Higher Prices Won't Deter Apparel Shoppers
Retailers -- except at the bottom end -- can look forward to brighter prospects.
No more sale signs blanketing clothing store shelves: Retailers’ ruthless inventory slashing is paying off. Stores cut their orders throughout 2009 to avoid repeating the fire sales needed in late 2008 to get rid of excess inventory. They got what they wanted: Clothing prices rose for the first time in 10 years last year. And they probably won’t come back down anytime soon. Retailers will do only selective discounting.
Despite the higher prices, consumers will buy more new duds, helping retailers put about 6% more money in the cash register. That’s double the likely average gain for retailers of all types. Last year, the opposite was true: Apparel sales declined by about 4%, while the retail sector as a whole lost only about 2%.
The fact is, for decades, apparel has been grabbing a smaller and smaller share of consumers’ dollars. Today it accounts for only about 3% of consumers’ total spending, versus 5% 20 years ago and 8% in the 1960s. That’s largely because though Americans are spending more on clothing than they did years ago, even larger chunks of their budgets are going to other goods and services. Health care, in particular, is soaking up a much bigger share, notes Adam York, an economist at Wells Fargo. Total consumer spending nearly tripled between 1990 and 2010, but apparel spending rose by only about 50%. And since the mid-1990s, steadily declining apparel prices have eroded apparel makers’ and sellers’ share of consumer spending as well.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
An uptick in apparel spending is good news for the economy. Apparel purchases are a good indicator of consumers’ willingness to spend on anything but necessities. And on that score, things are looking up. In a March survey by retail consultancy Kantar Retail, apparel was among the discretionary purchases gaining the most favor: The share of consumers planning to spend more on clothing for themselves and their children doubled from 2009 to 2010.
It doesn’t hurt that retailers are getting a better understanding of who’s shopping at their stores and what they want. Chris Goodin, a principal in Deloitte Consulting’s Strategy and Operations practice, says you’ll see “tighter assortments better aimed at retailers’ core customers,” because shoppers won’t open their wallets for just anything. The retailers that have been strongest coming out of the recession have distinctive product lines at the right prices: For example, Aéropostale has kept its teen-centric clothing at the right price throughout the downturn. Eclectic and trendy Urban Outfitters stocks unique dresses, shoes and T-shirts in its stores. Kohl’s, too, draws in consumers with a number of store-exclusive designer clothing lines at affordable prices, while Nordstrom is among the best performing department stores because its product mix has strong appeal to fashion minded consumers.
As the economy strengthens further, consumer demand is likely to support higher prices, even when inventories start climbing again. And they will rise again, says Frank Badillo, senior economist with Kantar. Higher-end makers and sellers, in particular, may be able to nudge prices up a bit, helping to reestablish the value of their brands. “There’s a certain quality for which consumers are willing to pay a premium,” says Adolfo Laurenti, deputy chief economist and managing director at Mesirow Financial, a financial services firm.
At the low end of the retailer spectrum, it’ll be tougher for prices to budge off the bottom. Steep discounts at department stores, piled on top of the usual sale prices, plus the rise of value chains such as Wal-Mart and Target, have conditioned shoppers at these stores to lower clothing prices. Coupled with the price-cutting retailers did during the recession, “there’s a new normal,” says Nate Herman, senior director for international trade at the American Apparel and Footwear Association. And high unemployment means many consumers will continue to pinch pennies, keeping pressure on prices at mass merchandisers and discount retailers.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
-
Four Surprising Signs You’ll Never Retire (and How to Fix Them)
Gearing up to retire? If any of these four signs ring true, you may want to make some changes before you do.
-
Stocks Rise After Trump-Powell Fed Tour: Stock Market Today
Nvidia hit a new all-time high intraday, but another renowned semiconductor name and some less iconic stocks were bigger movers Friday.
-
AI-Powered Smart Glasses Set to Make a Bigger Splash
The Kiplinger Letter Meta leads the way with its sleek, fashionable smart glasses, but Apple reportedly plans to join the fray by late 2026. Improved AI will lure more customers.
-
Breaking China's Stranglehold on Rare Earth Elements
The Letter China is using its near-monopoly on critical minerals to win trade concessions. Can the U.S. find alternate supplies?
-
Things that Surprise Business Owners When It’s Time to Sell
The Kiplinger Letter When it’s time to retire and enjoy the fruits of growing their business, owners are often surprised by how tough it is to give up their baby!
-
What New Tariffs Mean for Car Shoppers
The Kiplinger Letter Car deals are growing scarcer. Meanwhile, tax credits for EVs are on the way out, but tax breaks for car loans are coming.
-
AI’s Rapid Rise Sparks New Cyber Threats
The Kiplinger Letter Cybersecurity professionals are racing to ward off AI threats while also using AI tools to shore up defenses.
-
Blue Collar Workers Add AI to Their Toolboxes
The Kiplinger Letter AI can’t fix a leak or install lighting, but more and more tradespeople are adopting artificial intelligence for back-office work and other tasks.
-
Will State Laws Hurt AI’s Future?
The Kiplinger Letter Republicans in Congress are considering a moratorium on state AI laws. But it’s likely a growing patchwork of state AI regulations will be here for a while.
-
The New AI Agents Will Tackle Your To-Do List
The Kiplinger Letter Autonomous AI agents “see” your computer screen, then complete a task, from buying a concert ticket to organizing email. This opens up a world of possibilities.