One highly visible result of the ‘Great Recession’ is the vast number of high-end retail stores and shopping malls across the US which stand deserted and forlorn.
Where have all the consumers gone? Are they standing in the unemployment line or are they hunkered down in their current jobs doing all they can to hang on to every dollar they have?
Or perhaps the ‘Great American Consumer’ has finally been cured of its case of consumerism and Affluenza.


It’s July 2009 and the ‘Great Recession’ has been well under way for more than eighteen months with no end in sight. Tens of thousands of people are added to the jobless roles every month as countless others fall off the roles and join the ranks of the ‘discouraged workers,’ not even worthy of being counted on the unemployment roles. The state of California is no longer paying its debt with checks, but is instead issuing IOUs. Pundits and experts alike talk about a recovery that is years away even though the US economy is no longer spiraling downward.
One highly visible result of the ‘Great Recession’ is the vast number of high-end retail stores and shopping malls across the US which stand deserted and forlorn. Where have all the consumers gone? Are they standing in the unemployment line or are they hunkered down in their current jobs doing all they can to hang on to every dollar they have? Or perhaps the ‘Great American Consumer’ has finally been cured of its case of consumerism and Affluenza. An examination of the current retail sector and marketing trends offers a few clues., in its July 23, 2009 article on “Selling Apparels through Recession,” says: “Financial problems are growing in an alarming rate even for big retailers and suppliers. Small and medium sized retailers see their cash flows drying up. Shopping is now on the verge of undergoing a sea change. The amount of disposable income in the hands of over leveraged consumers is less. As the economy stagnates, businesses are under the responsibility to develop sales, and management strategies' to generate revenue.” The article continues, arguing that “in high end stores, the era of putting a hefty price tag for luxury goods seems to be over. High end shops such as Coach, Saks, and Neiman Marcus will be having more mid-priced merchandise in their store racks.” Marketers have been witnessing this emerging trend in consumer frugality for the last few years. Now retailers are beginning to recognize and react to this trend as well.
A July 27, 2009 article in Women’s Wear Daily titled “Retail Rollback: Wave of Store Closures Expected” coined the phrase “The Great Retail Rationalization of the Great Recession.” The enormous decline in retail consumer traffic has created a panic among retailers to retain their ration of the shrinking consumer dollars. The article chronicles the thousands of US retail locations that have already closed since the ‘Great Recession’ began in 2007 and predicts the further closing of thousands more.
A July 23, 2009 article in The Economist entitled “Rebalancing the World Economy: America Dropping the Shopping” reports that “the entire American economy is at an inflection point. For decades, its growth has been led by consumer spending. Thanks to rising asset prices and ever easier access to credit, Americans went on a seemingly unstoppable spending binge, fueling the global economy as they bought ever bigger houses and filled them with ever more stuff. Consumer spending and residential investment rose from 67% of GDP in 1980 to 75% in 2007. The household saving rate fell from 10% of disposable income in 1980 to close to zero in 2007; household indebtedness raced from 67% of disposable income to [a whopping] 132%. As Americans spent more than they produced, the country’s current-account balance went from a surplus of 0.4% of GDP in 1980 to a deficit of almost 6% in 2006.” The article conjectures that the recent credit collapse resulted in the destruction of $13 trillion in consumer wealth which, in turn, has “triggered a shift to thrift”. The article continues by asserting that future global economic expansion will rely on China, Germany, Japan and other countries with surplus economies.
While many retail chains are struggling to keep the shelves stocked and the doors open, others are prospering during this economic downturn. Retailers across the United States are re-tooling to try to capture their ration of the rapidly proliferating thrift-based shoppers who are searching for low-priced, need-based consumables. One reason for retailers’ scramble to re-tool can be seen in the July 29, 2009 article in USA Today entitled “More Retailers Say Yes to Food Stamps”. The article states that stores like Target, BJ’s Wholesale Clubs, CVS and 7-Eleven are now accepting food stamps or, Electronic Benefits Transfer (EBT) as they are now known, at most, if not all, of their locations. The article goes on to say: “In its third-quarter earnings report July 8, Family Dollar cited EBT as among the reasons for its success in this economy. Same-store sales were up 6.2% for the quarter, and food and beverages gained the most. ‘Food stamps represent a significant opportunity for us’, said CEO Howard Levine. EBT spending at Family Dollar was up 18% from March 2008 to March 2009, says spokesman Josh Braverman.” This is indicative of a widespread trend in consumer consumption focusing on basic-needs consumption and foregoing the conspicuous-consumption style of ‘keeping up with the Joneses’ that marketers have had their eye on for some time now.
Family Dollar’s increasing sales and market share could incorrectly lead one to believe that levels of consumerism have not declined in the US. However, a prime example of the difference between declining US consumerism and declining US Affluenza can be found in the closure of the Smith & Hawken retail chain. Smith & Hawken was an upscale lawn and garden retailer serving high-end consumers that closed its doors earlier this year. In the article “Smith & Hawken, RIP” that appeared in Home Channel News on July 23, 2009, Smith & Hawken’s parent company, Scott’s CFO, Dave Evans is quoted as saying the original idea behind Smith & Hawken was to "take the brand and extend it into our channels where we're already doing business and had existing customer relationships. That proved to be more challenging and became even more challenging in the economic environment we are in today. The business had been losing money. We explored multiple options to divest this business and at the end of the day concluded the best option for our shareholders was to actually just shut the stores down." Hence, a chain of beautifully merchandised stores, with high end products, good selection and fantastic upscale locations quietly ceased to exist. Evans stated in the article that Scott’s problems began when they first acquired Smith & Hawken prior to the onset of the recession. Scott’s acquisition of Smith & Hawken was simply too late to capitalize on America’s Affluenza. If Scott’s had examined the marketing trends showing the US’s declining interest in Affluenza-style consumerism they likely would have foregone the acquisition of the Smith & Hawken chain.
While many Americans have been driven to reduce or modify their consumption due to a direct impact from the recession, such as a job loss, many more have adopted a fear based strategy of hunkering down and protecting their jobs while they save every dollar they can. Will new-found American frugality be replaced once again by American Affluenza once the ‘Great Recession’ finally ends? The data indicate that this will not happen. Market trends from syndicated research company Scarborough in 2007 indicated that consumers were refraining from the conspicuous-consumption style of Affluenza that helped fuel US growth in previous years. If the US economy is to recover it will be based on the growth of exports to countries that still practice Affluenza-like high levels of consumption of US produced goods.
Fifty years from now when we look back on this period in time, economists will likely say that American Affluenza was cured by the ‘Great Recession’. However, marketers will tell you that America’s strain of Affluenza was already gasping it last breaths before the ‘Great Recession’ ever began. Either way, much like polio, American Affluenza has now been virtually eradicated.
China, America humbly passes our Affluenza to you. Please carry the torch well. Our global economy depends on you, and a few other countries like you, to continue our expansion. By the way, China…. Have you driven a Ford Lately? If not, perhaps you should. And remember, carrying the Affluenza torch is really hard work. So right after work today drive your new Ford to the take-out window at McDonalds and order a Big Mac and fries because, after all…. You deserve a break today!