TIME: Almanac 1993/TIME Almanac 1993.iso/time/072390/0723208.000

Text File | 1992-08-28 | 8.8 KB | 207 lines

                                                                                BUSINESS, Page 56

Hunkering Down


After the glitzy '80s, cheaper and careful are back in style

By JANICE CASTRO -- Reported by David M. Gross/New York and
Rosanne Spector/Washington


    Suddenly, it is fashionable to pinch pennies. Washington
socialites Frank and Jayne Ikard are not taking their annual
grand tour of Italy this year. Instead they plan to drop in on
friends in Montana. Beverly Hills matron Joan Gross last week
was browsing at the Price Club, a discount warehouse in nearby
Inglewood, alongside an Asian restaurateur shopping for kitchen
supplies and a Hispanic family buying low-price food in bulk.
Said Gross: "Conspicuous consumption is out."

    The mad, impetuous '80s are over. The shop-till-you-drop
gilded decade of excess, Rolex, baby millionaires and their
legions of wannabes has given way to a new age of moderation
and caution. Dynasty, meet Roseanne. In its June survey, the
Conference Board, which every month measures consumer
confidence across the U.S., found people more worried than at
any time since 1987. The economic shock therapy that began with
the Crash of '87 and continues with the $500 billion savings
and loan debacle has given Americans a new appreciation of
limits.

    Sobered by the sight of beleaguered billionaires and the
collapse of corporate empires strung out on debt, U.S.
consumers are hunkering down. They are borrowing less, shopping
carefully and saving more. During the first six months of 1990,
according to the Department of Commerce, consumer spending
growth was flat. At the same time, consumer debt rose at an
annual rate of only 3%, down from 7.6% in 1989 and 8.5% in
1988. Edward Hyman, chief economist at C.J. Lawrence, Morgan
Granfel, a Manhattan brokerage firm, predicts a virtual
standstill in consumer borrowing for the next 12 months, a
phenomenon not seen since the 1950s. At the same time, socking
away money is regaining popularity. In April the personal
savings rate topped 6% for the first time in more than five
years.

    At privately held Montgomery Ward (1989 sales: $5 billion),
chairman Bernard Brennan sees the new consumer caution in the
declining sales of such big-ticket items as appliances and
furniture, usually two of his company's strongest categories.
Says he: "People are beginning to worry. They are reading more
today about factory layoffs and companies failing because of
the debt restructuring of the '80s. There's a great deal of
unrest out there about job security and even levels of pay."

    Generally, though, the mood is not so much one of abject
fear as a mixture of resignation and relief. Resignation to
diminished expectations, for one thing. The children of the
large baby-boom generation are reaching their expensive teenage
years, and college costs loom. Something's got to give. Many
consumers also feel a back-to-basics sense of relief now that
'80s icons like the Santa Fe look, sun-dried tomatoes and
goat-cheese pizza have seen their day. Such ordinary pleasures
as gardening, milk shakes and fried chicken and mashed potatoes
are acceptable once more. Exclusive name brands no longer carry
the same cachet or inspire the same hell-bent-for-leather
efforts to pay for them, because nobody really expects anyone
to be impressed. Says Martin Puris, chief executive of the
Ammirati & Puris advertising agency in Manhattan: "The trend
is pragmatism."

    Dropping thousands at a Ralph Lauren boutique has suddenly
become excessive with the end of the era of the borrowed
life-style. In fancy restaurants, fighting for the check has
given way to fighting about the check. Says Denver developer
Peter Janopaul: "Even in the better nightclubs, people are
figuring their share of the check down to the penny. They're
not embarrassed to do so -- they're proud of it!"

    Similarly, buying top-price imports no longer seems so
smart. Many U.S. products have regained their reputation for
quality and value. U.S. sales of Porsches fell 69% from 1986
to 1989, from 30,471 to 9,479, though they recovered 19% during
the first five months of this year. BMW's U.S. sales dropped
33% from 1986 to 1989, from 96,759 to 64,881 cars, and slipped
an additional 10% in the first five months of this year.

    Buying bargain imports, though, is smart, very smart. In
Elizabeth, N.J., the grand opening of IKEA's 6.2-acre furniture
store in May created nightmarish gridlock usually seen only for
the nearby Giants football games. More than 25,000 eager
shoppers heading for the Swedish-owned store jammed the New
Jersey Turnpike, and 200 others camped in the parking lot
overnight to get first crack at the firm's $39 bookcases, $7
rag rugs, $98 pine beds and other basic furnishings. Parents
could drop off their children in a play area supervised by
store employees before turning to serious shopping. A lunch
counter served plates of Swedish meatballs and boiled potatoes
(price: $3).

    Old habits, of course, die hard. Even bargain hunters can
get carried away when confronted with tempting prices. And many
shoppers still rationalize luxury purchases as investments. In
Santa Monica, Calif., the local Lexus dealer cannot keep the
$40,000 Toyota sedans in stock.  Customers say the car is worth
much more than its sticker price. Posh shops on Rodeo Drive in
Beverly Hills continue to be packed. But the days of wretched
excess have passed for most consumers. Some of the same folks
who dropped expensive brand names like credentials last year
are impressing their friends by rattling off discount outlets
and off-price brands.

    Even the rich and famous are not above looking for a
bargain. Elysa Lazar publishes the S&B Report, a monthly
compendium of up to 250 designer showroom sales where, on
certain days, customers can buy overstock fashions from Donna
Karan, Perry Ellis, Oscar de la Renta and other top designers
for 50% off. Well-heeled subscribers include Dr. Joyce
Brothers, Regis Philbin and Sally Jessy Raphael. After Joan
Lunden mentioned Lazar's new mail-order catalog on Good Morning
America two months ago, 80,000 viewers wrote to request the
guide to discount suppliers of everything from wallpaper and
pet food to boating equipment and books. Bubbles the publisher:
"There is a movement growing in the country, a mini-revolution.
Consumers are putting their feet down and refusing to pay high
prices."

    Things have gone so far that getting your home featured in
Architectural Digest, an honor to die for in the '80s, is
considered tacky. After all, most of the homes are not so much
designed as crammed with very expensive clutter. Interior
decorators are outre, and making slipcovers and clothes for the
children seems to be gaining favor. Fabri-Centers of America,
a chain of 620 fabric stores in 35 states, reports that
earnings have grown 72% in the past year, from $5.1 million to
$8.8  million, while revenues are up 15%, to $333 million.
Chairman Alan Rosskamm attributes his company's new growth to
a renewed interest in puttering around the house and making
things from scratch. Sales at K mart were up 16%, to $7
billion, during the first quarter.

    Consumers fed up with $100-plus price tags for top-drawer
Nike Air Jordans or Reebok Pumps are turning back to $25 plain
canvas Keds, the reliable old workhorse of the athletic-shoe
industry. Keds sales rose from $150 million in 1988 to $200
million in 1989, and are expected to top $230 million this
year, at a time when most companies' sales are slowing.

    While busy Americans are eating almost as many meals out as
ever, they are hunting harder for bargains. Surveying
restaurant-dining patterns across the country between December
and February, the NPD Group, a Port Washington, N.Y., market
research firm, reported that ethnic and quick-service outlets
fared best. Some top eateries have shaved prices 10% to 20% to
keep their kitchens busy. Many popular night spots that would
have shunned families two or three years ago have added
children's plates and have hung out the welcome sign. At home,
catered dinners have largely been replaced by casual cookouts.

    Is the new consumer caution bad for the U.S. economy? In the
long run, a renewed emphasis on savings, and a preference for
products that work over those that impress can only be healthy.
If U.S. manufacturers and service firms find that they must
offer greater value to win customers at home, they will be
learning lessons that should improve their chances of doing
business abroad. Frenetic consumers who spent much of the
decade trying to have it all and wondering how to deal with the
resulting stress may find unexpected serenity in their
backyards. A touch of the tightwad is a much needed correction
after the excesses of the '80s.