Luxury Spending Up

Could the “fabric of our lives,” cotton that is, be the reason retailers targeting the middle class experienced loss during the recent economic crisis? Or, is the increased cost of cotton the possible culprit of the cutback in middle class spending during the recent stock market recovery? According to Karen Tailey of DOW Jones Newswires, it’s possible among other underlying issues that middle class consumers are saving because they are, “facing higher prices because of the greatly increased cost of cotton, as well as higher labor and transportation costs.”

On the other hand, luxury living, luxury products and luxury spending remains unharmed, besides a few bumps and bruises, after the economic downturn. The reason, Barbara Kahn, director of the Jay Baker Retailing Center at the University of Pennsylvania’s Wharton School, explains in a statement to NASDAQ, “During the recession, shoppers at the high-end still had money, but there was embarrassment.” The economic downturn left those with money ashamed of excessive spending as others were trying to make ends meet. Now, with the stock market making a recovery, many luxury retailers and their customers have bounced back, taking the lead from those supplying to mid and lower markets.

This isn’t to say that mid market or discount retailers aren’t experiencing slight growth from this time last year. As NPR contributor, Sonari Glinton, confirms, “Consumers spent more on retail goods in the first quarter than they did during the same time last year.” However, consumers’ “frugal fatigue” has led them to do more splurge spending on luxury items rather than every day items. The numbers speak for themselves. For instance, as NASDAQ reports, “For March, the latest available period, same store sales gains were 11.1 percent for Saks; 5.1 percent for Nordstrom; and seven percent for Neiman Marcus, which includes its Bergdorf Goodman stores. For more mainstream retailers, Kohl’s Corp. showed a 6.5 percent decline in comparable store sales; J.C. Penney Co. a 0.3 percent drop; and Target Corp. a 5.5 fall, all off of declines the prior year.” All in all, while the middle class continues to be frugal with its everyday spending on everyday items, independent retailers who market to them are feeling the effects. This story originally appeared in a NASDAQ report at