The Weird World Of Economics

Once seemingly invincible marquee chains like Coach, Starbucks and Abercrombie & Fitch are settling for ho-hum growth this winter.

As the nation’s merchants began poring — or weeping — over holiday sales receipts Wednesday, a surprising pattern emerged: even brands that for years have inspired the undying devotion of shoppers felt the pinch of tightening wallets.

Once seemingly invincible marquee chains like Coach, Target, Starbucks and Abercrombie & Fitch are settling for ho-hum growth this winter, after surpassing even the most rosy expectations season after season.

Though they sell very different products, at very different prices, these companies all shared the same bragging rights. Their customers considered them indispensable, even expressions of who they were.

But in this turbulent economy, the indispensable is becoming disposable.

“This season tested brand loyalty,” said Marshal Cohen, chief analyst at NPD Group, a retail research firm.

By early December, the traditional start of the holiday buying rush, Coach, Target and Starbucks — arguably the reigning trendsetters among American retailers — warned that the number of consumers walking into their stores had begun to dip, or was likely to, as consumers restrained their spending.

Coach cautioned that the 20 percent growth rate for handbags over the last several years would most likely fall to 10 percent for the final months of this year — nothing to be ashamed of, but a significant setback. And Target, which is used to monthly sales increases of 4 percent or more for its stores, said results for December could fall 1 percent, a rarity for the chain.

A final sales tally from the season will not be available from most chains until next week. But an early projection from MasterCard Advisors, a unit of the credit card company, found that overall spending from Nov. 23 to Dec. 24, when adjusted for inflation, was essentially unchanged over last year, a weak performance.

Lynn Brisbois is the kind of shopper who is giving these companies holiday heartburn. At the Twelve Oaks mall outside Detroit on Wednesday, Ms. Brisbois, 46, browsed the pristine white shelves of a sparsely filled Coach store, but bought nothing.

When she walked into an Abercrombie & Fitch, it was not to make a purchase but to return a pair of pajamas and a sweatshirt to obtain a post-Christmas discount, which knocked $25 off the $98 she originally paid.

“I was very limited in what I did this year,” said the mother of two, who gave her twin daughters cash instead of head-to-toe clothing from Abercrombie, a brand they covet.

Retail executives had predicted that the collision of high gas prices, falling home prices and an uncertain economy would hurt most, if not all, stores this winter.

But these chains were supposed to be different.

For decades, retailers and the analysts who track them have bemoaned the death of brand loyalty. A Sears shopper, or a Woolworth consumer, remained that way for life.

The explosion of mass merchants meant that the same product, for example a Sony digital camera, could be found at a dozen competing stores. That inspired consumers to make shopping choices based on low prices, rather than allegiance to a single store.

But a handful of astute retailers, like Coach and Target, thrived through fashionable stores, sleek advertising and irresistible merchandise.

Inside the retailing industry, they earned the nickname “lifestyle brands” because they managed to reflect their customers attitude and taste, overriding concerns about price.

Coach, for example, became so popular over the last decade that many otherwise judicious women purchased six of its $500 handbags, with their elaborate designs and eye-popping colors. Its sales, profits and stock price soared.

Slightly lower down the retail hierarchy, Target, with its guest designers, like Isaac Mizrahi (for dresses) and Thomas O’Brien (for housewares), earned a zealous following. Shoppers even took to calling it Tar-ZHAY, in the mock French fashion, because of its flair for style, which distinguished it from Wal-Mart. Like Coach, Target’s sales soared.

This year, both brands are falling back to earth.

So, it seems, is Starbucks. After years of strong sales, the chain last month disclosed that customer traffic dropped 1 percent in the United States during the summer, the first falloff since it began reporting such information three years ago.

There are exceptions, of course. Apple, for example, has expanded the ranks of devotees with all its new i-products (iTouch, iPhone, iPod and so on).

But consumers appear reluctant to splurge on their favorite brands. Abercrombie’s popular Hollister division, a surf-themed store intended for a slightly younger shopper than its namesake chain, said sales failed to grow in November, compared with last year — a letdown for a fast-growing brand.

Tom Lennox, a spokesman for Abercrombie, said that “while it’s argued that spending is more difficult, our brands continue to perform quite well.” Indeed, at the flagship Abercrombie brand, sales rose 4 percent in November.

Shining Young, 25, and Ray Chou, 29, both graduate students, waited for clearance sales before buying clothes Wednesday at the Hollister store at the Westfield San Francisco Centre.

In the end, they bought a puffy jacket for $80, regularly $128, and a zip-up sweatshirt for $30, originally $50. The life of a graduate students is not luxurious, and with their expenses rising, “I shop at Hollister when it’s on special,” Ms. Young said.


Have You Ever Seen A House THAT SMALL?

Free $500 Target Gift Card (One Per Person, Must Be A US Resident)

Quite possibly, the cleverest blog post I ever read

The Homies Success Story

How To Become A Facebook Millionaire

posted by UncommonBusiness @ 3:13 AM