Post Great Recession logic would dictate that in an improving economy customers trade up in all categories from Marshall’s to Kohl’s and from Power Stick to Axe. Yet our products, along with retailers obsessed with value such as Dollar General, Marshalls and TJ Max, are thriving. This begs the question of why?
A recent Wall Street Journal article about consumer spending derived from data collected by the Bureau of Labor Statistics hit the nail on the head about the new “NEW” economy and its consumer angst. According to the story, the consumer dark side of our billions of twitter and facebook posts is the cost of the hardware and connectivity. This is further combined with cost increases associated with improvements in health care via new medicine and technology. These two alone explain a lot of the new “squeeze” on the monthly spending flows of our consumer oriented economy.
Our omnipresent smart devices and their connections are family budget “busters”. Because the expense has increased faster than incomes, the dollars have to come from a reduction in spending elsewhere. According to the story, the new digital expenses in our personal budgets create an amazing shift of spending that has broad sector repercussions. If consumers are spending on internet connections at a pace that costs more than 81% more than in in 2007, then something else is not being purchased…..as in look at the struggling teen apparel retail space.
And consumer mobile connectivity spending, which is the foundation of the mobile world, increased 51% over that six year period when inflation was only 12%!
This increase in living expenses gives a majority of the population, “folks” as labeled by the Washington Beltway crowd, a feeling that despite a job with some wage growth, they are falling behind in the sysifistic battle of paying their bills. This new digital expense is overlaid with a 24% increase in health insurance costs to the consumer during 2007-2013.
So something has to give. According to the article household textiles and women’s apparel led the way in significant spending declines. Because consumer spending represents two thirds of our economy this massive shift matters. There is no question the economy is improving and the recent plummet in gas prices will cement this as the best Christmas in years. But the PERCEPTION of consumer squeeze driven by new categories of cost of living, will not disappear with a strong recovery.
So welcome to the big squeeze for which our brands are the answer. Our brands of Power Stick and Soft Whisper had their best year ever. According to Nielsen data we are the leading (as in number 1!) men’s brand of deodorants body spray and body wash by both dollars and units in the “Value Retail Channel.” (over 25,000 doors)
Mystery solved…..(of course great new products help!)