Americans are not buying new cars or homes in this nose-diving economy, but how about low-price-point instant-gratification items such as booze and makeup?
According to a recent report by the U.S. Census Bureau, liquor and personal care products are faring well in this credit-strangled environment.
Marcia Mogelonsky, senior research analyst with the market-research group Mintel International in Chicago, is not surprised.
“Yes, we still keep buying these products even in a recession,” Ms. Mogelonsky says. “What we see are changes within these product categories.”
Meaning we might opt for a store-brand cosmetic instead of the high-end versions, and we might buy that bottle of Glenfiddich at a liquor store to serve at home rather than ordering a couple of drinks on the rocks at a bar or restaurant, where the markup can be astronomical.
“The on-premise sales will flatten out, but people will entertain more at home instead,” says David Ozgo, chief economist for the Distilled Spirits Council of the United States.
Mr. Ozgo says he doesn’t regard liquor as a “recession proof” category, but it’s certainly not in the same league as the car or housing market.
Not recession proof? Even though sales of liquor are predicted to increase this year?
“Yes, but the growth is slowing,” he says.
That sounds like the car industry during good times.
In the alcoholic beverage segment, beer is the most recession proof, says Jie Zhang, assistant professor of marketing at the University of Maryland at College Park.
“Products that make people feel good without costing a lot of money will do well in this economy,” Ms. Zhang says, adding that cosmetics fit into this category as well.
Also, Ms. Mogelonsky says, there is so much variety in each product category that consumers most likely will find something that fits the particular constraints of their pocketbook.
“There are so many inexpensive varieties of lipstick nowadays,” Ms. Mogelonsky says. “Many women are just moving from a high-end brand to something cheaper.”
A quick search on Amazon.com showed lipsticks varying in price from $2.25 to $52. In the beer category, a 12-pack of something a la Miller Lite could be $9.99 or less.
So, there it is: instant gratification for $12.25.
Throw in a Netflix movie (as little as $5.95 a month) and some microwave popcorn (usually less than $1 a pack) and you’re up to $19.20.
However, will this make us as happy as buying an expensive pair of shoes or sipping cocktails at a swanky bar?
“Shopping is pleasurable. There’s no doubt about that,” says Kit Yarrow, professor of psychology and business at Golden Gate University in San Francisco. “And that’s not American. It’s cross-cultural and across time. Shopping gives us a boost.”
Now that we don’t get the boost?
“We’ll get used to it, and I think something good will come out of it in the end,” says Ms. Yarrow, the chairwoman of her department. “It’s hard to talk about the bright spots when so many people are hurting, but maybe this will allow us to become more appreciative of what we do get.”
It also may help us lower our ever-escalating standards on beauty and fashion.
“And that can only be healthy,” Ms. Yarrow says. “Maybe get some department-store nail polish instead of a pedicure; and there’s nothing wrong with getting your fashion at H&M.”
While times are tough, though, we’re not facing the Great Depression, Ms. Mogelonsky says. There are no food shortages or gas rationing.
“It’s all about putting things in perspective,” Ms. Mogelonsky says. “You have to figure out what is your personal recession. What are you willing to bear?”
Some might be willing to give up the Godiva chocolate, but not the L’Oreal lipstick. Others might give up the brand-name and organic groceries but not a favored facial product.
Most of us, though, are making adjustments somewhere, somehow, Ms. Mogelonsky says.
In the end, we won’t have the full story on 2008 until after the all-important holiday season - in the liquor industry, for example, about a third of the year’s sales happen in November and December.
Ms. Zhang predicts that discount retailers such as TJ Maxx and Marshalls will do very well.
“The holidays are going to be very challenging,” Ms. Zhang says, adding that this recession is affecting even the upper crust’s willingness to spend.
“Frankly, I think all groups are affected because of the psychological effect of this economic downturn,” she says. “No one feels like spending a lot of money.
“It’s not going to be pretty,” she says of holiday sales.
In other words, let’s party like it’s 2008 on $2.25 lipstick and a $9.99 12-pack of brewskis.
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