More on What the Consumer Is Up To

Whether or not the current unraveling turns out to be a modern day version of the Great Depression -- which I've argued against because, among other reasons, the policy responses we've seen so far and those I expect to see in future point to another sort of unhappy ending -- spending won't fall to zero. People will still need to eat, put a roof over their heads, find clothes to wear, etc.

Given that, I try to help visitors to Financial Armageddon -- especially those who are investors or who make key business decisions -- keep tabs on what Americans are or are not doing with their money. Recent examples of posts on this subject include "Where the Axe Is Falling," "Green Shoots in Escapism," and "Proving Me Wrong" -- as well as the one you are reading now, which highlights an interesting New York Times article entitled "The Recession, Wal-Mart Style":

With the recession in its 18th month and unemployment now topping 9 percent, even semi-conspicuous consumption is a distant memory. Consumers are hunkered down. But when they do venture out, chances are they’re on their way to places like Wal-Mart and other big discount chains.

“Our sales — it’s like holding up a mirror to our society,” said John E. Fleming, the chief merchandising officer for Wal-Mart, the nation’s largest retailer.

So what are Wal-Mart, with 4,100 stores across the country, and other major retailers seeing?

Less browsing in the aisles, for one thing. Consumers now are “very disciplined in terms of making sure that they don’t go beyond what they have on their lists,” Kathryn A. Tesija, Target’s executive vice president of merchandising, told investors recently.

Food, of course, is high on those lists (discretionary items like clothes and furniture are not). But consumers are cracking their wallets only so far. Many are trading down to private label groceries. At Wal-Mart, sales of refrigerated pizza were up last month compared with a year ago. Lower grades of meat are outselling the higher-grade, pricier cuts. A recession protein hierarchy has emerged, with ground beef trumping steak, and chicken trumping beef. Some consumers are forgoing protein altogether, opting for pasta.

“We’re seeing a movement away from protein into carbohydrates,” Mr. Fleming said. “It stretches the dollar a lot further.”

Retailers generally don’t divulge details of their sales by category of goods. But they were willing to discuss trends. One stood out: consumers are discovering there’s no place like home.

“This whole idea of staying home and entertaining at home, we’re seeing that everywhere,” Mr. Fleming said, “from the ‘take and bake’ pizza to the $5 movies.” Ms. Tesija noted that “sales of popcorn poppers and microwave poppers are very strong.”

Retailers say consumers are trying to make being cooped up as painless as possible. Mr. Fleming said that would explain why even in this economy, sales of flat-panel and high-definition televisions at Wal-Mart are strong. After all, the retailer’s $378, 32-inch RCA LCD television is more affordable than a vacation. (Which may be why retailers like Macy’s say luggage sales are among their weakest categories.)

Home Depot’s Craig Menear, executive vice president for merchandising, told investors recently that vegetable and herb sales were thriving because “more customers are opting to grow their own vegetable gardens.”

Car maintenance and repair is also big. Sales of motor oil, filters and tires are among Wal-Mart’s top sellers. “Anything that helps their car last longer is doing well because they’re not buying new cars,” Mr. Fleming said.

Consumers are spending to keep themselves in good health too, for fear of having to miss work. Wal-Mart said sales of vitamins are robust. So are sales of over-the-counter medications. Sales of sleep aids, pain relievers and antacids have spiked.

Home repair projects are also a priority. Home Depot’s basic repair and maintenance products — plumbing items, roofing materials, caulk — have sold better than other items.

At Wal-Mart, sales of baby formula and clothing are up. Still, Mr. Fleming said Wal-Mart could tell when parents were strapped: in the first weeks of the month they buy packs of 88 diapers; by the end of the month they’re buying the 40-pack. And at Sam’s Club, sales of pull-ups — that intermediate step between diapers and underwear — are down, suggesting parents are moving their children directly to underwear to save money.

The bottom, apparently, has met the bottom.

Comments

[roger]

WAL-MART THE NEXT GM ? 4100 big box stores & growing
from sea to shinning sea.
Big biz always locking for unlimited growth ,unlimited
profits. Consumers always on the hunt for the cheapest
and the most they can get. If you don't see where this
is leading you must must have a mental block as big
as Wal-Mart big box

[Rocky]

I think Walmart/Sam's Club will be around a lot longer than Macy's or a lot of mom and pop stores.

[Pseudothyrum]

"A recession protein hierarchy has emerged, with ground beef trumping steak, and chicken trumping beef. Some consumers are forgoing protein altogether, opting for pasta. ... “We’re seeing a movement away from protein into carbohydrates,” Mr. Fleming said. “It stretches the dollar a lot further.”"

Foregoing good natural proteins/lipids and replacing them with nutrient-scarce empty calories like pasta, bread, and other heavy carbs will only serve to make even more Americans dumber.

The human brain needs quite a bit of good fats/protein to function well (the brain is composed of about 60-70% fat), and without a constant intake of good healthy fats the brain suffers. Many Americans are already what might be termed 'fat starved,' that being a condition whereby their bodies lack a sufficient/constant intake of good fats and proteins...they try to make up for this 'fat starvation' by gorging themselves on massive amounts of heavy yet ultimately empty (nutrient-scarce/fat-free) carbs like pasta or bread, which does not alleviate the gnawing 'fat hunger' they constantly feel yet still makes them all doughy and overweight because carbs have so many empty calories.