Nov 26, 2008

Christmas 2008: 'Tis the Season to be Jolly?

With more unemployed, large corporations such as Citicorp planning to cut thousands of jobs in 2009, a questionable and uncertain automobile bailout plan many are wondering how this happy this Christmas may be. With money tighter than before questions of ‘will we have presents?’, ‘can we afford presents?’, ‘what kinds of presents will we have this?’ are definitely on the minds of the majority. From high positioned financial directors to workers in the car industry thousands this year have been laid off and it’s only a matter of time before more are let go. Many who have been lucky to keep their jobs have had to undergo salary cuts. With less money and several bills to be paid the idea of presents may be less whimsical and more stressful. Will children still receive presents this year? What kind of presents will be bought? Will more practical presents be exchanged this year? With so many questions about how merry this Christmas may be given the unstable economy and increase in unemployment I decided to explore the blogosphere.

The first post I came across ‘Sour Economy, Layoffs Dampen Inland Holiday Spirit’ is by New America Media, a large collaboration of ethnic news organizations. Being part of ethnic media, the fastest growing sector of American journalism, the blog focuses on current significant news using reliable sources and writers. The second post I used ‘The latest consumer information from Big Research’ is by ‘The News-Review’ blog. This post focuses heavily on economic and business data regarding current consumer spending. Although this blog is catered for Douglas County, Oregon, it remains strongly reflective of the current American economic situation. This blog focuses on how people will still be spending this year, however many have opted to shop at cheaper stores. When exploring the blogosphere I found other blogs regarding other states which showed the same change in spending. These hard times may be food for spending more quality family time. I left comment on both blogs and have added them below for your convenience.

Comment 1:
Thank for you a timely post regarding the important matter of how deep the economic crisis may really be. The Christmas holiday has always been when consumers spend most, yet this year it more are worried about keeping their jobs than putting presents un
der the tree. Your post is analytical of why and how this employment concern has come about. From the “out of work construction worker” to “financial giant CitiCorp’s plan to lay off 53,000 workers in 2009” it can be seen that everyone will be affected by the financial crisis during this year’s holiday. With retailers “shopping meccas” even “seeing slowing sales as the economy stalls” with Christmas only a month away, consumer plans to less are clear. Parents and children alike will feel the financial ‘pinch’. Many forecast that children will receive fewer presents as parents cut back their spending. As you discuss the concern of Thompson not being able to make mortgage payments, Christmas gifts are now seen as luxury items more than before.

You further address the problem of how “excessive worry can be a problem” as it creates the cycle of people spending less due to a decrease in hiring. Your use of the “employment studies” is a reliable source to show how companies have reduced employment. As recently discussed on the news and in one of my own blog entries, many believe that a decrease in consumer spending will harm the economy even more. Another reason you mention as to why this Christmas may not be so jolly is the increase in marital problems. Your mention of how “the growing financial anxiety” has created more problems among the “minorities and low income families” which I find extremely interesting. Is it because low income families already have such financial stresses, so any further decrease causes greater stress on the family or couple? I would have liked to have read on why this may be. I appreciate how your blog covers the many reasons of why this Christmas will be less whimsical than those before. You use a wide range and variation of sources but I would have liked to read more of your own point of view regarding this topic. With such large financial problems in the current economy, will families focus more on having each other and the fundamentals of a family than the material goods? Or have children and adults become too materialistic to enjoy a Christmas with less presents?

Comment 2:
Thank for you an extremely detailed and calculated blog on the “latest consumer information”. Your use of statistical information gives a general conclusion of how the economy may be doing and consumer confidence. Not only do you use bar charts and several references to the differing percentage outcomes but you also give a concise analysis of what they show. I highly appreciate your use of paragraphs to group together related figures making for an exceptionally informative post.

It is clear that the economy is both suffering from the financial crisis and now also a reduction in consumer confidence and spending. However your figures reflect that “post-election…22.3% are confident/very confident in chances for a strong economy”. Obama has clearly stressed the importance of stabilizing the economy through creating 2.5 to 3 million jobs through construction, education and green jobs. You mention at the end of your blog that “spending appears to have perked up in November” showing how consumers are still doing their Christmas shopping. You do well in further analyzing the different goods and that “most major categories… declined from last month and last year” yet there is an increase in spending on TVs and digital cameras. Your figures show the although there is a decrease in overall spending from the years before, Novembers spending has increased in comparison to Octobers. Many still plan to buy presents this Christmas though the consumer trends have changed. This year has been what you call “the year of the bargain hunter” where it’s “chic to be cheap”. Many consumers have also turned to lower-priced stores such as Wal-Mart and Target to pick up presents for this season. With this alternative kind of spending many should still see presents under the tree. I also enjoyed how you ended the post by showing that although people will be spending this Christmas they will also be “advocating spending” through staying at home, shopping online and eating cheaper.

Given the statistical nature of your blog you do very well is keeping it from being a dry read. Your paragraphs aid in a fluid read. My only criticism is that I would have liked to read more on your own opinion of this holiday spending. You clearly have a thorough understanding of the situation so I would have liked to read an additional small ending paragraph about your thoughts and what you might be doing this year. All in all I found your blog very interesting and credibly informative.

Nov 11, 2008

Recession: A Reason for Less Coffee?

It can no longer be denied that the U.S. economy is suffering from a recession. With shops closing after being opened for less than a month, a plunging stock market, thousands of people being laid off daily it is clear that the U.S. is now facing tough times. Starbucks, the world's largest chain of coffee shops reported a major 97 percent plunge in their fourth-quarter profits. Does this mean less people are drinking coffee? Each time you step into a coffee shop its hard not to notice all the businessmen lined up waiting to purchase their daily cups of coffee. With thousands of caffeine strung bankers out of work, has this lead to a decrease in the demand for coffee? Then chances are both yes and no. Yes in that with more people out of work, less coffee is needed to get the working population through each work day. No, in that many newly unemployed caffeine fiends will still need their coffee to get them through their job hunting days. The difference is that they now turn to the cheaper kind of coffee. The dollar cup from 7 11 or McDonald’s or even just making it at home using their 20-dollar Mr. Coffee machine is now the alternative to lining up at Starbucks and ordering a Grande coffee. Recessions have always caused a change in consumer spending and even the small luxury of coffee has begun to feel this.

Not only has Starbucks profits drastically dropped but Starbucks Corp recently reported that fewer international stores would be opened and offered a pessimistic earnings forecast for the coming year. Aside from a decrease in openings internationally, Starbucks shares have plunged by 50% this year alone, and in June they closed around six hundred stores. Many make the mistake of thinking that Starbucks drop in profits and sales means there has been a decrease in the consumption of coffee. Although the coffee industry may somewhat be affected, reports have shown a more significant change in consumer spending than a decrease in sales for coffee. An article by Time looks into the demographics of Starbucks and McDonald's customers and clearly states at the beginning that "McDonald's is planning to capitalize on the public's willingness to pay $4 for a cup of coffee by hiring baristas" while Starbucks has "lagging business". According to CNN Money Starbucks same-store sales were down 5% for the fiscal year while McDonald's sales "rose by 8.2 in October alone." This is a clear indication that more are turning to the cheaper alternative of coffee rather than a cut in the consumption of coffee.

Many have always felt that Starbucks and other major coffee shops are extremely overpriced, but only now are these chains feeling the consequences of selling at such a high-price. By looking at the demographics it can be seen that Starbucks consumers were generally older and consisted of those who earned more than $60,000 while McDonald's consumers were around the ages of 18-34 who earned less than $60,000. Therefore this change in consumer spending illustrates that people are simply trying to save more here and there rather than drastically cutting their spending. If overall coffee sales were plummeting along with decreases in sales of coffee by all stores this would signify a more drastic cut in consumers willingness to spend. Therefore, this signifies that the current economy is not in a depression as many are still spending onthe luxury good of coffee. Simply put, those of higher class status, the upper class and upper-middle class are feeling recessionary pressures and see the importance of cutting back. If the vice president of Boston Consulting Group still thinks that "the core group" of brand conscious consumers is enough to maintain Starbuck's Corporation he may be proven wrong. The first of many problems would be trying to prove this "core group" has not already changed their spending on coffee. Is it only a matter of time before this statistic further drops especially as more people are being laid off?

It is clear that Starbucks is suffering from the financial crisis. Yet their decline does not mean that Americans are consuming less coffee. Ultimately the recession has caused for a change in consumer spending where people are having to cut back or alternate their spending on luxury goods. During these times the stock market turns into a bear market where shares of low-priced businesses such as Target, Wal-mart and McDonald's increase in price as more people begin to shop at these stores. The slowdown and change in consumer spending has not just been felt by the U.S.: Starbucks has reported decreases in sales in the U.K. and Canada. The global economy and markets have undoubtedly started to the feel the negative effects of the crisis, luxury-good companies such as Starbucks are feeling the pinch by consumer pockets, their regulars both businessmen and even college students are no longer willing to pay or an expensive cup of coffee. It is clear that millions of Americans will remain caffeine energized, only this time without Starbucks.
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