Sixty percent of U.S. adults plan to spend less next year than they did in 2008 — and apparel purchases are targeted for major reductions, Boston Consulting Group has found.
The vaporization of personal wealth and the deepening recession in the U.S. have resulted a new urgency to save money — a change that is unusual for its speed and scope. About half of the country’s adults plan spending cutbacks this holiday, an indicator of still-tighter budgets for the year ahead.
“We never expected to find a decrease of this size,” said Michael Silverstein, a BCG senior partner. “It is a totally different mood and attitude. I’ve never seen as rapid a shift” in people’s view of their personal finances as the one that’s occurred between spring and fall 2008. “Consumers are cutting spending with a vengeance, saving their last few dollars, and are fearful.”
Apparel is an area in which shoppers anticipate making their sharpest cuts in 2009, along with restaurants, vacation travel, electronics and home furnishings. One in five consumers said they would be spending less on clothes, and half anticipated making fewer visits to restaurants — the sector facing the biggest potential loss of customers.
The findings were based on a late-October representative survey of about 1,700 adults with annual household income of $50,000 or more, conducted by Harris Interactive for BCG and analyzed by the consultant.
An “extraordinarily tough” consumer climate will prevail at least through spring 2009, a period in which shoppers will likely be making fewer visits to stores than a year ago, said Britt Beemer, chairman at America’s Research Group. “We will probably see more retailers go bankrupt in the first six months of 2009 than in the last five years combined,” he said.
A similar scenario is anticipated by Stacy Janiak, a vice chairman and U.S. retail leader at Deloitte, who expects “another pick-up” in retail bankruptcies this winter, following the “pick-up in the pace of Chapter 11 filings going into the holiday season.”
This holiday, a group of 300 people in their 20s and 30s who are considered tastemakers by trend forecaster Zandl Group, said they were being more discriminating about fashion purchases for themselves. Apparel for the workplace and boots top their shopping lists.
“That has a lot to do with the job market, if they’re looking for jobs, and secondarily, wanting to seem as buttoned-up as possible in their current work environment,” said Irma Zandl, president of Zandl Group. Unemployment rose to 6.7 percent in November from 6.5 percent the previous month, and 533,000 jobs were lost, the biggest monthly increase in 34 years. Some economists project the jobless rate could rise as high as 8 percent next year — twice the estimated 4 percent considered more typical in the U.S.
The tastemakers are getting choosier about holiday gifts, too. “There’s more of a sense of wanting to buy things that are really wanted,” Zandl noted. “People don’t want to waste money on junk.”
Three-quarters of the cohort had holiday gift budgets of either $100 to $300 or $300 to $600, when polled by Zandl in mid-November.
“It’s going to take a while for people to get out of debt; I don’t see a turnaround until 2010,” Beemer said of consumer finances. “This year, 70 percent of people’s tax refunds went to paying off debt.” A still-bigger piece of tax refunds is likely to be used this way next year, he added.
Fear and worry have possessed shoppers, Silverstein said, with a plunge of 40 percent in the value of “paper equity” owned by the 40 percent of U.S. households with the highest annual income. People in these 46.3 million homes have an annual income of $62,500 or more.
Silverstein said it will take four key elements to restore people’s confidence and get them to start spending more on discretionary items such as apparel:
• President-elect Barack Obama taking office Jan. 20, signaling the possibility of new solutions to the economic crisis, such as his proposed economic stimulus program.
• A fiscal stimulus policy that will produce some inflation and defuse the deflationary threat to business profits.
• A job-creation program.
• A stabilization of housing prices, propped up by government assumption of foreclosures and lower interest rates on mortgages of homes in danger of foreclosure.
Rates on 30-year fixed mortgages have eased to about 5.96 percent from 6.1 percent, according to HSH Associates, since the Federal Reserve revealed plans for an $800 billion stimulus package to aid both consumers and money lenders. The announcement came just ahead of the traditional Black Friday kickoff to the holiday shopping season, when spending rose about 5 percent, but came at a cost to profits in many deeply discounted transactions. Holiday spending has since lagged.
With fixed costs eating up about half of Americans’ monthly budgets — a big bite, given their fears about job security and broader economic woes — discretionary spending is likely to keep falling well into 2009, Silverstein said. Discretionary outlays now command about one-third of the income in most U.S. households. Discretionary purchasing in homes with an annual income of $94,000, for example, is averaging about $30,000. By comparison, householders with an annual income of about $48,000, the U.S. median, are buying a considerably smaller $14,000 worth of discretionary goods a year.
“Azzedine has been one of the biggest influences in my life. He has always been such a strong, loving, fatherly figure to me. I call him Papa. His designs are indescribably unique, they are pieces of art. He knew how to make the female form look its loveliest. I have so many memories of him; my favorite might be during my first show with him in Paris. He liked me and he wanted to help me get more work. He called all his friends at Kenzo and Comme des Garcons, and asked them to book me. They said, ‘But she can’t walk!’ And he said, ‘but she has such a great ass!' His friendship and support has been the great privilege of my career. I can't imagine life without him. Repose en paix mon Papa.” - @stephanieseymour tells @wwd. #wwdfashion (📷: @steveeichner) #alaia #azzedinealaia
Azzedine Alaïa, flanked by two of his closest friends, models Stephanie Seymour and Naomi Campbell.
He designed Seymour’s dress for her 1995 wedding to Peter Brant, and treated Campbell (who famously called him Papa), like a daughter. For more on the legendary designer, tap the link in bio. #wwdfashion #alaia #azzedinealaia
Azzedine Alaïa's “I-did-it-my-way” ethos stood out starkly at a time when brands are experimenting with consumer-facing fashion shows, coed formats and trans-seasonal collections – anything to perk up lackluster sales of ready-to-wear in an age of Insta-everything. “It’s not creation anymore. This becomes a purely industrial approach,” the late designer told WWD in an interview last year. “But anyway, the rhythm of collections is so stupid. It’s unsustainable. There are too many collections.” Read more about the iconic designer’s life and work on wwd.com, link in bio. #wwdfashion #azzedinealaia (📷: @WWD Archive, 1986) #alaia
Sneaker reselling app @goat’s latest exhibit, "The Greatest: New York," tells the story of New York's sneaker culture. To celebrate the exhibit, an intimate crowd gathered on Thursday night at the pop-up gallery space, located at Platform in Culver City, to hear guest speaker and illustrator @esymai talk about her own rise in streetwear and women in the business. "For me I'm just someone who is creative. I like to create things," said Chang. #wwdfashion
Azzedine Alaïa, one of the most iconic couturiers of the modern era whose body-con designs defined Eighties fashion, has died in Paris. The diminutive Tunisian-born designer, known for his structured knitted dresses with fitted waists and impeccably cut, figure-hugging second skin silhouettes was deeply admired by his peers, and counted supermodel Naomi Campbell - his adoptive daughter - among his inner circle, one of a gang of glamazons including Farida Khelfa, Carla Bruni and Stephanie Seymour who became ambassadors of his style. (📷: Alexandre Guirkinger) #wwdblast