Classic study reveals economic downturn wouldn’t affect parents’ spending on kids’ needs, including their clothings. Some discretion, however, occurs, which might influence purchasing patterns.
Kids’ needs will stay, so is their clothing need, classic study says
Special to FashionIndustryToday.com
May 2, 2008
by Sarah Taylor, San Francisco
There is no doubt that the United States economy has hit a rough spot, as gas is four dollars per gallon as of printing of this book, food prices continue to rise and homes sit on the market for months and to lose value in the process. Several airlines had declared bankruptcy and many are cancelling flights because they simply cannot keep up with the price of jet fuel. Financial giant Bear- Sterns announced lay offs and that it is seeking bankruptcy protection in late March 2008. President Bush approved and signed an economic stimulus package that will hopefully encourage consumers to spend. How much worse can the economy really get?
Marvin J. Cetron and Owen Davies in “Trends Shaping Tomorrow’s World: Forecasts and Implications for Business, Government, and Consumers” in The Futurist (March-April 2008) predict that there will not be a significant economic downturn in the near future despite the recent news Consumers will keep the economy growing according to their report in “Trends Shaping Tomorrow’s World.” They credit continued economic growth to the optimistic Generation X, who in the 1990s knew nothing but good, prosperous economic times and who are more entrepreneurial than past generations. International travelers also play a part in an economic boost.
Because of the weakened dollar, it is much more affordable to vacation in the United States than in previous years. International tourism grew by 6 percent in the first half of 2007, but that is still down 17 percent from the peak of approximately 850 million in 2001. This can be attributed to the attacks of September 11th and tighten security and access as a result. Nonetheless, Americans can manage through this tough economic time. Tips from news outlets include always pay the mortgage/rent first then whatever utilities and necessities you may have- food and clothing.
Other than food, clothing is the largest spending category of individuals, according to Weatherburn, J.R. in “The Sources and Nature of Statistical Information in Special Fields of Statistics: Clothing Statistics” in a classic issue of Journal of the Royal Statistical Society. The need, and demand, of an individual is the primary factor into how much is spent on clothing. While important clothing items will be purchased without a second thought, discretionary and lavish clothing purchases will be avoided.
Economic woes are a concern for most retailers. While at the WWDMAGIC Expo in Las Vegas, NV, small boutique owners voiced their concern. “You can feel the tightening of the belt,” said Kendra Miller of Jackie B. Libby Karcsh, owner of Haven in Sea Isle City, New Jersey said that she will stick with more traditional pieces as apposed to riskier and more expensive styles. She wants to make sure that “people are not walking away because [she sells] $200 dresses.” Other retailers remain optimistic of high end purchases despite the economic weather. “If it’s truly exceptional and unusual they’ll pay more for it,” said Garrett’s buyer Rosalyn Lester. Newport Dry Goods Owner Mike New said that he was “concerned about the future” but was not planning to cut down on his merchandise selection.
President Bush recently signed an economic stimulus package that will give American taxpayers a rebate check of up to $600. Orit Kohen, owner of Los Angeles vintage clothing store, Jet Rag, believes these checks will help encourage discretionary spending. “Once people get stable, it’s going to be fine,” said Kohen. The rebate checks can help, but buyer beware of Mother Nature.
According to the USA Today report, “Wrong Weather Can Foul up Retailers’ Sales”, October 2007 sales were the slowest in 12 years throughout states in the Northeast as well as the rest of the country. Average temperatures topped 80 degrees in most states followed by an unseasonably warm October. As summer temperatures lasts longer and winter weather begins later, delayed seasonal changes put a damper on seasonal clothing sales. “Who wants to buy a winter coat in September,” said Colorado shopper Dawn Master, “It’s supposed to be 75 degrees today,” she added.
Retailers typically put out merchandise ahead of the season, but are not guaranteed a return. “If consumers aren’t motivated to buy cold-weather clothing, retailers are forced to slash prices.” “We see sales spike as soon as cold weather spikes,” said Wally Brewster senior vice president of marketing at General Growth Properties. Even when cold weather arrives in late February or early March, retailers have moved winter clothing out to make room for spring and summer fashions. Target is catching on to the weather pattern and now waits to display winter wear until November instead of September like most retailers to combat down sales on seasonal wear.
As the economy continues to slow, secondhand stores, on the other hand, continue to grow. The National Association of Resale and Thrift Shops (NARTS) estimates that sales for secondhand and consignments shops has risen 5 percent over the last 10 years. Children’s secondhand clothing stores see the biggest sales. “Clothes are so expensive and kids grow quickly, and many times, they outgrow clothes before they have a chance to wear them,” said NARTS Executive Director Adele Meyer. The few weeks before school are the busiest times she added.
The children’s clothing industry made $9.6 billion in 2006, according to Datamonitor in 2007. Market forecasts show that the industry will continue to grow at a steady compound annual growth rate of 2.3 percent, earning a value of $10.8 billion by the end of 2011. With an average birthrate of 4 million a year, infants’ clothing sales will remain strong, especially for new parents with a limited budget. Wal-Mart sales in infant and toddler apparel were estimated at $3 billion in 2003.
This figure does not include diapers, food and other accessories sold at the retail giant. National and private labels do well because of “strong floor play”- racks proudly displaying styles by George Baby, Kid Connection and mary-kate-and-ashely, as well as others. The Child of Mine brand by Carter’s saw a 74 per cent rise in sales from by selling at Wal-mart. Director of Investor Relations Eric Martin credits the profits to “good quality and good value”.
Children are the future of America, and may also be the life preserver for the rocky retail environment. According to NDPFashionworld, children’s apparel sales grew by 6 percent in 2002. “It’s the only apparel sector that grew in 2002,” said NDP co-president Marshal Cohen. The rise in sales is attributed to the fact that children constanly outgrow clothing and a shift in demographics among parents.
According to Time magazine article, “Spending it all on the Kids,” the birthrate for women between the ages of 30 to 34 was 14 percent higher in 2001 than in 1990. Births to women ages 35 to 39 were 28 percent higher. Women typically are more stable, financially speaking, in their 30s than they are in their 20s. “We have great jobs, own a home and have no debt,” said Cheryl Kilton. Kilton, at 40, is a pharmaceutical sales representative and the mother of a 2-year-old daughter.
Grandparents are also a big part in boosting children’s apparel sales. “My heart just glows when I see them wear something so cute,” said Jan Burton, 52, who has 2 grandchildren, ages 2 and 6 weeks. Baby boomers, like their 30-year-old counterparts, also have more disposable income.
Women over the age of 45 have more disposable income according to Birtwistle, Grete and Tsim, Cayan in an article “Consumer Purchasing Behaviour: An investigation of the UK mature women’s clothing market” in Journal of Consumer Behaviour. According to Birtwistle and Tsim, women in this age group typically spend between 100 and 200 pounds a month in clothing, whether it is for themselves or others. The women in their study also liked to research and try different brands. While the women were “ready and spend a high disposable income” on clothing, they were also careful about where they spent it. More women would spend more money in a store that offer high quality products and maintained a neat, organized store.
Despite current economic conditions, the children’s clothing industry can expect to see steady gains in the next few years. Because children grow so quickly and some parents and grandparents have the extra income to spend, children’s retailers will make it through this tough economic time.[]
Sarah Taylor is a business writer at FashionIndustryToday.com