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Consumers willing to spend at higher-end retailers

Mitchell Hartman May 13, 2011

Consumers willing to spend at higher-end retailers

Mitchell Hartman May 13, 2011

Kai Ryssdal: There are something like 42 bajillion variables that go into figuring out how the American economy’s doing. It’s just that complicated an organism.

One of the biggies is a little number called CPI. The consumer price index — or inflation. The Labor Department said today it’s up 3.2 percent over a year ago. If you’ve listened to this radio program at all recently, you know most of that’s in food and energy costs.

But even what the government calls core CPI — all the other stuff, basically — is up as well, to its highest level in more than a year. Now, I mention that for two reasons. A) Inflation is still historically really low. And B) We talked yesterday about how the rising cost of gas is pulling spending away from other parts of the economy. How, then, to explain that at lot of department store chains are reporting that sales and profits have come roaring back?

Marketplace’s Mitchell Hartman explains.

Mitchell Hartman: Business is great at Macy’s, Nordstrom and other fancy department stores. But most consumers are still strapped for cash. It’s a disconnect, because well-heeled shoppers are disconnected from economic trouble, says analyst Richard Jaffe at Stifel Nicolaus.

Richard Jaffe: The consumer at Nordstrom and some of these better department stores is certainly in the top half of the U.S. economy, and fairly immune to variations in gas or food prices.

Jaffe says the so-called “aspirational” consumer is back, willing to pay full retail, or nearly that, for brands that represent luxury and status. And he says chains like Nordstrom have invested to meet them with a clicks-and-mortar strategy.

Jaffe: So the consumer can find a shoe that fits and order it in three colors and have it delivered to their home. And similarly they can shop online and then go to the store to pick it up.

I met Tim O’Hearn coming out of the Nordstrom in downtown Portland this morning. I asked what he’d been shopping for.

Tim O’Hearn: Socks.

Hartman: Why do you pick Nordstrom? I mean, there’s cheaper socks elsewhere, right?

O’Hearn: I like good quality things; I like to shop in an environment that’s attractive.

And wouldn’t you know — O’Hearn is also a small retailer, with a pair of luxury linen shops in Portland and San Francisco.

O’Hearn: We do not have to sell at discounted prices as much as we used to. Customers, if it’s the right product, are buying it at a fair retail price.

Following in the footsteps of big brother Nordstrom, sales at O’Hearn’s stores were great in April.

I’m Mitchell Hartman for Marketplace.

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