native American friends (or potatoes).

But I digress. Back to Philly. Jeopardy fans there will surely know this one:

American Holidays” for, DING DING DING DING — The Daily Double!!! Contestants, you have 30 seconds for this question. What famous or infamous day in America has Philadelphia given to the world? Ben, would you like to go first? What is, Black Friday? YES!!! You win a week in Philadelphia. Betsy, as runner-up you get two weeks in Philadelphia, a wheelbarrow of South Philly cheesesteaks and all the Yuengling lager you can drink.

What’s in a Name?

In the mid-1960s, Philadelphia’s Police Department coined the name “Black Friday.” The name denoted the day after Thanksgiving, a day characterized by an overwhelming volume of traffic due to a confluence of two events: the onset of Christmas shopping madness, plus the torrential influx of West Point cadet and the Naval Academy midshipmen family and friends attending the Army-Navy game on Saturday at Franklin Field. Holy Liberty Bell, Batman! The entire police force was tasked to cover every intersection in Center City, stretching the force to the max, requiring even the Philadelphia Police Band members to pitch in. Philly’s Finest were not happy about this day and so it got its dark nickname.

Retail legend has it that most merchants make their first profit of the year on Black Friday. It was the first day of “being in the black” financially. For years, Black Friday was the spiking pinnacle of a one-day volume of sales. Black Friday pushes balance sheets into rosy American Dreamland, making CEOs, executives and stockholders feel good about themselves. But there’s also that robust lay-of-the-landscape benefit downstream. This is advanced retail capitalism at its absolute max, prompting a flash mob frenzy of shelf emptying and inventory clearing out at fast-forward pace all over this great nation. And now it’s trending abroad.

Trench Warfare

To date, there have been seven fatalities and 90 injuries at various retail stores that have attracted the Black Friday hoards of shopper mobs since 2008. Doors have been torn off their hinges as unruly crowds give way to their basest knuckle-dragging instincts. But who can blame them when flat screen TVs are going for $400? There have been shootings by male customers who have entered stores with fully loaded firearms. Black Friday lore has is that two wives get into a little tiff on the checkout line and one husband reaches for his loaded pistol, resulting in a wild chase through the mega-store, then resulting in a shooting and a death. Thankfully the shooter could buy more ammo at the store; don’t want to go home with an empty clip, now do we?  But hey, he defended the honor of his wife — and then had lots of time to think about his wife’s honor while serving a chunk of the rest of his life in prison, where it’s Black Friday every day.

Collateral damage is a decidedly negative way of expressing the downside of the phenomenon of Black Friday. Let’s just call it the creepier side of human greed and reckless disregard for one another.

Sentimentality Aside

But hey, look at the bright side.  Retailers are now spinning the Black Friday phenomenon forward or backward, depending on how you look at it. What the hell, retailers have finally gotten smart, and EUREKA, they open shop for business on the actual Thanksgiving Day. Yes!!! Huge Win!!!  Who cares about eating turkey anyway? Honestly, which is more American: a family dinnering-down with a large earth-bound bird; or flying through the malls, enjoying a day shopping together? Bonus point: at the store, the family football fans get their holiday football fix watching somebody play somebody, and then the Cowboys playing somebody else on the endless expanse of flat screens. I mean, c’mon!!!

But wait, there’s a wizard behind the curtain: Big Data! Retail data from Adobe Systems (proof of God, again) tell us that the biggest sales are no longer on Black Friday, but the Sunday before Thanksgiving. The really good news is that Black Friday is not even Black Friday anymore. Nope. It’s Black November!  Even old G-Dubya never thought of that! Just as Hurricane Sandy changed the coastline of New Jersey, the 2008 Recession changed Black Friday and spread it over the whole month of November. Let’s use the WHOLE MONTH not just that one Friday. But hold on, what about Cyber Monday? Over $2.29 billion spent on that day. That’s billion with a, ‘b,’ friend. This is what is so good about America. We really know how to make a buck!

So after the final whistle of the last football game on Thanksgiving Day, thanks to the City of Philadelphia, the Philadelphia Police Department, and the founding father himself, I will be zooming down the NJ Turnpike to Philadelphia, Black Friday – Ground Zero – Holy Grail.  I will be armed and dangerous, credit cards polished and sharpened, ready for serial swiping.

Happy Thanksgiving and be careful out there!

Lou Gerstner Was Right: Consumer Spending Matters, Not Stock Price

mc_gerstnerUS consumers are discriminating as to where they spend, and while demand has come back in what may seem unexpected categories, there is emphasis on experience and on purchases as investment.

Readers of Lou Gerstner’s book, Who Says Elephants Can’t Dance?: Inside IBM’s Historic Turnaround, or anybody who has heard the legendary former IBM Corp. CEO speak, will remember some sage advice: pay no attention to the stock price.

Let’s expand on this. Pay no attention to the stock market unless, of course, you’re investing in it. But as an economic barometer, the stock market has proven to be a fickle and even inaccurate judge of global economic health. Making cogent statements thereby is a delicate process, and I would argue that the more reliable barometer is consumer spending. The stock market is at best a confirmation of one’s previous calculations, not a factor in any of them.

What drove Gerstner to make the statement was his epic turnaround of IBM in the last century’s final years. Many friends and associates had congratulated him on the company’s resurgence based on a rebounding equity price. Gerstner warned them the number meant little, and the hardest work was yet to do. [Read more…]

Defining the Value of Omnichannel Shopping

Mobile banking wallet on screen of smartphone isolated on whiteBefore investing in an omnichannel strategy, retailers need to understand the true value of this consumer shopping behavior and the opportunity it presents. A new MasterCard study suggests the right approach is to start with the customer. How does their omnichannel spending behavior differ from spending in a single channel?

Conventional wisdom suggests that retailers should invest in bolstering the omnichannel experience they offer consumers on the basis that more channels will result in increased sales. Makes sense, but merchants can either invest in an omnichannel strategy and technology because it seems like the right thing to do, or they can make informed decisions based on data that details the value to be gained from key customer segments. Imagine the following scenario: A working mother of two needs a simple dinner solution for the evening. She logs onto Pinterest for “quick kid-friendly dinner” and decides on the “Cowboy Casserole.” The list of ingredients she needs is automatically saved onto her mobile phone, and dropped into her local grocery store shopping app. She opens this app, and decides to pick up the order on her way home. She stops at the store, where her order is waiting in a cart. She notices a sale on blueberries and adds two pints to her cart. She picks up a single-serve sparkling water for her car ride home and a few magazines to wind down later. The kids love dinner and the mom has illustrated the type of behavior that merchants of all classes are moving to better serve. She is an omnichannel shopper. As such, she is highly sought after but not very well understood. [Read more…]

Wellness on the Verge of a Revolution

shutterstock_185901890The past 50 years have seen a transition in healthcare from the Marcus Welby model of a kindly physician taking charge, even ownership, of a patient’s well-being to a phenomenon called participatory medicine, where physicians play the role of senior, expert collaborators with an individual in their plan for health.

In the past, the medico/hospito/pharmaco players were gatekeepers who doled out medical information and care with schedules at places that served their needs. Today’s patients demand greater and more convenient access to health information and medical care. They want care to be provided with the convenience of any other retail service. Simply said, they want it now, wherever they want it… now.

Healthcare On Demand

An early manifestation of “retail” convenience in healthcare was the standalone, limited service clinic. This movement began in the workplace with employers contracting with companies such as CHS Health Services to operate health clinics. These services have offered free services to employees as a benefit, and for the employer as a means to reduce absenteeism and healthcare costs. CHS, newly merged with Walgreens-owned Take Care, operates more than 500 workplace clinics for major US companies. [Read more…]

Target’s Big Leap of Faith

targetNot long ago, Brian Cornell was appointed Target’s CEO, becoming the retailer’s first CEO hired from the outside instead of being appointed from within the company’s hierarchy.

At any company, when a long-standing practice concerning the appointment of the top-level executive is changed, it usually means there is a lot of repair work to be done at the company. Target is no exception to that.

Let’s take a quick look at four key issues at Target and then see how — or if — Cornell’s experience addresses them. [Read more…]

International Intrigue: How Retailers Can Gain Share of Cross-Border Spending

crossborderInternational travel has been remarkably resilient in the post-financial crisis period. In fact, MasterCard research shows that since 2009, international visitor arrivals and spending have grown faster than real global GDP. Despite its size and strong growth, cross-border spending is a challenging area for retailers. When international travelers arrive, many merchants have difficulty recognizing them, anticipating their needs and catering to them. Even worse, most merchants neither recognize the size of the cross-border opportunity nor understand their current share. This is important, since even a 1% share of a leading market such as New York or London is near $200m in annual revenue. As it does with so many retail issues, data can play an important role in gaining share of cross-border spending. Insights into spending and behavioral trends can help retailers understand their current share of wallet and provide the intelligence needed to attract more cross-border dollars.

The International Traveler of Mystery

For those who are successful at attracting the international traveler, the ‘prize’ can be substantial: MasterCard research forecasts that cross-border visitors to the 10 leading destination cities will spend $136 billion during 2014. Narrowing that down to the biggest cities for cross-border spending and the opportunity becomes even clearer. In London, the leading global destination this year, this translates to an average of more than $1,000 per visitor. Average spending is even more impressive for other major travel destinations, such as New York ($1,600) and Taipei ($1,700).

Retailers seeking to gain cross-border sales should consider four approaches to anticipate the arrival and needs of the cross-border customer, to capitalize on the opportunity:

1. Benchmark the Current Competitive Set

Retailers and other types of merchants typically lack data on their share of cross-border spending, and have even less visibility into their share of spending by visitors from specific countries. A first step should be to measure current performance and compare it to that of competitors. In doing that, merchants can gain valuable insights by analyzing key indicators based on recent transactions and determining how they stack up against their competitive set.

2. Leverage Existing Customer Base

After benchmarking competitive performance, retailers can capture a greater share of cross-border spending by analyzing existing customers. As an example, many types of merchants – including airlines, hotel chains and luxury fashion brands – have established relationships with travelers through loyalty programs. Analyzing the spending patterns of frequent traveling members of the program can help identify the merchant types with which members engage most frequently. This may uncover partnership and ancillary revenue opportunities for the brand.
Analyzing the membership of a hotel chain affinity program, for example, may show that affluent customers from certain countries engage frequently with particular luxury industries. Such insights may yield partnership potential as a means of attracting customers from those markets and gaining share of spend while they visit.

3. Understand Spending Habits of Cross-Border Customers

Another strategy to gain share of wallet with international travelers is to analyze past spending activity by international traveler customer segments for predictive insights. As an example, a retailer at a shopping mall in London could see that high-income customers from New York City are likely to have shopped for apparel before they come to the mall. The retailer may also notice that the international traveler segment frequents bookstores at some point after leaving the mall. These insights may help the retailer evaluate partnerships or category expansions.

4. Choose Influential Partners

Cross-border travelers interact with many different travel market participants, including airlines, airport authorities, tourist boards, car rental companies, hotel chains, online travel-related services and banks. These are potential partners to other merchants looking to grow their business with international travelers.

A tourist board, for instance, may wish to attract visitors from certain markets. From some markets, a high proportion of travelers will be affluent, while those from others will be predominantly business travelers. These different cohorts may favor certain types of retailers, restaurants and hotels during their stay. A tourist board will have an interest in connecting the two, both to improve the customer experience of the traveler and to drive business within its region. Insights from spending behavior patterns of travelers from these markets will identify areas of alignment and potential partnership between the tourist board and merchants in its region.

Cross-border spending is growing rapidly and should be of particular interest to retailers in geographies with high penetration of international visitors. With cross-border visitors to the 10 leading destination cities alone forecasted to spend $136 billion during 2014, the opportunity for merchants cannot be ignored and a critical first step is tapping into and understanding the right data and insights.

A version of the article appears in the Fall 2014 issue of the MasterCard Advisors “Compendium.”

Bursting the Bubble on August Retail Sales

BTN-9-16-14Last Friday the Department of Commerce released its August retail sales figures. Total sales rose 5% compared to August of 2013.

The business and economic media heralded the news and what it might mean for retail sales performance over the next several months. The New York Times decided that the 70% of GDP growth dependent on consumer spending would be buoyed by this clear message that consumers are fed up with being cautious and poised to open their collective wallet in a big way.

A look behind the numbers tells a slightly different story, however.

Auto sales were responsible for most of the gain. Sales at automobile dealers and parts stores grew by almost 9% to $90 billion, representing over 20% of total retail sales. Retailers of health and personal care products enjoyed an 8% increase, but represent less than 6% of all retail sales. Sales at non-store, or pure-play e-commerce, retailers grew by 7%.

Department stores, apparel specialty stores, off-pricers and other purveyors of non-auto and discretionary goods, however, posted sales growth that underperformed the average. Apparel specialty stores got only a 3.2% pop from back-to-school. Food and beverage store sales rose by 3.6% compared to last year, boosted by rising prices in some key product categories. General merchandise store sales were up by less than 2%, depressed by a 1% drop in department, chain and specialty stores.

In other words, once folks have finished replacing their worn out pre-recession cars, retail sales could be facing a tough period.

Retail Doldrums

Over the past several weeks, publicly-held retail companies have been publishing their second quarter and first half sales and earnings performance results. Total sales of the top 35 companies in the department, discount, apparel specialty and off-price sectors were up by only 1% for the quarter and the half compared to the corresponding period in 2013. Market growth is not even keeping up with inflation. In real terms, it is in decline. The sales data indicate that off-pricers and apparel specialty store sales took share from department stores in the first half of the year, mostly by opening new stores.

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Comps were flat for both periods. Comps at specialty stores fell by almost 2% in the six-month period, due largely to big drops at teen specialty stores, while those at department stores were flat.

There were a few standouts in the crowd. Cato Stores, Chico’s, Dress Barn parent Ascena Retail, Limited Brands, off-pricers TJX and Ross, Nordstrom, JCPenney, Urban Outfitters and board sports inspired teen retailer Zumiez were among those reporting nice total sales increases, positive comps, or both.
But there were far more losers. The teen retailers suffered an almost 4% drop in total sales in the second quarter and the first half. Specialty stores dELia*s, Aeropostale and Wet Seal and department stores Stage and Sears Holdings suffered low-double-digit sales declines. Almost all of them had serious drops in comps as well. Overall gross margin deteriorated by 50 basis points. Total net income fell by a whopping 11%.

Predictions?

I’ve pored through the transcripts of at least two dozen quarterly earnings conference calls, looking for some indication that better days were expected in the third and fourth quarters. Most of the retailers were cautiously optimistic at best.

I also spoke to several Wall Street analysts. Although some were bullish about the ability of particular companies to gain share at the expense of others, none would go so far as to say that the overall market is growing more than a percent or so.

So, although I would love to believe that consumers are going to start spending more on clothes, shoes, jewelry, home furnishings, and other fun stuff, I think those predictions are a bit premature, if not flat-out wrong.

Which might explain why Wall Street met the retail sales news with a yawn, and markets closed down on Friday.

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As we enter the all-important holiday selling season, it’s important to keep in mind that an oversupplied market chasing apathetic demand is not a recipe for growth. This year, an over-hyped and über-promotional Thanksgiving and Cyber week will consume a large part of the holiday budget, after which things will quiet down a bit before the last weekend leading up to Thursday, December 25. Every indication is that the back half of the year will be just like the first, with flat sales and challenged margins and earnings.

Increased market share alone is what will separate the winners from the losers, and will require compelling product and an engaging store environment, both online and off. To achieve this, retailers will have had to invest in store expense, technology, and intensified customer engagement marketing. They will also, unfortunately, need to be willing to take it on the gross margin chin.

Stalking the Cyberazzi

iStock_000027023380SmallDo you ever get the ominous feeling you’re being watched or followed? Well, you are!

They know what you’re doing and where you are at any given time; what you eat; the car you drive; ailments you have and whether you’re pregnant; divorced; trying to lose weight; cheating on your spouse at some sleazy motel; or the color of the upholstery in your Lear Jet.

They know every predilection, quirk and fetish you thought were buried deep in the recesses of your private life. You are fair game and their job is to create a dossier on you from cradle to grave.

Disturbing isn’t it? But this is the shadowy world of the data broker, companies that track every aspect of people’s lives and lifestyles. They are the keepers of a Pandora’s box of consumer data and it’s there for anyone to open—for a price! [Read more…]

How Equinox Could Save Your Mall

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The Great Recession turned most US consumers into necessity-based shoppers, eliminating their need to spend a day or even an afternoon impulse shopping at the mall. But these changing demographics and shopping habits across the country have real estate developers getting creative – in some cases, by filling now-empty anchor stores with non-retail properties like fitness centers. Ironically, this emphasis on non-retail may be what woos consumers away from the convenience of online shopping and back to the mall.

Seventy-two percent of consumers say they prefer to buy separate apparel pieces at different stores, according to the Cotton Incorporated Lifestyle Monitor™ Survey, compared to the 28% who would prefer to purchase everything in one place.

“That number has really remained consistent over the last several years, indicating that the very nature of malls still holds strong appeal among consumers even as the traditional anchor store model has become outdated,” says Kim Kitchings, Vice President, Corporate Strategy & Program Metrics, Cotton Incorporated. [Read more…]

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.

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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.

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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.

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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.

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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.

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