Another holiday shopping season has come and gone; it wasn’t too bad depending upon whom you ask. After some difficult years at retail, many stores reported better sales. Consumer attitudes have improved too, along with a seemingly improving economy. Things may be looking up, but — as with many things in economics — the aggregate story is a composite of differing, often conflicting factors.
Let’s begin with the economy; it has improved. According to the U.S. government, top-line GDP grew nearly 3% in 2014. Even better, unemployment is down while consumer spending rose nicely. All in all, it’s a pretty rosy story — except when you look at the fine print. Although overall GDP grew last year, for many Americans it didn’t continuing a long string of economic. Top wage earners did well; everyone else, not so well. Indeed, retail apparel store sales rose by more than 2% last year, but the growth was primarily at high-end stores. Mass market and discounters didn’t do nearly as well. Perhaps it is the result of an increasingly weaker American middle-class? Or is it the effect of online sales — up more than 7% last year — which continued to carve a growing share of consumer dollars?
Then there’s consumer confidence: it looks good until we dig into the details. Some consumers feel better about their economic prospects. After all, the job market has improved. But what about the kinds of jobs that are being filled? Many are for hourly wage service jobs. Also, there are new distractions in the marketplace, particularly for younger consumers. In many ways, gadgets have cannibalized garments. Today’s young consumer struggles with a very tight budget; there’s not a lot available for frivolous purchases. $150 for a pair of jeans? Nah, she’ll buy a new mobile phone instead. How does that affect retail sales? Specifically, what does that do to apparel sales?
So what are the American consumer’s discontents? When it comes to apparel purchases, fashion, fit, availability, and source of production always are important. But today, perhaps more than ever, price remains central to consumer purchasing decisions, as economic uncertainty, changing demographics, and tight budgets continue to weigh on consumers.