“The Consumer Is Underwater!”

Howard Davidowitz is one of our favorite people to interview. The retail analyst, who is chairman of NYC-based consulting firm Davidowitz & Associates, is always fun to talk to because of his strong and animated opinions, many of which are too “colorful” to add to a news article.

In this MarketWatch audio clip, he is pretty tame, probably because he knows he’s on radio. But there are still a few things he says that are gems, like: “The consumer is underwater.” And there is also a reference to rebate checks “flying out of helicopters.” Fun aside, Davidowitz’s outlook for the industry is pretty bleak right now.

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6 Responses to ““The Consumer Is Underwater!””


  1. 1 Don May 16, 2008 at 9:47 am

    Not only are we underwater, we are sinking to the bottom with very little hope of seeing the surface anytime soon. With that said, who will we be taking down with us, we won’t be alone?

  2. 2 Nancy H May 16, 2008 at 12:26 pm

    I tend to agree that a lot of retailers are going to continue to see terrible sales, and there will be more store closings. Smaller, specialty shops are going to have difficulty surviving the overwhelming allure of getting everything at the same time and on sale at WalMart, Cosco, Sam’s Club, Target, etc. Especially if those smaller stores can’t ramp up their marketing efforts to get and stay noticed, and/or reduce their pricing to be more competitive. However…I still see development going on all over – in outlying areas where newer housing developments are hurting for commercial development to catch up to them, and in infill areas where living, working, and playing close to home (without having to waste gas) is becoming more popular. We are resiliant. We adjust. We change. We survive.

  3. 3 Realist May 19, 2008 at 2:31 pm

    Seventy percent 70% of our GNP is reliant on the good old Consumer, who, unfortunately, was primarily reliant on the home equity loan to fuel their consumption. While the housing boom blazened forward, the consumer had a purse of equity and felt wealthy enough to spend, spend, spend due to increasing housing values. This allowed an ever increasing sales performance year after year for many retailers, which fueled retailer’s ability to pay the higher rents the Landlords were charging. It all worked until last summer of ’07. With the rising price of oil (now $127 per barrel), higher food costs, higher education costs,and higher credit costs due to the credit crisis, the consumer’s wind is now out of their sails. And speaking of sails, er… I mean sales, that’s been the only thing carrying retailers since last summer. Ergo the boom in consumption until the summer of ’07 is over, never to reach those lofty heights again in this country.
    As for the rebate checks, count on 3 of 10 making it into the retailers’ coffers. Best Buy, and others are already jumping onto the discount cards bandwagon to profit from the rebates. Thirty percent 30% of whatever the billion dollar number is still a good size to give the retailers a glass of water to drink, but don’t count on it quenching their thirst. Same store sales will continue to be a monumental hurdle to deal with…. Retailers are asking for rent reductions and Landlords are reluctant to give them, but it’s only a matter of time before it becomes like the mid 90’s with emptying shopping center and malls. Macy’s just announced last week another 200 store closures over the next 2 years. One rebate does not an economy make. After the rebate mini-boom, it will be back to business, and back to hybernation for the retailers regarding their store expansion plans, and more retailers hiring rent reduction specialists.

  4. 4 Price of Oil May 20, 2008 at 12:21 pm

    T Boone Pickens is saying expect $150 per barrel oil by the end of the year. He said it’s a mere issue of supply and demand, not the value of the dollar: they can produce 85 million barrels of oil but the demand is for 87 million, so the price will go up.
    Given this, the plight of the consumer will be even worse than it is right now.

  5. 5 Realist as well... May 20, 2008 at 12:51 pm

    Things are not as bad as some hope them to be. How many times are we going to read the same headline…?

    The US economy is still growing and there likely won’t be negative GDP any time soon. The US economy is dynamic enough to absorb a housing correction and some inflation.

    Sure, the consumer may have to cut out 3$ starbucks, overpriced groceries at wholefoods, and that new super plasma 1,000″ TV. Who cares? The rest will be just fine and will continue working through it all. Retail development needed to cool down anyway. How many Home Depot stores do we really need…?

    Of course, if our next president raises taxes, all bets are off the table. Maybe we will have that recession EVERYONE says we’re already in afterall…!

  6. 6 ahab May 21, 2008 at 11:20 am

    Everyone, keep rearranging the deck chairs…..


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