Akkam’s Razor

There has been a trio of stories that have come out that point out the economic problem of rising inflation and stagnant wages and their affect on many American households.

First, we have the decline of US teen drivers from about 50% all the way down to 33%.  Then, in a local story, we have Pennsylvania State Senators worried about a dwindling lottery surplus, casting a suspicious eye at currently-being-implemented casinos.  Lastly, there is the NY Times story about the decline of Americans playing golf.

The reason I illustrate these is that there are all examples of items sensitive to Americans disposable income.

American teens usually inherit the oldest car in their household and work part-time for gas money.   Nowadays, that old car may still be in service, as their parents may have decided to put off purchasing a new car, in light of economic uncertainties. Compound that with gasoline costs that have AT LEAST doubled since 2001.

The same holds true with lottery - both the working poor and the lower-middle class, self included, wouldn’t bat an eye at throwing a buck or two at a lottery ticket.  Nowadays? Not so much.

Golf is the perfect example of something the nouveau rich have taken up - I have several friends who like to drink their microbrews and smoke their cigars on an early Sunday morning tee time.  I’ve always chalked it up as something to be done in the professional setting, or as an excuse to go out drinking with the guys, even if it had to be at 5 o’clock in the morning.  Now, with budgets being squeezed by utility bills, gasoline prices, and healthcare costs, that’s one of the first items to be cut.

I also recall these last few Christmases, excluding the most recent one, paying careful attention to hot items, costs, and which retailers did well (and which didn’t). Suffice to say, the overarching theme has been high-end stores (and aspiring high-line stores) such as Lord & Taylor and Nordstrom doing well, discount chains such as Walmart and Target meeting or exceeding expectations, and mid-line retailers, such as Sears and JC Penny’s struggling.

Now, certainly some of this is due to Americans moving away from both the mall and department stores towards power centers and the internet. But I strongly suspect some other economic trend was happening as well.

Could it be that each of the three types of retailers were experiencing different circumstances - with those shopping the mid-line stores either becoming bargain- or luxury shoppers, dependent on their economic conditions? What will happen next, since it appears that inflation is full bore and spreading beyond core items?  Will the high-end stores suffer?  Will the share of business be reallocated?

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