Glossing over the economic gap

Scrimping at the dollar store, splurging at designer ones

August 06, 2011|By Jean Marbella, The Baltimore Sun

What is wrong with this picture?

On Wednesday, there was a story on Slate, "When Dollar Stores Are Too Expensive." In a nutshell, it said that while dollar stores showed strong first quarter profits, customers were bypassing discretionary items — which at these outlets means hand lotions and knickknacks — and sticking with necessities like toilet paper.

The next day, we had a dispatch from the opposite end of the retail spectrum, with The New York Times reporting, "Even Marked Up, Luxury Goods Fly Off The Shelves." Sales at Tiffany's, Louis Vuitton, Mercedes-Benz and their glossy ilk were up, the article said, by double digits.

So that's where we find ourselves today, one customer forgoing a $3 bottle of Dial body lotion at Family Dollar, while another hands over $1,650 for Crème de la Mer facial moisturizer at Bergdorf Goodman.

Most of us, I'm guessing, find ourselves somewhere between these two extremes, neither unable to afford bargain-brand lotion nor slathering on pricey elixirs. And yet, wherever we fall on the moisturizing continuum, somewhere below skin level, this should gnaw at us: The burden of a bad economy weighs more heavily on those already at its lowest end.

The recovery from the recession has indeed taken two divergent paths, Jie Zhang, a business professor at the University of Maryland, tells me.

"The economic recovery has been unevenly distributed," said Zhang, who specializes in retail management and consumer behavior at the Robert H. Smith School of Business. "High-income households have enjoyed a good recovery," she said. "They've pretty much recovered to pre-2008 levels. But low-income households have not come out of the woods. That's what's driving this phenomenon."

That phenomenon being the scrimping at the dollar stores, versus the splurging at the designer ones.

Zhang said that when the recession struck, luxury retailers saw their sales plummet as consumers flocked to lower-end stores. Now, though, the wealthy have seen the return of their disposable income —and, more importantly, Zhang said, their confidence.

But those on the low end of the economic scale, haven't seen a similar bounce, she said.

The contrast could not be more stark. As the Slate story noted, the CEO of one of the dollar store chains said he was holding the line on prices because "a $1 item going to $1.15 in our channel is a major change for our customer."

Meanwhile, the Times story quoted a former Saks Fifth Avenue exec as saying, "If a designer shoe goes up from $800 to $860, who notices?"

That's quite a different tune from the rhetoric we've been hearing in Washington lately — that any increase in taxes on the wealthy, for example, will cause them to freeze in their economic tracks.

What was most dispiriting about the whole debt ceiling drama that we just went through was the sense of how out of touch Washington lawmakers are from the people they represent, and are constantly invoking. Even as polls showed that the public was open to considering some tax increases in addition to spending cuts, for example, the debate was restricted to the latter — and you can guess which end of the income scale those would most likely affect.

Maybe our elected officials need to take a shopping trip, or two — to a dollar store, and to a many-dollars store.

jean.marbella@baltsun.com

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