Teens Choose Apple Over Abercrombie
In its bankruptcy filing this week, teen clothing retailer Aeropostale reportedly blamed its troubles on, among other things, "a shift in customer demand away from apparel to technology and personal experiences."
When a company blames its troubles on economy-wide shifts in consumer behavior, it's tempting to dismiss it as a cop out. Teen clothing retailers come and they go (and go and go). Maybe Aeropostale -- which began as a Macy's private label in the 1980s, became an independent company in 1998 and went public in 2002 -- has just reached the end of its natural lifespan.
Aeropostale isn't alone in its troubles, though. Fellow teen-oriented chains American Apparel and Wet Seal both filed for bankruptcy last year, while Abercrombie & Fitch struggled mightily (it's doing better now). Maybe consumer demand really is shifting away from clothes "to technology and personal experiences." Over the long run, consumer spending in the U.S. certainly has shifted in that direction:
Part of the decline in clothing's share of consumer spending can be explained by prices -- they haven't gone up nearly as much for clothing and footwear as for most other spending categories. Overall consumer prices, according to the personal consumption expenditure price index calculated by the Bureau of Economic Analysis, were 11 times higher in 2014 than in 1929. Clothing prices were only four times higher. Prices do not, however, explain everything. They have risen only threefold since 1929 in the recreation category and have actually fallen almost 90 percent for video, audio et. al. (which is a subcategory of recreation).
So yes, there really has been a shift in consumer demand, not necessarily from clothing but definitely to tech and experiences. As Americans became more affluent -- and yes, despite stagnating median incomes over the past couple of decades, the country is a lot more affluent now than it was in 1929 -- they spent less of their incomes on necessities such as clothing and food and more on optional things such as recreation. (Interestingly, the share of personal consumption spending that goes to housing and utilities has remained constant, except for a dip during the 1940s due to wartime rent controls, at about 18 percent.)
Still, from the looks of the above chart, the shift away from spending on clothing seems to have halted over the past decade. Here's a closer, more timely look using quarterly spending data (for somewhat different categories because that's what's available):
Yes, there definitely was a change in the slopes of both lines in 2009. The most plausible explanation is that straitened circumstances during and after the Great Recession meant Americans were forced to spend more of their money on necessities and less on optionals. From the looks of it, the pre-recession trends have begun to reassert themselves since 2012 or so. The great spending shift continues.
We'll presumably always need clothes. But when our incomes rise, we're likely to keep finding other things (and, increasingly, non-things such as services and virtual entertainments) to spend them on.
All this information can be obtained from the BEA's interactive data tool under "personal income and outlays."
This is in large part the result of hedonic adjustments that consider a big increase in, say, the processor speed of computers to be a fall in prices even if the price that consumers pay for a computer remains the same or rises.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
To contact the author of this story:
Justin Fox at email@example.com
To contact the editor responsible for this story:
Susan Warren at firstname.lastname@example.org