'The New Age of Thrift'

Tuesday, September 30, 2008

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Sky News Online: Bail-out Vote: Tough Times Ahead in the US, by James Silver in New York

Flash holidays, designer labels and bling are out - cooking, home entertainment systems and "nesting" are in.

As the financial turmoil and its toxic aftermath seeps from Wall Street to Main Street, Americans are poised to enter a period of thrift and austerity, according to leading figures in the US retail and advertising sectors.

"Our target, middle American women, are really hurting right now," Ruby Anik, senior vice president and director of brand marketing at one of America's biggest retailers, J C Penney, told an industry forum in New York attended by Sky News Online.

"These women are forced to trade down because of the economic situation and the question for us is how we keep the emotional connection with the J C Penney brand and stop them shopping at discount retailers. It's a huge problem."

She added: "Our CEO said he has never in his 37 years seen an economy like this and we don't think we know yet what the long-lasting effects will be and what it's going to mean."

The high-level forum, which focused on business in the age of the female economy, provided a snapshot of the US retail economy as it teeters "on the precipice".

The audience of insiders also heard that US consumers now accept "the good days are over" and that marketers are currently tailoring their messages to the newly austere mood.

In trends that seem certain to be mirrored in Britain, retail industry figures suggest that "nesting" and home entertainment are on the rise, at the expense of restaurants, holidays and other luxuries.

Meanwhile, the US car industry, which has been reeling since 2007, will continue to be squeezed.

National sales have shrunk from 16-17 million units-a-year in 1999-2007, to a predicted 14.5 million in 2008.

The sector is also estimated to have lost 67,000 jobs since the end of 2007.

"What we're experiencing right now is something similar to what we experienced after 9/11," said Julie Gilbert, senior vice president at consumer electronics giant Best Buy.

"Instead of taking the big family vacation, what families are doing - and women are driving this - is making the home entertainment area much nicer, because they're going to be spending a lot more time in watching movies (and TV).

"They're also expanding their kitchens and buying new appliances, as cooking and entertaining replaces going out to restaurants.

"Any facet of the home is on a rapid increase and, from what we're seeing, big vacations and new cars - those kinds of things are on the decline."

However, the prognosis for the retail sector was not all doom and gloom.

Ruby Anik reported that J C Penney's cosmetics range Sephora was doing well despite the credit crunch.

"A by-product of what's happening in the economy and how people are staying at home more is that our women customers are really looking for the little treats, like lipstick or fragrance, which make them feel good about themselves," she said.

"So even though a large part of our stores are affected, we're finding that our accessories business, including Sephora, is doing very well and we're actually seeing very good business in that area."

Posted by James Silver - On Tuesday, September 30, 2008

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