Consumers are swapping everything from Lululemon leggings to Natori underwear for cheaper alternatives
4 min
Many shoppers are trading down to less expensive clothing and accessories—swapping Lululemon leggings for Uniqlo and expensive lingerie for Target bras and panties—as inflation eats into their disposable income and a rocky stock market erodes their wealth.
The downshift raises concerns about the coming holiday season, historically a time when many people splurge on designer handbags, fine jewellery and other extravagant purchases for themselves or loved ones. Investors will get updates on shopping attitudes this week when Ralph Lauren Corp., Michael Kors parent Capri Holdings Ltd. and Tapestry Inc., the owner of Coach, report their latest results.
“I’m skipping the splurge this year,” said Kate Cheng, who owns a jewellery store in San Francisco. Ms. Cheng said she normally treats herself to a designer handbag or another luxury item during the holidays, but is holding off this year over concerns about a looming recession.
She has noticed a shift in her customers’ buying habits in recent months to less-expensive silver jewellery from gold. That has prompted her to curtail her own spending. She switched to Uniqlo leggings instead of products from Lululemon, which cost about twice as much. She also canceled a trip to Maui, which would have cost about $4,000, and instead plans to take a road trip to New Mexico for about half the price.
Seventy-two percent of consumers plan to look for less expensive alternatives this holiday season as a result of inflation, according to a survey of 2,200 U.S. adults by Morning Consult, a research company.
With inflation at a four-decade high, consumers have been trading down to less-expensive groceries and other necessities for the better part of this year. Now, with the stock-market plunge of recent months further eroding the wealth of middle- and higher-income households, the penny-pinching is extending to more discretionary purchases.
Holiday retail sales in November and December, excluding spending on cars, gasoline and restaurants, is slated to increase between 6% and 8% from a year ago, after a 13.5% jump last year, according to the National Retail Federation, a trade group. The labor market is strong, and NRF expects some consumers will tap their savings and credit cards to deal with price increases.
U.S. consumers slowed their spending on luxury goods in recent months, according to credit-card data from Mastercard Inc., Citigroup Inc. and BofA Securities Inc. Spending over the summer and into September fell from the same period a year earlier, after posting double-digit percentage gains for most of the past two years.
Thomas Chauvet, who heads Citi’s Europe luxury goods equity research, said the slowdown was driven by a deceleration in transaction values, suggesting that even affluent consumers are trading down. According to BofA Securities, middle-income consumers, those making $50,000 to $125,000, slowed their spending the most.
Marc Metrick, chief executive of Saks, the online platform of the Saks Fifth Avenue brand, said customers with household incomes of about $100,000 are still spending but at a slower rate. These customers spent 20% more at Saks in recent months compared with the same period in 2021, but that is down from the 40% increase during the first six months of this year. As a result, Saks is selling fewer wallets, belts and other items bought by entry-level shoppers. “They are the canary in the coal mine for sentiment at that aspirational level,” Mr. Metrick said.
Jean-Marc Duplaix, finance chief for Gucci parent Kering SA, told investors in October that entry-level shoppers are buying less. “Among certain categories of products, which are maybe more appealing to a more aspirational clientele, there is some more pressure,” he said.
The slowdown has also hit American jeweller Tiffany, according to its parent, LVMH Moët Hennessy Louis Vuitton SA. “The business in the U.S. is a bit less strong than it used to be,” but it is still growing at a double-digit percentage, Jean-Jacques Guiony, LVMH’s finance chief, told analysts in early October.
Kering and LVMH executives said some U.S. shoppers shifted spending to Europe given the strength of the U.S. dollar. LVMH said its overall business with American shoppers in the third quarter was similar to the first and second quarters of this year.
Mr. Chauvet said the U.S. slowdown in Citi’s data, which started in May, wasn’t the result of purchases shifting overseas because it captures spending by U.S. consumers regardless of their location.
Luxury brands have been among the most aggressive in raising prices. HSBC estimates the sector raised prices around 5% since April, on top of an 8% increase starting in September 2021.
David Hampshere, who owns a real-estate investment company, switched from Ralph Lauren button-down shirts to Costco Wholesale Corp.’s Kirkland brand earlier this year. “With the stock market tanking and mortgage rates rising, I’ve definitely been cutting my expenses,” said Mr. Hampshere, who is 55 years old and lives in Freeport, Fla.
Mr. Hampshere recently returned a pair of $300 noise-canceling headphones and is instead using an old pair that he already owned. He plans to give friends and family $30 gift cards this holiday season rather than the $100 cards he doled out last year.
Stacie Krajchir, 54, a publicist who lives in Los Angeles, has stopped buying Natori underwear and now gets her bras and panties at Target. “I don’t need a $110 bra,” said Ms. Krajchir. “A $12 bra is good enough.”
She recently returned a $300 blouse she bought at Nordstrom. “I can buy a blouse, jeans and a dress at Zara, and it still won’t add up to $300,” Ms. Krajchir said. She plans to trade down in her gift-giving, too. She is getting her sister one gift this year, instead of the five gifts she normally gives her.
Brett Glickman started swapping lower-priced items for high-end ones in her San Francisco boutique after she noticed consumers becoming more frugal in recent months. She is pulling $198 French silk nightgowns off the shelves and replacing them with $24 sweaters and $65 baby-doll dresses. “I had to flip about 30% of my inventory to less- expensive prices,” the former Levi Strauss & Co. executive said.
JCPenney and Kohl’s Corp. said they are seeing consumers switch to private-label brands, which tend to be more affordable than national brands. “They were definitely trading down,” Jill Timm, Kohl’s finance chief said at a conference in September, referring to Kohl’s shoppers.
Vered DeLeeuw, of Washington, D.C., used to buy most of her clothes at Bloomingdale’s, but has switched to Nordstrom Rack for its bargain prices. “Bloomingdale’s was my mother ship, but it is too expensive now,” the 51-year-old food blogger said.
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CIOs can take steps now to reduce risks associated with today’s IT landscape
3 min
As tech leaders race to bring Windows systems back online after Friday’s software update by cybersecurity company CrowdStrike crashed around 8.5 million machines worldwide, experts share with CIO Journal their takeaways for preparing for the next major information technology outage.
IT leaders should hold vendors deeply integrated within IT systems, such as CrowdStrike , to a “very high standard” of development, release quality and assurance, said Neil MacDonald , a Gartner vice president.
“Any security vendor has a responsibility to do extensive regression testing on all versions of Windows before an update is rolled out,” he said.
That involves asking existing vendors to explain how they write software, what testing they do and whether customers may choose how quickly to roll out an update.
“Incidents like this remind all of us in the CIO community of the importance of ensuring availability, reliability and security by prioritizing guardrails such as deployment and testing procedures and practices,” said Amy Farrow, chief information officer of IT automation and security company Infoblox.
While automatically accepting software updates has become the norm—and a recommended security practice—the CrowdStrike outage is a reminder to take a pause, some CIOs said.
“We still should be doing the full testing of packages and upgrades and new features,” said Paul Davis, a field chief information security officer at software development platform maker JFrog . undefined undefined Though it’s not feasible to test every update, especially for as many as hundreds of software vendors, Davis said he makes it a priority to test software patches according to their potential severity and size.
Automation, and maybe even artificial intelligence-based IT tools, can help.
“Humans are not very good at catching errors in thousands of lines of code,” said Jack Hidary, chief executive of AI and quantum company SandboxAQ. “We need AI trained to look for the interdependence of new software updates with the existing stack of software.”
An incident rendering Windows computers unusable is similar to a natural disaster with systems knocked offline, said Gartner’s MacDonald. That’s why businesses should consider natural disaster recovery plans for maintaining the resiliency of their operations.
One way to do that is to set up a “clean room,” or an environment isolated from other systems, to use to bring critical systems back online, according to Chirag Mehta, a cybersecurity analyst at Constellation Research.
Businesses should also hold tabletop exercises to simulate risk scenarios, including IT outages and potential cyber threats, Mehta said.
Companies that back up data regularly were likely less impacted by the CrowdStrike outage, according to Victor Zyamzin, chief business officer of security company Qrator Labs. “Another suggestion for companies, and we’ve been saying that again and again for decades, is that you should have some backup procedure applied, running and regularly tested,” he said.
For any vendor with a significant impact on company operations , MacDonald said companies can review their contracts and look for clauses indicating the vendors must provide reliable and stable software.
“That’s where you may have an advantage to say, if an update causes an outage, is there a clause in the contract that would cover that?” he said.
If it doesn’t, tech leaders can aim to negotiate a discount serving as a form of compensation at renewal time, MacDonald added.
The outage also highlights the importance of insurance in providing companies with bottom-line protection against cyber risks, said Peter Halprin, a partner with law firm Haynes Boone focused on cyber insurance.
This coverage can include protection against business income losses, such as those associated with an outage, whether caused by the insured company or a service provider, Halprin said.
The CrowdStrike update affected only devices running Microsoft Windows-based systems , prompting fresh questions over whether enterprises should rely on Windows computers.
CrowdStrike runs on Windows devices through access to the kernel, the part of an operating system containing a computer’s core functions. That’s not the same for Apple ’s Mac operating system and Linux, which don’t allow the same level of access, said Mehta.
Some businesses have converted to Chromebooks , simple laptops developed by Alphabet -owned Google that run on the Chrome operating system . “Not all of them require deeper access to things,” Mehta said. “What are you doing on your laptop that actually requires Windows?”
