In Time of Scrimping, Fun Stuff Is Still Selling

By STEPHANIE CLIFFORD and ANDREW MARTIN

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With a flat job market and an economy that will not improve, Americans are once again buckling down and cutting back.

At least on the things that they can resist.

Consumers at all income levels have been splurging on indulgences while paring many humdrum household expenses, according to industry data for the last year. Many retailers also report that while fripperies like purses and perfumes are best sellers, they cannot get shoppers interested in basics like diapers, socks and vacuum bags.

“My birthday is coming up, so I’m treating myself,” said Ragan Belton, a social worker leaving the Macy’s in Manhattan with newly styled hair and a pair of shoes.

Consumer psychologists say that in this uncertain economy — coming after one of the worst recessions in generations — it is just too hard being good all the time.

“People have a limited supply of energy to put toward controlling their urges,” Kathleen D. Vohs, a professor of marketing at the University of Minnesota, said in an e-mail. Ms. Vohs studies spending behavior at the university’s Carlson School of Management.

Many of the products selling briskly are not high-priced, but they could be on a party supply list: premixed cocktails and coolers, cheesecake, cosmetics and wine. Meanwhile, sales of staples like batteries, bleach and fertilizer have declined sharply.

The pattern has shifted since the recession, when shoppers stocked up on basics but consumer spending and overall retail sales plummeted. Now, despite persistent consumer pessimism, spending is holding up, retailers have posted consistent profits and some companies that make the fun stuff are reporting especially strong results.

The cosmetics maker Estée Lauder, for example, announced last month that it had recorded its strongest fiscal year in North America in a decade, and a competitor, L’Oréal, said its first-half net profit was up 12 percent from a year ago. Last week, a crush of shoppers hoping to buy a cheaper line of Missoni fashions at Target brought down the retailer’s Web site for the better part of a day.

“When the crisis hit and people really started to feel a pinch in their pocketbooks, they started to spend less across the board, especially in discretionary kinds of things,” said Vicki G. Morwitz, a professor of marketing at the Stern School of Business at New York University. “But it’s difficult, I think, for people to do that for a long time, even when they need to.”

Economists say the spending does not translate into a broader shift in consumer confidence, nor does it point to an economic revival. In the long run, basics are the bread and butter of retailing, and when they slump, the industry as a whole eventually feels the pinch. Also, some analysts say, many shoppers remain price-conscious, even about their indulgences. That means they tend to gravitate toward cheaper imports, which might help on the retail employment front but does not create manufacturing jobs domestically.

“The toughest businesses, frankly, have been in the middle of the basics assortments,” Myron E. Ullman III, chairman and chief executive of J. C. Penney, told investors last month, referring to clothing staples. In the company’s second quarter, shoes, handbags and jewelry were top sellers.
At Kohl’s, similar categories — watches, handbags and women’s shoes — were among the strong sellers in the second quarter.

“The psychology of the customer is you can — I hate to sound too esoteric here — but you can improve your outfit or dress up your outfit without buying a new outfit by buying a new handbag,” said Kevin Mansell, chief executive of Kohl’s. “It makes people feel better.”

Unit sales of premade cocktails and coolers, which declined in the first two years of the recession, have jumped 24 percent in the last year. A similar pattern holds with many other indulgent items, which dropped in sales when the recession hit. In the last year, though, sales of body scrubbers jumped 21 percent, cosmetic accessories rose 22 percent and nail polish rose 10 percent. Refrigerated baked goods were up 16 percent, and wine 6 percent. The figures come from SymphonyIRI Group, a market research firm in Chicago, that tracked sales at most major stores, excluding Wal-Mart, for the 52 weeks ending July 10.

“In a poor economy, at any given moment people are more likely to have problems with self-control than otherwise — because there’s only so far their self-control energy can be stretched,” said Ms. Vohs, the professor of marketing.

Some of the products that declined are associated with household chores. Fertilizer and weed killer dropped 19 percent, as did vacuum bags. Thermometers declined by 20 percent, and flashlights and batteries by 10 percent. Diapers, bleach, shoe polish, car wax and socks are also on a downward trajectory, the data shows. Of course, not all products fit neatly into these trends. Experts are still pondering the run on meat pies, the sales of which jumped 15 percent.
People interviewed about their shopping practices sounded as if they had grown tired of budgeting. Ms. Belton, the shopper at Macy’s, said that she had curtailed spending as her hours and pay decreased, but that she needed a break from the austerity. “This was one of the first times shopping in six months,” she said.

Outside a Sephora store in Times Square, Angela Spencer, 50, said, “I may not buy as much, but I accessorize more.” She splurges, she said, “only if I really got to have it.”

One thriving category in the treat-yourself economy has been cheesecake, with sales rising 22 percent in the last year, according to the SymphonyIRI data.

At Junior’s Cheesecake, a Brooklyn-based restaurant and cheesecake store, a co-founder, Alan Rosen, said sales at the 61-year-old company were increasing again after dropping for the first time ever during the recession.

“People want to get back to living — it’s become a more adjusted normal,” he said.