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Frugality in Fashion Amid Economic Slump

Now more than ever, Americans are bragging about their rock-bottom fashion finds.

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Davidowitz noted food stamp usage in the U.S. is at an all-time high, banks continue to repossess homes and state and local governments running large deficits should result in further layoffs. He pointed to TJX’s $20 billion sales, Ross Stores Inc.’s strong financial results and Family Dollar and Dollar General’s building 1,000 stores between them as signs of retail’s future. And fast-fashion specialists such as Forever 21 and Topshop are responding to trends and getting goods into stores in two weeks — a turnaround time that is considerably faster than department stores. “In business, time is life. If you are competing against someone who can respond in 14 days and you take two months, you’re done,” he said.

There is plenty of proof that stores expect shoppers to keep shopping for deals. High-end department stores are accelerating the expansion of their outlet formats: Saks Fifth Avenue is opening more Off Fifth stores, this spring Neiman Marcus unveiled an 11,000-square-foot Last Call discount store in Dallas, Nordstrom opened a Nordstrom Rack store earlier this year in Manhattan's Union Square and Bloomingdale’s has just entered the outlet store business, Davidowitz said. Last week J.C. Penney Co. Inc. and Kohl’s Corp. lowered their profit forecasts, though Davidowitz noted the non-mall-based Kohl’s is better positioned with one-third the size of most big-box department stores.

Going forward, time-starved consumers will be more inclined to patronize urban stores as opposed to mall-based ones, Davidowitz predicted. And many fast-fashion resources — Forever 21, H&M and Mango, among others — are favoring city streets for new stores as opposed to malls. Urban Outfitters, for example, opened a 15,800-square-foot store at 2633 Broadway on Manhattan’s Upper West Side Thursday, and plans to unveil a Fifth Avenue flagship Dec. 9 and an Upper East Side store next month.

Vice president and senior analyst Scott Tuhy of Moody’s Investors Service said, “We’ve been talking about two things. One is value is in, and the second is high-end spending is tough. Just look at TJ Maxx’s results versus Neiman Marcus’.”

And boasting about bargains is as much about necessity as it is about anything else, he said. “Part of the reason this is happening is because consumers don’t really have an alternative. Incomes are under pressure and credit is tight,” Tuhy said. “If you look back at the boom years, a lot of that spending was accessed through credit. Debt-fueled affluence or aspirational consumerism is going to be challenged to return and is not about to get us back to where we were.”

Needless to say, he is not counting on shoppers to start spending more freely anytime soon. “From a big-picture macroeconomic standpoint, we are expecting a very sluggish recovery in the economy that is probably not conducive to consumers waking up one day feeling a lot better about everything and willing to spend again,” said Tuhy, adding the projected growth in consumer spending is 2 percent. He also noted the bounce-back will take at least 12 to 24 months, if not longer.

Chris Christopher, senior principal and economist with IHS Global Image, said, “When times are good, people use fashion to show how important they are. When times are tough, they use it to show more modesty.”

Just as the Great Depression called for a more subdued dress code, this recession has triggered more restrained spending. The fact that the U.S. Commerce Department reported Americans on average saved 6.4 percent of their monthly incomes clearly shows they are cutting back on discretionary purchases, Christopher said.

“They don’t want to be in your face,” he said. “We can’t get economic data from the census to show these things, but economists can gather anecdotal evidence from people who follow these trends. People have been traumatized by losing a job or seeing so many people unemployed. That affects what they do with their money. It’s not just the economy. It’s a mixture of the sociological, psychological and economical.

“I always take my shoes to be repaired and I ask the owner, ‘How’s business?’ Last time I asked, he said, ‘Wonderful.’ That’s when I know we’re in trouble,” Christopher said.

The financial fallout has led to a greater appreciation for experiences rather than possessions, and quality family time will only become more important, he said. “Conspicuous consumption is not very chic right now,” Christopher said. That behavior is counter to the Veblen effect, named after economist Thorstein Veblen, who first noted that decreasing the value of high-end goods only decreases people’s interest in buying them, he added.

 

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