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The Consumer View: New Priorities and Patterns

NEW YORK — America’s apparel shopping binge is over, and robust consumption may not return for at least another year. <br><br>The terrorist attacks of last September may be a full 12 months in the past, but their effects on Americans are...

NEW YORK — America’s apparel shopping binge is over, and robust consumption may not return for at least another year.

This story first appeared in the September 11, 2002 issue of WWD.  Subscribe Today.

The terrorist attacks of last September may be a full 12 months in the past, but their effects on Americans are like a long arm that is dramatically rearranging consumer spending in the present.

The broad consensus among consumer behavior analysts, market researchers, economists and trend spotters is that the attacks have crystallized and accelerated Americans’ responses to existing economic forces and demographically driven lifestage changes. Dynamics such as steadily decreasing interest rates; an expanding raft of layoffs, and an increasingly competitive workplace — plus a lengthening list of corporate scandals that have further decimated numerous investment portfolios — have combined with lifestage changes to increasingly shift spending away from fashion merchandise and toward big-ticket purchases, particularly real estate, home goods, electronics and cars.

Muddying the outlook for apparel, noted observers, is the presence of dualities in the country’s consumption patterns: A number of people have turned inward and placed a lower priority on buying fashion merchandise — let alone on the status of various labels. Many have become reluctant to flaunt their success, via material objects, due to security concerns. Yet, at same time, many are spending, sometimes extravagantly, on family and friends, and sometimes on themselves.

“Extreme events move people to the extremes,” observed Edie Weiner, president of long-term trend analyst Weiner Edrich Brown. “There were people who saw only the spiritual coming out of 9/11, which was bullshit. There is a hedonistic side, too. Each side can co-exist within one person, the person who is traveling to family events and donating more to charities, while buying a car or a boat or a home.”

Pointing out that these are complementary rather than contradictory attitudes, Weiner added: “There are people who felt the events of 9/11 made material things unimportant and elevated spiritual values. At the other extreme, though, there are people who are living for today. They believe, if you enjoy it, do it. If you want something for the kids, go get it. People are still coming to grips with both extremes.”

For Paco Underhill, managing director of Envirosell, a researcher and consultant that advises a roster of Fortune 100 firms, 9/11 amounted to a wake-up call for retail. “What retail has to wake up to is that discretionary income can be spent in a variety of ways,” he counseled. “Expensive toys like cabin cruisers have done well. Many people have decided, ‘This is a time to be really good to myself.’ The ‘trust fund’ business is sucking dollars out of wallets that otherwise might be spent at the local shopping mall. This year, I’ve spent a lot of money on people I care about, if not on myself.”

After a half-dozen years or so of cramming their closets full of apparel, consumers are demanding retailers — from Prada to Saks Fifth Avenue to Gap or Target — do more than show them tons of product. “There’s too much of it out there, and it will never be sustained in a compromised economy,” contended trend consultant Jeffrey Miller. “It’s about retailers attracting customers to their door by moving beyond simply marketing product at a good price. Creativity and daring can come out of disarray like this. People shouldn’t fear the unknown. Whoever can tickle the funny bone or state the truth will be the survivors.

“With Simon Doonan at Barneys, there will always be a customer,” Miller maintained, in citing the provocative creative director of Barneys New York. “He keeps people smiling and intrigued.”

Miller is far from alone in his assessment of the post-9/11 scene.

According to a slew of observers, it’s the unfamiliar marketing ploy, novel store ambience, and fresh design twist that are most likely to whet shoppers’ appetites for consuming healthy portions of apparel once again. In the aftermath of 9/11, observed WSL Strategic Retail president Wendy Liebmann, fashion shoppers have, by and large, “pulled in their heads.” Following a lengthy, spirited shopping spree, by the time last September rolled around, Liebmann recalled, “People were emotionally tired. The pace of it was wearisome. The terrorist attacks [sealed] those feelings.” Despite President Bush’s attempt, in the period immediately following Sept. 11, to equate shopping with patriotism, Liebmann recounted, the attacks, in fact, “gave people a reason to take a step back and not go madly shopping again.”

The numbers tell a similar tale.

In the 12 months from July 2001 through June 2002, unit sales of apparel at retail tumbled 11 percent, to 6.6 billion items, from 7.4 billion items sold in the 12 months from September 2000 through August 2001, reported Port Washington, N.Y.-based market researcher NPDFashionworld. Dollar volume transacted by consumers slumped 8 percent, totaling $88 billion in the mostly post-9/11 period, compared with volume of $95.3 billion in the earlier timespan.

The biggest drop in share of unit volume transacted emanated from the under-25 set, which bought 1.2 billion pieces, or 18 percent of overall volume, in the most recent 12 months tracked by NPD, down from 1.5 billion pieces, or 20 percent of overall volume, in the prior period. Those unit volumes were valued at $12.8 billion and $15.1 billion, respectively.

Another range of data, from Columbus, Ohio-based consultant Retail Forward, shows apparel’s share of the consumer’s wallet, in 1996 constant dollars, shrunk to an average of 3.56 percent this July from 3.6 percent last July and 3.77 percent in July 2000. In addition, that 3.56 percent share, replicated in May, was nearly flat with the 3.54 percent share of wallet apparel captured last September. Those three months marked the low-points of apparel’s market share over the past two-and-a-half years. The high-water mark during the past 31 months came in March 2000, when apparel attained 3.84 percent of consumer dollars.

Even once hard-core shopaholics, like trend consultant and former fashion editor Miller, have changed their ways. “I put myself in that great big, affluent, urban crowd who were very much chasing fashion labels,” Miller said of his pre-9/11 persona. “I was a Prada addict. I loved Jil Sander. There were five labels I ran after that made me feel puffed up, better than other people.” But after the events of last September, Miller confided, “That air was deflated for me. I’d gone off a schedule of running from Barneys on Madison to Helmut Lang downtown. I respect these brands, but I don’t have a personal attachment anymore. It’s a vague distancing from compulsively collecting fashion labels.”

Miller’s more ascetic approach to fashion shopping turns out to be representative of much of America’s mind set. According to trade group Cotton Inc.’s Lifestyle Monitor, a larger portion of people intended to plan their apparel purchases rather than buying on impulse, this April through June, compared with those who said they’d do so last July through September. Further, when polled this spring, a growing number of people aimed to spend less on apparel over the next three months, or this July through September, than they had during the prior three months, versus those polled last summer about their fourth quarter apparel budgets.

For instance, in the second quarter of this year, 62 percent of the people polled by Cotton Inc. said they intended to plan their apparel purchases — the largest group saying they’d do so since the Lifestyle Monitor was initiated, in 1994. That compared with the 56 percent who said they were going to plan their apparel purchases, during the third quarter of 2001. (The smallest portion of consumers ever to tell Cotton Inc. they’d plan their apparel purchases was the 52 percent who said they’d do so back in the fourth quarter of 1995.)

With a growing share of the population intending to plan their apparel purchases, it’s not a surprise that the smallest group ever identified by Cotton Inc.’s Lifestyle Monitor, or 43 percent, said they were aiming to increase spending on apparel during the third quarter, compared with the prior three months. That marked a substantial decrease of seven percentage points from the 50 percent who said, in the third quarter of 2001, that they planned to hike their apparel expenditures in last year’s fourth quarter. (The 43 percent level was also recorded in the first quarter of 1999.) Meanwhile, 38 percent of people polled by Cotton Inc. said they would be spending less on clothing in the third quarter, up from the 34 percent who planned to pare their fashion budgets in the fourth quarter of 2001.

The sharpest shifts in planned spending on apparel, as detected by the Lifestyle Monitor, were voiced by baby boomers, with only 39 percent saying they’d shell out more this July through September, signifying a sharp, 13-basis-point decline from the 52 percent who said they’d do so in the fourth quarter of 2001. And 44 percent of boomers said they’d expend less on apparel between July and September, or 13 percentage points more than the 31 percent who said they’d pull in their purse strings for the fourth quarter of 2001.

The challenge to America’s fashion business doesn’t stop there, however.

In part, that’s because the response of the country’s consumers to the terrorist attacks has been far more complex and multi-layered than a simple rollback of spending on fashion items currently seen as non-essential or too familiar. The rush to buy homes and cars, among other things, is evidence of a larger shift in people’s priorities. It’s one that is underpinned both by a desire to leverage low interest rates — fixed rates on mortgages this month sank to a 32-year low of 6.15 percent — and various demographic and psychographic forces at play.

For the country’s under-35 population, observed Envirosell’s Underhill, the terrorist attacks constituted the first “very bad thing that’s happened in their adult lives.” As a result, he said, “It has made them more serious, forced them to reconsider their priorities, and focused them on their nests. So, home spending has done well over the past nine-to-12 months.

“The other thing that has done well is real estate,” Underhill continued. “The 50-and-older crowd has been somberly reminded that most of them are in the last third of their lives. Many are reconsidering their housing choices and feel they can’t delay them. That’s why the housing market has held up.”

Furthermore, observed Diane Hamilton, partner in Boston-based Retail Value Consultants, an ego-association with one’s home and a growing desire to cocoon instead of traveling or buying fashion “was pushed to the forefront by 9/11.” Hamilton added: “People are spending more time at home, whether relaxing or entertaining, and spending more money on their home, all of which has left apparel begging for something to help it out.”

Indeed, the events of Sept. 11, said NPDFashionworld co-president Marshal Cohen, “moved apparel way down the consumer’s priority list.” In addition, many people are managing their budgets differently and are no longer setting aside money specifically for apparel, Cohen related.

As a result of these dynamics, observers pointed out, apparel increasingly is competing with big-ticket items, like big-screen TVs, computers, furniture, gas grills and cars, for funds from an overall household budget. And it’s often coming out on the losing end of the battle. “Apparel has been harder hit by the economic downturn than other sectors,” commented Lois Huff, a Retail Forward vice president specializing in consumer shopping behavior and demographics.

So, the question for the fashion business remains how it can tap into people’s remaining desire to spend, especially at a time they’re less interested in opening their wallets for fresh apparel. For the near-term, the answer appears to be that there is no clear solution in sight. Instead, various forces are crimping the category’s growth.

For one thing, the number of shopping trips people are making for apparel are expected to fall this year by roughly 9 to10 percent, NPD’s Cohen projected. That means Americans are expected to make about 33 shopping trips for clothing, on average, compared with 36 trips last year; down 15 percent from 39 trips in 2000, and off 23 percent from 43 trips in 1999. Moreover, said Cohen, “People are express shopping. They are not looking to spend two-and-a-half hours per trip. That’s why stores that are easy to shop, like Kohl’s, are doing well.”

“There’s a lot of talk about how fashion drives apparel spending,” said Huff, “but we’ve seen it has more to do with people’s life stages. The biggest spenders — the boomers — are using their money for other things: health needs, fitness, personal care products and services, homes, savings and investments,” Huff added. “That’s a big demographic shift for apparel to contend with.”

Adding to apparel’s difficulties are a slackening demand for luxury labels, a priority on convenient shopping, and a growing emphasis on value and willingness to trade down — trends exacerbated by 9/11. “Style will be driven more by comfort along with value,” projected Dr. Andrew Erlich, a cross-cultural psychologist and principal of Woodland Hills, Ca.-based Erlich Transcultural Consultants. “I don’t think impulsive buying will be on the rise anytime soon. I don’t see a complete abandonment of status [via fashion], but it will be approached differently.”

Ironically, observed trend analyst Weiner, fashion itself is a harbinger of democracy. As such, she contended, it played a symbolic role in the attacks of last September. “People can ‘scream’ as loudly as they want at each other, by wearing different styles, without having the capacity to silence each other,” Weiner stated. “To a certain extent, that’s why the Islamic extremists hate us. American girls can dress any way they want. And if they show their body, [sometimes] they can gain status.”

For Envirosell’s Underwood, 9/11 was a “punctuation mark in the gender wars of Islam — a patriarchal society. It raised questions about how the genders will relate to each other throughout the world.”

With such influences at work, Weiner reasoned, it’s not surprising that, post-9/11, teens and young adults are showing less of their bodies, and instead are expressing their individuality through hair styles, tattoos, and accessories — one fashion category that is expected to keep thriving in the short run, even as people keep reining in spending on clothing.

Other trends on the horizon, said observers, include styles that are escapist, decorative, ethnic, eclectic and rock-influenced rather than the somber, minimal aesthetic some had expected to prevail, going forward from 9/11. More overtly masculine and feminine looks are anticipated to keep gaining ground with teens and young adults, trumping the unisex styles that predominated in the late Nineties and into the new Millennium. Also expected to become popular with Gen Y are looks that smack of authenticity.

“What do Enron and Al Qaeda have in common?” posed Weiner. “They are both hyborgs, or hybrid organizations,” she said of a word coined by Weiner Edrich Brown. As a result of mergers, acquisitions, outsourcing, joint ventures, and such, Weiner said, centralized command and control systems are becoming increasingly irrelevant and unworkable. This is making it harder to pinpoint all the components of a particular hyborg community or business, let alone an industry, such as fashion. “No one knows exactly what’s behind these entities,” Weiner said. “Licensing is an example. Today, there isn’t a kid alive who doesn’t know that everyone’s name is for sale [to a hyborg]. This creates some cynicism — and authenticity becomes more important, especially with younger people.”

For others, including Doneger Group creative director David Wolfe, “Fashion is representing an escape, rather than being real serious. That helps explain the boom in accessories and embellished jeans,” he said in speaking of 9/11’s psychological impact on style trends.. Wolfe added that the apparel at the recently held MAGIC show was the “most extravagant” he’s ever seen there, including “expensive jeans that have been tortured — decorated to death — and fancy tops with jeweled details, even from middle-of-the-road fashion houses.”

However, Wolfe cautioned, with the apparel business these days “dead in the water,” and inventories at retail razor thin, it will be a tricky situation if consumers move forward into a more robust fashion cycle. And WSL’s Liebmann forecast, “Although fashion has fallen out of fashion, as we move more and more beyond 9/11, I think consumers will be looking to be bold again, if the right merchandise is out there.”

Although Liebmann is not alone in anticipating a period of more energized apparel spending ahead, she was the only source contacted who thought that after the first month or so following the anniversary of 9/11 (a period she expects to be marked by a contemplative mood), there is an opportunity for a pickup in fourth-quarter business. “That is the nature of the American public,” she declared. “We are a strong consumer base and a very forward-looking culture, whether it’s about something as simple as shopping or complex as family issues. Fashion, so often for us, has been the most overt response to what we’re feeling.”

The balance of the dozen-plus observers interviewed were significantly less sanguine in their fourth quarter outlooks, however. “We anticipate some very strong declines, or weak growth, in comp sales, in the fourth quarter — even compared with very weak comps a year ago,” projected Retail Forward’s Huff. At best, said Doneger’s Wolfe, the fourth quarter outlook is uncertain. “Most people,” he said, including himself, “are expecting low-single-digit growth from Sept. 11th through yearend.”

In the meantime, said Weiner, Americans have settled back into stasis. Given the remaining trauma over the events of 9/11, Weiner believes that anything obviously pales in comparison. Although Pearl Harbor was certainly a traumatic and defining moment for the World War II generation, she pointed out that it occurred long before the post-Sixties era she characterizes, in part, by risk addiction — one reason it takes so much more to shake Americans to the core than it did back in 1941. Of course, Weiner acknowledged, “On Twin Towers Day, we were off the charts.”

Thus, after such cataclysmic events as the attacks of last September, it will take a lot more to move people, let alone inspire them about an everyday activity like shopping, Weiner maintained. “We are balanced at a much higher level [than Americans were in the Forties],” she said. “This adrenaline-rush mentality that has developed over the past 30 years means it takes more and more to get us to the same level of excitement,” Weiner remarked, referring to the diminished impact of shopping, among myriad other activities and experiences. “The media barrage, rise of interactivity, expansion of amusement parks, stock market gyrations, and corporate downsizing and scandals have all contributed to this effect.”