Apologies to whoever sent me the link to this because I don’t remember who it was. This graph is making the rounds on the intertubes. It is distressing a lot of kindred because it is used to prove our industry is dying because consumer spending on clothes today is half what it was in the 1970’s. Here’s the money quote:
Americans spent almost $326 billion on clothing and footwear in 2009, which as a share of disposable personal income, was the lowest ever in U.S. history, at only 2.98%. Spending on clothing as a share of income has fallen in 20 out of the last 22 years… Compared to 1950 when spending on clothing was 9% of income… and compared to spending on clothing of 6% of income in 1970, spending last year was half of that share.
Ugh. This is enough to convince anyone to throw in the towel. This blog author has a lot of credibility -he’s a professor of economics- but I disagree with his conclusions. A more comprehensive analysis of the research shows we’re doing quite well, far better than anyone realizes. The headline shouldn’t be Spending on Clothing and Footwear Falls Below 3% of Disposable Income for First Time in U.S. History but Clothing sales have increased 300%! I think it’s time for a bit of optimism amid the continual gloom and doom. Here’s why I think this is a great time to get into the industry or expand operations and product lines.
Sure, the percentage of disposable income spent on clothing has fallen by half -but is this bad news? Hardly. We have a lot more disposable income than we used to. For example, circa 1970, disposable income amounted to about $4,000. With clothing expenditures of 6% (see the chart above), that’s about $240. However, when you consider the increase in disposable income since then (43% in real dollars, adjusted for inflation) and even at today’s new low of only 3% of disposable income spent on clothing purchases, this means the average spent is $810 per year, amounting to a 300+% increase. We’re doing great! Disposable income only increased 43% but we got a disproportionate percentage of it, namely a 300% increase in spending. Don’t let statistics get you down, do the math.
Consider the alternative; if we were greedy and expected consumers to continue to spend that 6% on clothes, that would amount to each of us spending $1,600 for the chart to flat line amounting to a 600% increase in clothing purchases.
Are prices falling?
It is also claimed that clothing prices have fallen. Really? It depends on how you parse it so let’s look at one of the variables, namely product caliber. We have tons of clothes but they are not of the same caliber as before. Previously, a woman bought a greater percentage of blouses with interfacings, more involved sewing, buttons, trims etc but today, the average woman is wearing a tee shirt with some dye slapped on it. While a blouse and tee may provide the same function of covering a body part, the two product types are not the same caliber or cost of product. It would be a travesty if the average tee cost as much as a blouse once did, adjusted for inflation, so having the expectation the costs should be equivalent strikes me as greedy. For this reason, menswear is a good market to analyze. Apparel choices in menswear have evolved but not as radically. It’s better to look at outerwear, suiting and work attire. Prices of apparel in these categories is relatively static if not increasing slightly once adjusted for inflation and product caliber.
Doomsayers imply clothing costs less due to offshoring (with us presumably raking in the difference) but that isn’t completely true either. With respect to the cost of production, these have undeniably declined with offshoring -but also due to greater efficiencies. However, the kinds of costs incurred have evolved. Offshoring has reduced production budgets with the “savings” now being allocated to marketing and retail mark downs. This means the total costs getting product into consumer’s hands has remained static or increased with money shifted from production and applied to branding. Margins are thinner than ever. Nobody is raking it in to the extent doomsayers imply. The only change are spending priorities. Thank goodness consumers are spending 300% more than they were forty years ago.
Which is not to say I don’t wish people spent more on clothes but I think it would be more sustainable for all concerned if they bought fewer but better quality clothes for the same dollars.
Speaking of things not being as sucky as they’re purported to be: parents today are spending more time with their kids across all income brackets. The biggest gains are from men; more than doubling their time spent. And another thing, divorce rates continue to decline… there’s plenty of good news out there if you’re looking for it.