Cheap is the New Cool!

Cheap is the new cool and it is Now COOL to be Cheap!

The emergence of the Super Tsunami Kondratieff Long Wave in 2007/08 has ushered in a new era.  We comment about this extensively on our website and in our yearly Market Reviews and Quarterly and Monthly Updates and in a much abbreviated version on these Blogs. 

Basically people have much less money and they are going to begin shopping for value, which means cheap and inexpensive is ‘In’ and gaudy and unnecessarily expensive is ‘Out.’

The following is from our homepage:

“…We believed then that the economic shocks of 2000 & 2001 would force companies to refocus their Marketing and Advertising campaigns on the 'quality' of the products or services offered and the real 'needs' that they satisfied.  We believed that US consumers would no longer be as susceptible to the over-buying of massive quantities of  'cheap' imported products, merely because they were 'cheap.'  Conversely, we believed they would become resistant to the lure of overpriced luxury goods/services that only satisfied the 'ego-boosting' effect of owning something that everybody else wanted. We felt that these dramatic shifts in consumer behavior would be evidenced as the US consumer metamorphosed from an insatiably covetous 'Debt-Crazed Buying Fanatic' (DCBF) to a more Conservative, Frugally Sane Shopper (CFSS) focused on satisfying needs by the exchange of his money for value. …”

And the following is from our “New Normal” page on that website:

"... The “New Normal” of a decades-long Real Estate Deflation of ALL Commercial and Residential "Bubble" priced RE and a steady and increasingly pernicious Commodity Inflation will depress the Public Psyche for many, many years, as the Monetary and Fiscal Authorities of ALL Nations fight the unrelentingly depressive effects of the "Kondratieff" Long-Wave, to no avail.

The public's Psyche is now struggling with the adjustment to a real shocker, i.e. the continuing DEFLATION of the US consumer's primary asset, i.e. their home. This unpleasant and totally unexpected phenomenon is starkly juxtaposed against soaring commodity prices that will continue to soar as long as the Fed is intent on exploding the Monetary Base via successive Quantitative Easing (QE) campaigns.  QE 3 is now a foregone conclusion and promises severely impacted prices of food and energy.

So, over the next several years, while US "Bubble" priced Commercial and Residential RE prices are imploding, the level of incomes will be stagnating or collapsing, the number of good-paying jobs will be evaporating, the level of ALL taxes (local, State & US) will be inexorably rising, the prices of everyday necessities will be exploding and the Public's Psyche will be negatively impacted - day after day after day after day for many, many years into the future - until it is totally crushed in the onslaught of the "Kondratieff" Long-Wave.

The cognitive dissonance resulting from this nightmare scenario is just now becoming apparent and it will soon cause successively more powerful emotional shock waves to repeatedly jolt the Public's Psyche. …”

Are you and your company ready?  

Or, are you and your company choosing to ignore these things?

If the answer is the latter, then you are in ‘good company’ along with Bernanke and Greenspan and all the other loony economist ‘Pencil Heads!’

So, read about one of those who does clearly realize, and evidently has all along, that people really don’t have the money to spend that they like to pretend they do.

Ortega Tops Buffett With Zara Fortune of $53.6 Billion

By Alex Cuadros - Oct 31, 2012 12:02 AM ET ; Bloomberg Markets Magazine

Oct. 31 (Bloomberg) --
"Bloomberg's Matthew G. Miller and Alexander Cuadros discuss Bloomberg Markets' inaugural list of the world's richest people. The roster is a snapshot of Bloomberg's exclusive daily wealth ranking, the Bloomberg Billionaires Index, which identifies the mega-rich and quantifies their fortunes. China’s richest man, Zong Qinghou, and This issue features profiles of Europe’s richest man, Amancio Ortega, …

Since opening the first shop in his seaside home of La Coruna in 1975, billionaire founder Amancio Ortega has built the world’s largest clothing retailer -- and a fortune exceeding Warren Buffett’s, Bloomberg Markets magazine reports in its December cover package.
Ortega’s wealth is soaring even as his country battles an economic meltdown. Spain’s unemployment is hovering around 25 percent as the country suffers its second recession since 2009 and a debt crisis roils Europe. Standard & Poor’s cut Spain’s debt rating to one level above junk on Oct. 10. With the global economy growing the slowest in three years, Ortega’s cost- conscious lines are ringing up sales.

Cool Status

“That turbulence strangely favors a retailer like Zara,” says Nancy Koehn, a retail historian at Harvard Business School. “Among fashionistas, there’s a new badge of status in finding the cool at a lower price.” Kate Middleton, the Duchess of Cambridge, is sometimes photographed wearing Zara.
Inditex, short for Textile Design Industries in Spanish, boosted revenue to 7.2 billion euros ($9.3 billion) in the first half of 2012, 17 percent more than a year earlier. Revenue in Spain remained stable at about 1.6 billion euros during that time.
“They are fast reacting to fashion, they are very flexible with their product and they are growing nicely,” says Peter Braendle, who helps oversee $55 billion, including Inditex shares, at Swisscanto Asset Management AG in Zurich.
…. Wearing a simple shirt and slacks rarely of his own brands, which are cut for slimmer men, he confers on everything from placement of a zipper to the September debut of Zara’s Chinese website. …

Democratizing Fashion

“He saw that fashion has to be accessible, not just for a small elite,” says O’Shea, who describes Ortega as humble, eager for her opinion and trusting of young talent. “Fashion had to be democratized.”
Ortega doesn’t have qualms about borrowing from haute brands. In 2008, French footwear maker Christian Louboutin Sarl unsuccessfully sued Inditex, saying the company had infringed on its trademark red-soled high heels. A typical Zara shoe costs less than $100; Louboutin’s can exceed $1,000.

Low Inventory

Seamstresses in nearby cooperatives assemble the pieces and then send them back for ironing. A machine tags the price, applies plastic wrap and, using a system that borrows from Deutsche Post AG (DPW)’s DHL shipping unit, slots each item for delivery. …

Cheap Prices

Inditex doesn’t make everything at home. For less-fashion- sensitive items such as jeans and office wear, it outsources about half of its production to lower-cost countries.
Ortega’s drive for a cheap price tag has sparked a clash with Brazil, home to 35 Zara stores. Last year, government inspectors discovered more than a dozen Bolivians laboring in slavelike conditions, living in shops where they sewed garments for Zara Brasil Ltda. …”