Yuppie Life
During college I minored in Economics because I knew I did not want to major in it, yet somehow I was interested. After taking various courses I find my interest piqued when anomolies or trends pop up in the economic landscape around us. For that reason, and thanks to far more eloquent writers who have penned discerning articles (
trading up and
rising luxury costs), I have found some trends which seem to directly mirror my own experience and habits. These economic trends actually
explain WHY I'm spending like I'm spending.
First off, isn't Godiva Chocolates considered a high-end luxury store? You see, many stores cater their products to the affluent. They look for their niche among the rich because they charge greatly inflated prices for their products. Even Starbucks coffee is supposed to be a high-end commodity. For generations now the poor have shopped at discount retailers and the rich have perused the limited/rare/niche stores that by price simply exclude the non-rich. The "non-rich" in question even includes the masses: the middle class.
However, over the past 10 years a trend disparate to the norm has become evident: the middle class and upper middle class are "trading up". They are picking areas of their lives to live like the upper class. These types of thoughts go into their minds: "I'm a chocolate connoisseur, so it's okay to have Godiva" or "This is my hobby/passion, so I'll just spend a little more on this". The interesting thing is that it sounds perfectly normal to think that way, but it is NOT the way things used to operate.
That type of spending has translated into lower profit margins for Walmart, fast food, etc and huge earnings for the higher end "yuppie" stores. It has become so profitable that many of these "yuppie" stores have built plenty of new stores in very accessible (read: available to the middle class) areas. Now just about anybody can have at least a little bit of luxury in their lives. Some fancy shoes here, a yummy truffle there, a few Frappuccinos here, a nice spa treatment there...
A new trend seems to be starting. Over the past few months the trend is the exact opposite. Starbucks profits are down. Nearly across the board every so-called high-end retailer has come in under their projected earnings...especially during July. Now, we all know that the rich will stay rich and they really won't be hurt badly if the market takes a dip. However, the middle class and upper middle class will be hurt because they are the ones that have already gotten used to trading up and living above their means in a few areas of their lives. The new trend makes it look like the upper middle class is reeling in it's expenditure on luxury items. It's sort of a "You know what, honey? Let's not go out to eat at the Cheesecake Factory and instead just have a little Burger King." Do you know
why this is happening? It's because Thorstein Veblen's conspicuous consumption is becoming more and more expensive to partake of (If you are lost that is the guy who came up with the theory that says you buy luxury items to make yourself stand out in a crowd and appear to be wealthy). If you follow the wall street stock index for Starbucks and it's
kinsman that target the upper middle class you will see that they have all taken a dip recently. Beyond that, the cost of their items has exceeded inflation. In other words, for every dollar you earn over time you can afford less and less of these luxury items. They are becoming TOO EXPENSIVE for the average person.