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Never before has it been so chic to be cheap. And the looming threat of a double-dip recession means consumers aren’t about to abandon that mind-set anytime soon, according to industry observers.
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While restrained spending has always gone hand-in-hand with a shaky economy, now, more than ever, Americans are bragging about their rock-bottom fashion finds. As America’s unemployment rate nears 10 percent and underemployment weighs in at 17 percent, shoppers are opting for more affordable labels to freshen up their wardrobes or are staving off purchases altogether. Job security and salary growth have gone out the window for many, along with lenient consumer credit.
And all over the globe, there is speculation the fallout from the worldwide recession could lead to a deflationary spiral that would leave the global economy in the doldrums for years. The U.S. Federal Reserve just downgraded its outlook for domestic economic growth, with chairman Ben Bernanke sizing things up as “unusually uncertain.” Japan’s gross domestic product inched up at an annualized pace of 0.4 percent in real terms in the April-to-June quarter, which only put global recovery into further question. Adding to the consternation is the fact that Eurozone inflation climbed 1.7 percent in July, its highest annual rate in 20 months.
While the average American may not be glued to London’s FTSE or Japan’s Nikkei, he or she is more inclined to acknowledge the reality of his or her own financial situation. At Forever 21’s new 90,000-square-foot Times Square flagship Friday with her teenage daughter, Donna Georgio said she is definitely shopping at stores such as Marshalls and TJ Maxx more than Bloomingdale’s like she used to. “Part of it is due to clothes being too expensive and I’m afraid of losing my job or getting into debt,” she said. “I’m 50 years old. I’ve had all the clothes and have gone from having Audis and BMWs to a Volkswagen. My priorities have changed. But I can still hook it up and look good.”
Nearby, 27-year-old Blanca Martinez, a Seattle resident, was shopping away despite being laid off by American Apparel in March. Two months into a cross-country road trip with her boyfriend, Cody Perez, she said she prefers to splurge at fast-fashion chains and thrift stores (though she does buy shoes at Nordstrom). “I love clothes and I want a lot of them, but I don’t want to put a huge dent in my savings,” Martinez said.
Consumers have plenty of reasons to be frugal and will keep trading down and saving money for years to come, according to Howard Davidowitz, chairman of Davidowitz & Associates Inc., a New York-based retail and consulting banking firm. “People are looking for value and the consumer mind-set has changed forever. All you have to do is look at what’s going on with Mango, Zara and H&M [financially],” he said. “The most dramatic example is Japan. I have a home there. It used to be the biggest place for luxury [shopping]. Everything has changed there because the standard of living is declining and that’s what is going on here.”