The danger of a double-dip recession is scaring everybody, but not enough to keep them from buying frivolous things. As third quarter sales figures come trickling in, consumer confidence is tanking, but consumer spending is still holding up. While Americans appear more frugal in some categories, they also seem to be having a few willpower problems. Whether spending too much on make-up or abandoning their commitment to environment-safe products, consumers are indulging as much as they're cutting back, but it's not their fault. "In a poor economy, at any given moment people are more likely to have problems with self-control than otherwise," Kathleen D. Vohs, a marketing professor at the University of Minnesota recently told The New York Times. "Because there's only so far their self-control energy can be stretched."
Rising Sales Numbers
Cosmetics: After a downturn during the recession, beauty products are on the rise for more frivolous items. "The cosmetics maker Estée Lauder, for example, announced last month that it had recorded its strongest fiscal year in North America in a decade, and a competitor, L'Oréal, said its first-half net profit was up 12 percent from a year ago," The New York Times reported last month. These numbers are counteracted by drop in sales of staple goods, like diapers and household cleaners. "The psychology of the customer is you can--I hate to sound too esoteric here--but you can improve your outfit or dress up your outfit without buying a new outfit by buying a new handbag," said Kevin Mansell, chief executive of Kohl's which is strong sales of accessories like watches and handbags. "It makes people feel better."
Luxury Goods: In a very different price range, the most expensive brands are having a great year. (See also: bank profits.) Bain & Company expects the luxury sector to grow by as much as 10 percent on average this year, though much of the growth is being power by Asia. Nevertheless, in the slower growing North America but should still see eight percent growth. The earnings reports are so far confirming the estimates. LVHM, the luxury giant that controls brands like Louis Vuitton, Moët Champagne and TAG Heuer watches, just posted gangbuster revenue figures, growing 18 percent.
Booze: Not just regular booze is selling better, though--the more expensive pre-made mixers are doing very well. The Times also reports that cocktail sales are on the rise: "Unit sales of pre-made cocktails and coolers, which declined in the first two years of the recession, have jumped 24 percent in the last year. … Refrigerated baked goods were up 16 percent, and wine 6 percent." Of course, the armchair economist might just have a look at the above growth categories, and assume that shoppers are just downing some pre-mixed Mai-Tais and heading to the mall to make some bad decisions.
Falling Sales Numbers
Smartphones: AT&T and Verizon are both feeling a pinch. Smartphone sales across the board were down by over a million units in the third quarter. As we reported last week, the iPhone's especially dismal numbers--sales were down over 16 percent from last year--surely suffered by the glut of iPhone 5 rumors, as many people waited to buy a new phone until Apple had unveiled their new product. And of course, Apple rebounded right away with an incredibly strong first weekend in sales but those figures will go into the fourth quarter report. Google is also coming out with a new Android, and if sales spike there as well, it would appear that American's are still willing to spend the extra cash on fancier phones.
Diapers: A couple week's ago The Wall Street Journal reported that sales for diapers are flagging and are rising for diaper rash cremes. Brand-names took a much harder hit that the generics with Huggies sinking 4 percent over the month of September, and store brands only down 0.5 percent. The Journal notes, "The U.S. birth rate has declined since 2007, and it isn't clear how much of the drop in diaper buying is due to penny pinching and how much results from fewer kids. Or people could simply be using more cloth diapers. In their just-released third quarter earnings reporte, Huggies manufacturer Kimberly-Clark confirmed that their bottom line had taken a hit.
Green Cleaners: People are less willing this year to fork over a few extra cents for green household goods--cleaning supplies, soaps and whatnot--The New York Times reported in April. Market research showed "that the market shares of green products generally were down from their peak--especially those offered by the big consumer-products companies." Clorox's Green Works brand, for instance, fell $60 million in the past year. Asked about why she chose regular Clorox over the environment-friendly brand, one shopper told The Times, "That's something you buy and think about when things are going swimmingly."