By Jonathon Gatehouse - Tuesday, April 2, 2013 - 0 Comments
Jobs are returning, factories are humming — the U.S. economy is taking off
Our latest cover story is actually two stories, comparing the state of the Canadian and American economies. View the companion piece to this story, here.
For more than four decades now, John Sharp has been able to measure the economic health of America by gross output. When times are good, demand for the portable toilets his family business furnishes to construction sites in and around Orlando, Fla., surges. And when things cool off, all he has to do is look out his office window and count the green-and-white plastic huts to calculate how deep the markets are in the dumper. During the housing heights of 2007, his company, Comfort House Inc., had just 500 scattered around its four-acre parking lot. A year later, there were more than 3,000 lined up in neat rows like soldiers.
Over the past five years, Sharp has sold off equipment, cut his staff from 33 down to 11 and dipped deep into his credit line to keep the enterprise afloat. “This recession has been the worst,” says the 71-year-old. “It’s lasted the longest, and it took the biggest cut.” But now, finally, his business’s alimental indicator is showing a real increase, with fewer than 2,000 toilets left on the lot. For the last six months, Comfort House has been turning a profit again, and he’s invested in some new trucks and hired back four workers in anticipation of more to come. Local developers are acquiring land, the architects are busy, and so are the realtors, he reports. “It’s the residential sector that’s coming back. We’re still waiting on commercial,” says Sharp. “But Florida was so high, and then we fell so darned low, I’m happy just to be in the middle.”
It’s a sentiment that’s spreading among America’s bruised and battered consumers and corporations, as an economy—which has been growing sluggishly since the Great Recession came to an official end in June 2009—has suddenly turned vibrant. Job growth, which had languished at around 150,000 per month through last summer and fall, jumped to more than 200,000 in the lead-up to Christmas, and then topped 236,000 in February, the latest figure. (The national unemployment rate dropped from 7.9 to 7.7 per cent, a four-year low.) Industrial production that month rose 0.7 per cent, almost doubling the predicted 0.4 gain. And the last time U.S. factory workers put in longer workweeks than they did in February, they were churning out guns, tanks and bombs to fight the Second World War. Building permits jumped 4.6 per cent, and housing starts are now predicted to exceed one million for 2013, up more than 220,000 from last year. Auto sales have rebounded to pre-recession levels, while retail sales are also ticking up.
By Anne Kingston - Friday, March 22, 2013 at 1:00 PM - 0 Comments
Lessons from Bed, Bath & Beyond’s ‘towel-gate’
Recently, Neatorama, a popular blog, caused a big stir when it published a photograph taken at housewares emporium Bed Bath & Beyond. The snapshot was hardly scandalous: it revealed that the rows and rows of colourful towels stacked to the ceiling that greet shoppers in the chain’s stores are in fact a mirage—they’re actually a handful of towels draped over undulating foam-rubber backing to appear like stacks of towels.
On one level, it was all a big joke—“Towel-gate,” as Daily Beast dubbed it. Yet the faux outrage was clearly animated by something else—surprise, even betrayal. It was as if the picture offered evidence that maybe the retail abundance North American consumers take as a birthright—overwhelming displays and continually replenished inventories—may itself be backed with foam.
The consumer of the early 21st century can be forgiven for believing that retail resources are infinite. Just look around: T-shirts piled high at Old Navy, walls of toothpaste at Shoppers Drug Mart, ever-fresh shipments at H&M, tables laden with polyester tools of seduction at Victoria’s Secret. Shoppers expect plentiful, ever-changing display, says Joe Mimran, the founder and creative director of Canada’s top budget brand, Joe Fresh (and, before that, Club Monaco): “Basic Retail 101 is all about density,” he says. “Our visual team is constantly reworking the displays to showcase the new product that arrives each week.”
Retail anthropologist Paco Underhill, author of Why We Buy: The Science of Shopping, is bemused by the reaction to Bed Bath & Beyond’s ability to make four towels look like 24. “Retailers have been doing this for years,” he says. “I think it is curious that the shopper hasn’t realized the degree to which it is all theatrical.”
A sense of plenty triggers optimism and positive emotion in shoppers, which makes them buy, says psychologist Barry Schwartz, a professor of social theory at Pennsylvania’s Swarthmore College. The perception of scarcity, on the other hand—stores where the shelves look as if they’ve been decimated by zombies—engenders a defensive, preservation mode that encourages hunkering down, not heading to Zara. “It feels better to go into a store that has 12 rows of Coke rather than one with four rows and eight empty rows on the shelf,” Schwartz says. But it’s not just the benefit of fullness versus emptiness; it’s many versus few: if you see 12 rows of Coke rather than a modest display of one row, you’re simply more likely to buy a Coke.
Plentiful display telegraphs tacit permission, says Steve Hall, a Dallas retail display consultant who started his career at Gap Inc. “When there’s a lot of something, it’s easier to take one,” he says. Underhill agrees: “It suggests you’re free to take as many as you want—or more than you need,” he says. It also benefits retailers who have less back-room storage space than they used to: “In a typical Sears Canada of 1960, maybe 30 per cent of space was storage; today it’s 10 per cent,” says Underhill.
Abundant merchandising is about selling the forest, not the tree: it’s not just the 50 turtlenecks, but a sweeping variety of colours that also distracts shoppers from the quality of one product. Colour and lighting are crucial, Mimran says: “We look for colours to pop in an impactful way.” There’s a reason the Bed Bath & Beyond model is the norm, Mimram points out: “You can take a very basic item and when you see it repeated through the kaleidoscope of colour, you get transfixed; it’s elevated.” Colour also prevents “repetition blindness,” says A.K. Pradeep, author of The Buying Brain: Secrets for Selling to the Subconscious Mind, to describe what happens to shoppers’ brains when they’re faced with too much of the same thing. “Too many of the same thing isn’t seen as abundance, it’s a Xerox,” Pradeep says. And that’s a turn-off for shoppers.
It’s no accident that the rise of department stores in the 19th century, which banished the shopkeeper as sentry for goods hidden behind the counter or in the back, came at a time when shortage and scarcity were threats to large portions of the population. France’s Le Bon Marché and America’s Macy’s transfixed shoppers with excessive displays intended to convey a sense of luxury. With seemingly endless supplies of goods, the first department stores served as cultural pacifiers, creating a symbolic meaning of surplus and comfort. Today mass chains, along with online shopping, provide the same effect. The true “palace of LIES!” sham isn’t that retail resources are more finite than they seem: it’s that consumer resources are, too—with the schism between rich and poor widening, and the “99 per cent” seeking relief at Costco. The result? Average consumer debt in Canada now stands at a record high of $27,485 (not including mortgage debt) per adult, according to credit-monitoring firm TransUnion.
As in the 19th century, goods displayed in volume encourage shoppers not only to spend more, but to want more, and they do so by creating imbalance, says Hall. “Nature abhors a vacuum, so the shopper becomes the vacuum. You almost feel obliged to take one.” Crowded floors trigger another reaction: the expectation of aggressive discounting—and getting a bargain, says Underhill. It’s a format that appeals particularly to women, he says, citing research that shows women view shopping as “treasure hunting.” “When there are more things on the floor, there are more things to sort through.”
A perfect exemplar of abundance merchandising is retail’s current darling, Uniqlo, the $12-billion, Japan-based, 846-store chain named 2010 International Retailer of the Year by the U.S. National Retail Federation. Walking into their vast stores (which have yet to come to Canada, though rumours are flying) is like entering an ecosystem calculated to elicit consumer vertigo—and fuel the adrenalin of want: interiors are wallpapered with thousands of items stacked floor to ceiling and arranged in a stunning array of hues. (As at Bed Bath & Beyond, sleight of hand is involved: when Uniqlo managers noticed that the towers of jeans sagged at the top, cardboard-backed “dummy jeans” were inserted on the highest rows.) The vast range of colour masks the fact that the actual selection is limited: one polo shirt, for instance, comes in 80 colours.
Abundance shouldn’t be confused with actual choice, says Schwartz, whose 2005 book, The Paradox of Choice: Why More Is Less, argues that the greater number of decisions foisted on consumers doesn’t mean more options and can even lead to unhappiness. “Abundance means you walk into a store and the shelves are piled high; they don’t have to be piled high with different things,” he says. Ultimately, most choices on the consumer level are trivial—picking mint versus cinnamon toothpaste. Yet the time spent deciding imbues them with import, he says: “What ought to be a five-second process becomes a five-minute process.”
The dynamic is intensified by the abundance-scarcity paradox most evident in “fast-fashion” chains, says Underhill: inventories are replenished once, sometimes twice a week. Consumers follow that lead: the average Zara customer, a survey found, doesn’t expect to wear what she buys more than about 10 times. And though stock may be plentiful, the quick inventory turnover can prompt an “if I don’t buy it now, it will be gone” anxiety, which propels purchasing.
Scarcity fear offers a perfect foil to the ethos of abundance, which is why retailers stoke it with flash sales, pop-up stores and limited-edition designer collections, such as Crate & Barrel’s recent designer teapot promotion or H&M partnering with the high-end Italian brand Marni. It’s the ideal marriage of the abundance of mass retail with the ethos cultivated by Hermès and other high-end shrines, which showcase select products with museum-like reverence in a setting designed to draw attention to craftsmanship, status and exclusivity.
Online shopping extends the abundance-scarcity paradox ad infinitum with sites such as the OutNet and One Kings Lane, filled with high-end goods selling at deep discount (think Winners on the Internet). Yet consumers are oblivious to many of these manipulations, says Underhill, as reflected in the flap over simulated towel displays: “I think, if there’s one thing that characterizes 21st-century shoppers, it’s how naive they really are.”
By Erica Alini - Wednesday, February 27, 2013 at 7:14 PM - 0 Comments
Update: As expected, GDP growth in the last quarter of 2012 was a dismal 0.6 per cent annualized, and the economy shrank 0.2 per cent in December. Despite that, Finance Minister Jim Flaherty said today the government might further trim spending in the next budget, as lower-than-expected growth impacts revenue flows the bean counters were banking on. NDP House leader Nathan Cullen called the finance minister’s concern over balance budgets at a time of withering growth “a manufactured crisis.”
Here we explain why the economy stalled in late 2012 and why it might take some time for it to pick up speed again.
Canada’s fourth-quarter GDP figures, out on Friday, are expected to show the clearest picture yet of the shift the economy has been undergoing for the per past year or so. For the first time in nearly seven years, monthly GDP numbers have already revealed, Canada underperformed the U.S. in 2012.
In January, the Bank of Canada forecast Octoober-to-December growth would come in at one per cent, but Governor Mark Carney hinted this week he expects the actual number to be lower.
Why the slowdown? Largely, because consumer spending and the housing market, which propelled Canada out of the recession as the rest of the global economy dwindled, are losing steam. And now that the economy can’t run on internal combustion alone anymore, it’s not clear how much of lift it’s going to get from the outside.
Here’s what happened over the past decade:
Exports, Canada’s traditional engine of growth, have been shrinking as a share of the economy: down to around 30 per cent of non-inflation adjusted GDP from a record 46 per cent in 2000. As the chart shows, the 2008-2009 crisis delivered a considerable blow to Canadian exports, which fell faster than GDP and haven’t come close to recovering. But the decline started long before global demand seized up in the wake of Lehman Brothers etc. The long-term trend reflects a loss of competitiveness and failure to diversify away from the U.S. and toward Asian economies, as the Bank of Canada has long been saying.
Consumer spending, by contrast, expanded as a share of the economy during the recession, limiting the magnitude of the contraction and picking up the slack from declining net trade:
By Martin Crutsinger, The Associated Press - Friday, September 28, 2012 at 1:40 PM - 0 Comments
WASHINGTON – Americans boosted their spending in August even though their income barely grew….
WASHINGTON – Americans boosted their spending in August even though their income barely grew. Much of the spending increase went to pay higher gas prices, which may have forced consumers to cut back elsewhere.
The Commerce Department said Friday that consumer spending rose 0.5 per cent in August from July. It was the biggest jump since February.
Gas prices rose nearly 50 cents per gallon in July and August, but have since levelled off. Excluding the impact of higher gas prices and other price gains, spending ticked up only 0.1 per cent last month.
Income grew only 0.1 per cent, too. But after accounting for inflation and deducting taxes, income actually fell 0.3 per cent — the poorest performance since November.
The increase in prices and slower growth in pay forced people to save less.
“The US personal income and spending data for August are worse than the headline figures suggest and indicate that subdued jobs growth is hitting incomes,” said Paul Dales, senior U.S. The increase “was largely due to extra spending caused by the surge in gasoline prices.”