Walk-in Closets and Consistent Deflation
One of the few categories of goods or services that has been consistently deflationary for decades is apparel and footwear. Whether this is good for the industry or the companies we watch day in and day out is debatable, but one thing is sure. Apparel and footwear is the most affordable it has EVER been when measured as a percentage of personal disposable income. Thankfully, this keeps consumers from running around naked and keeps those with big closets happy. While none of this is new (after all spending on apparel as a % of income has decreased in 20 of the past 22 years) , it’s still eye opening to take a look at the trend over time and consider how affordable clothing and footwear has become.
Global competition, technology advancement, and productivity gains have all been key drivers of deflation across the space for years. The question now is how much lower can prices actually go? It’s hard to envision retailers like Old Navy, H&M, Target, Wal-Mart, and even Aeropostale finding much more room to drive prices lower with sufficient demand elasticity. On the other hand we’ve created a society of hoarders, consumption junkies, and walk-in closets.