One of the toughest parts of the current economic situation has been simply not knowing when it’s going to hit bottom—or even where the bottom is. Once it hits bottom, at least you’ll know what you’re dealing with and you can begin to adapt to the “new normal.” Until then, all you can do is speculate about what might be the new normal and try to prepare for it.
In recent weeks, there have been some glimmers of hope that we might be at or near the bottom of this downturn. Housing starts have picked up slightly, the rate of decline of retail sales has slowed, and even the global diamond industry is showing signs of thawing out of its recent deep-freeze.
But what will be the new normal in terms of consumer shopping behavior? Right now it’s all about frugality, but what comes after frugality? And where will it leave our industry?
To date, all the signs and portents of what comes next point to a new kind of frugality. What we’ve been experiencing these past few months isn’t even frugality; it’s austerity. And it’s unsustainable in a consumer-driven, free-market industrialized society.
One might argue that the United States has in the past few decades become too consumer driven, too focused on things and not focused enough on people or on taking responsibility for the world we live in. Noted researcher and behavioral pundit Pamela Danziger of Unity Marketing observed in an interview on National Public Radio that American consumers have been spending perceived wealth, not actual wealth, and while I personally agree with those who say that we as a society have taken greed too far, the fact remains that human beings are hard-wired to want to acquire stuff and probably have been from the moment man saw that someone else had a nicer cave and a bigger fire.
So what will this “new frugality” look like? Ironically, it should look a lot like the old frugality—the kind practiced by our parents and grandparents. It means not living beyond your means. It means not buying everything you see the moment you see it, but rather saving up for the special things you really want and then feeling really, really good every time you wear them, use them, or look at them. It means not going into debt to own them. It’s the kind of spending pattern that is common for Europeans and the Japanese, and it used to be standard in the United States before the advent of cheap consumer goods and the general-purpose credit card. One nation, under Visa.
This shift is likely to be long lasting. If we as a nation do return to the kind of rampant consumerism we’ve grown used to, it’s not likely to happen for a generation—when today’s kids and teens grow up. Older baby boomers who were on the cusp of retirement and now frantically have to rebuild their portfolios aren’t going on a spending binge. Younger boomers and Gen-Xers who still have 20 years to go before retirement may not be as worried about their golden years since their savings have time to recover, but the lesson is not lost on them, either. Only the youngest consumers who haven’t been directly affected by the downturn might be spared its emotional baggage.
Still, this shift can bode well for jewelry. As we move away from a disposable society and toward one with a more long-term view of values, jewelry sits right in that spot. And, of course, the bedrock of our industry, the emotional sale, is timeless, regardless of generation, and it’s the only thing that’s somewhat recession proof. Consumers already are showing a shift away from name and status brands in other categories, be it food or handbags. This is a trend jewelers should track carefully, because it may indicate a need to shift merchandising strategies. Fortunately for our industry, it’s still the retailer that carries the primary brand recognition for the consumer, and that puts well-managed retailers in a very good spot indeed.
On a separate note, be sure to spend some time checking out JCK‘s new FirstRead section. It’s chock-full of information to help you run your business better, from store management to product sourcing to the most essential news that you may have missed online. We’ve punched up the graphics, tightened the copy, and kept a focus on giving you as much information as possible in a way that will take up less of your time to read and digest. Happy FirstReading!