Swine Flu & the Economy

This is a 2007 video of the BRILLIANT Laurie Garrett discussing pandemic readiness. Her talk is in relation to the H5N1 virus, but covers the 1918 Swine Flu Outbreak, as well as our current state of preparedness for handling such an event. 

Since Mexico is ground zero for the swine flu virus that has all the world's attention, I have been watching that country's governmental response to the problem. 

Yesterday they decided to suspend all operations of private businesses and forced all travel to ground to a halt. This type of response can be expected to spread as the virus threat-level is raised.

I thought it relevant to post this video here at the Oasis because, around the world,  shopping habits are already beginning to change in the face of this somewhat mild threat.

Mrs. Garrett also spends a portion of her presentation discussing over the counter and prescription products that are associated with controlling flu outbreaks.

Her talk is 14 minutes long, with an additional (and very informative) 6-minute Q&A to follow.

Enjoy:

Someone You Should Know

Barry Schwartz is BRILLIANT!

Here he talks about a new pathway to turning around the fortunes of all members and organizations within our society.

I find his section on education particularly illuminating.

Enjoy!

Who's Going To Pay For All This?

We are, that's who!

This weeks must read article, from the New York Times.

"Cities Turn To Fees To Fill Budget Gaps"

Essentially it lists things that are usually paid for with our tax dollars, such as street lights and emergency services response teams, being charged to us directly. 

Please take the time to read the article HERE

How the Olympics ARE Already Benefitting Chicago

I will say out front, I am not in support of the Olympic Games being held in the city of Chicago. There are too many reasons to list, but I will give you just one to chew on; Our city has not been it's beautiful self for quite some time.

The potholes that pock the city streets are not new, they were here, for the most part, since last winter's tremendous snowfall events took their toll.

The parks that are not located in the loop are starting to show wear and tear for the first time in at least a decade.

Even the beautiful skyline, surely the envy of every (at least American) city, now, squeamishly and humbly, announce our pain due to the economic downturn in the form of "FOR RENT" and "Now Leasing" signs braving the famously brisk wind atop many a skyscraper.

However Chicagoans, there are already a few benefits starting to roll in as a result of our being a serious candidate. Here are a few we can all find solace in:

Governor Pat Quinn (did I really just type those words?) is pushing a bill to extend, by 90 days, the amount of time homeowners can stay in their homes while fighting foreclosure. Does anyone believe that Gov. Quinn would go up against the powerful Financial and Real-Estate lobby's if there was no IOC watching our city for cracks in the foundation?

Me either (read about it here).

Chicago has also started re-paving the lakefront bike paths, for both sides of the city. The new paths are extra-wide, making them useful to walkers, bikers, runners and those tourists just out on a stroll. Of course this was done with the Olympics in mind, but what are they going to do, tear up the pavement if the IOC says no?

So hooray beer, we no longer have to deal with the pedestrian equivalent of the Hillside Strangler at Diversey Harbor anymore. Thank you IOC!

We also got our Buckingham Fountain back. Can you believe it? A large city project finished on time and budget? The fountain that forced me to learn about architecture is back.

As a high-schooler we took a trip to the fountain and, though I had visited almost 2 dozen times before, I spent the day learning about the fountain for the first time. The experience led me to learn, and love, more about Chicago than ever. I have never ceased to learn about our city and have never ceased my very Ike Turner-ish love affair since June morning.

Thank to Mayor Richard Daley wanting to show the fountain off to the visiting IOC, it's back on and more beautiful than ever. Thanks again Olympic folks!

Lastly, let's all thank heavens for the Olympic people getting President Obama to talk about Chicago. Lord knows we haven't heard anything from him about our (AND HIS!!!!!) fair city in quite some time, save for "please send the Olympics to Chicago."

Yes, I know the prior resident at 1600 Pennsylvania left President Obama lots to clean up. Yes, I know we are in the midst of a Depression (he still says recession though). And yes, I know he is busy making google eyes, oops I meant goo-goo eyes at the International community.

However, here are just three reasons our city should be rolling off his tongue these days:

1. Thirty-One (31) Chicago Public School CHILDREN have been KILLED SINCE SEPTEMBER (maybe higher by the time you are reading this). President Obama chose, as the person to lead America's schools to a bright new future, ....................Arne Duncan. A person without an Education degree of any kind, and the former "CEO (yes, the first ever because his educational background and experience did not qualify him to be Superintendent)" of Chicago Public Schools.

He left a huge problem here in his wake, so...don't you think the President, being from the Murder Capitol of the United States, discussing the plight of Afghan schoolkids smacks a bit brittle in the face of what is happening in Chicago.

2. A sitting U.S. Governor has been indicted for trying to sell the Senate seat he vacated to when ascending to the Presidency.

3. His White House Chief of Staff has been named as one of the people said Gov. targeted for kickbacks.

So there are numerous reasons to have President Obama out talking about the City he calls home, it just has not happened. Oh, except for the Olympics.

So Thank You Olympic people! You have already given us more than we could have ever expected on a usual basis. I for one will not be out picketing you, because I am fully aware we Chicagoan's can never repay you for what you have already bestowed.

Feeling Froggy?

Then Leap.

Here they go again. 

Time for this season's first to blink contest.

And the winner is ...............

SAK'S FIFTH AVENUE!!!!!!!!!

After enraging the retail community last fall by doing markdowns +40% off in October (?!?), here comes the first, in recent memory, idea of pre-Easter promotions.

They are not the only one's doing crazy discounting.

As the previous article stated, Macy's is doing 80% off (and still have tons of inventory) without success, but at least that is Fall merchandise.

Nordstrom moved its annual June Half-Yearly Sale to early-MAY. 

And just about every retailer has maintained deep discounting on their websites, which are fall less scrutinized by the analysts covering the sector.

Well, I guess that's good news to the few people that seem to be in a shopping mood these days.

The troubling reality of all this is, mid-April begins the slow selling cycle for retailers, bottoming out in late-June through to early-August, at which time Back-To-School necessities bring shoppers back to the stores. 

Woefully sales figures thus far, early discounting and bigger inventory levels than 4th quarter 2008 continue to plague the industry. This is the start of failure season, when you will start to see companies filing for bankruptcy, liquidating and doing lay-offs. This happens because they understand the cycle and do not have any prospects for HUGE turnarounds for the next 6 months. 

The stores are thinking of helping the customers that walk through the front door of their establishment. However April marks a stark shift in planning and resource allocation in the minds of the Executive and Merchandising teams at 90% of retailers: 4th Quarter!

The stress being a little higher for this year's buy than any other. Mostly because, to the merchant teams who have the unenviable task of figuring out what you and I want 6 months from now, and more importantly, what we will pay for it, the reality is....

Get it right this year or their company more than likely will not be around in 2010.

I Am Legend

Before we start, I promised a very helpful young lady that I would let my readers know about Lord & Taylor's free shipping for online purchases of $99 and more (click HERE). Since free shipping is New Economy, I have now done so.

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I took a trip to a Chicago-area shopping mall last night with with a friend and, as you can imagine, I was moved enough to write about it. What you cannot imagine, is why?

We headed over to the Old Orchard Mall in Skokie, Illinois, just about 7 miles northwest of the Chicago city limits. This outdoor mall is a notoriously busy shopping destination (especially on warmer days), as it houses the most complete collection of stores, entertainment and dining options that serve Chicago's monied North Shore suburban communities, such as Lake Forest, Winnetka, Wilmette, Kenilworth and Glencoe, as well as the MASSIVE population center of Evanston, IL.

The 10-15 minute drive from Chicago's Rogers Park neighborhood and ample public transportation make Old Orchard's many luxury destinations (Tiffany, Nordstrom, Subway) a desirable option for many city residents as well.

So, taking what you now know (or knew, if you you are an area resident) about Old Orchard Shopping Center and it's surrounding communities into account, you can understand why the following observations were so stunning to me and my counterpart.

1. We arrived at 7:00 pm, on a cool Friday night and immediately found parking (less than 45 seconds after entering the parking lot). The spot, second from the door of THE FOOD COURT, had two additional spots right next to ours, with very few other cars driving around looks for openings.

2. The food court was virtually empty, with over 60% of those eating having ingested, or were in the process of ingesting, Subway. $5 foot long is sooooooo New Economy. As a matter of fact, from this point forward, $5 foot long is the official meal of the New Economy! If someone can top it, I am open to suggestions.

3. No lines at any of the theaters (with the highly anticipated "I Love You Man", a new Nicholas Cage film and the first starring role for Julia Robert's in 4 years all opening last night), a virtually empty Barnes & Noble (less than 15 people inside), not one restaurant had a wait time for tables and much fewer than 1oo people encountered in the entire mall during our 2-hour trip.

4. Macy's was having one of those head-scratching sales where you cannot believe they are "giving away" the stuff for such low prices. For example: Table(S) of Ike Behar, Ted Baker and Ralph Lauren neckties, which all retail in the neighborhood of $125, were all $8.99!, racks upon racks of clearance at 75-80% off everywhere and 11 racks of men's shoes at 65% off. Yet, not a soul was shopping. 

Perhaps you think I am saying not many people were shopping the sale? I am not saying such a thing. I am saying exactly what I witnessed: NOT A SOUL WAS SHOPPING!

I talked to 3 sales people, who separately verified that "nobody is buying anything these days" and, based on the generally immaculate presentation of the sale tables and clearance fixtures, evidence suggests they were telling the truth.

Wandering past the women's areas of the store on our way out, we noticed no less than eight double-sided, 10-foot long clearance fixtures with $4.99 signs atop them. These fixtures were stuffed to the gills with merchandise. As I told my friend last night, perhaps that was the most telling sight of the evening: If QUALITY $4.99 dresses, blazers, jeans, sweaters, shirts and skirts do not get people into your store, what will? 

I truly believe America's shopping habit (sic, pricing threshold) may have changed for the foreseeable future, by which I mean the next 5-10 years, or so.

If you price a suit at LESS THAN a $5 foot long and nobody budges, you are experiencing the New Economy from a front row seat. 

To close out the Macy's story, they are in TROUBLE. Way over inventory, no customers and unable to find a pricing strategy that agrees with their customer's idea of fair value = retail molotov cocktail!

6. No Teens at the mall. I say this with great trepidation: If teens are opting out of spending time at the shopping mall (I counted 5 total last night) most, if not all, major shopping centers will be in bankruptcy by mid-June/early July. There will be no recovering from this development. It will take minimally 5-7 years to climb back from such a blow.

7. Every mall store had posted closing hours of 9pm, however, as we walked by stores at 8:15, we saw many a light out, with doors locked. By 8:35 most stores, save the large department stores, were locked and vacated. 

I am not saying this was the wrong idea (in fact it was exactly the right idea). What I am saying is, for this to be the general practice of the entire mall, my notes regarding the lack of shoppers during this trip is not out of the norm, and has had to be the case for quite some time. 

Lights out at 8:30 on the first day of spring at a major shopping center is not normal. As a matter of fact, it's unheard of!

So as we made our way through the mall, back to our car, I could not help identifying with Will Smith's character in the movie "I Am Legend", wondering if "anyone is out there?"

In the movie, after he has had the question answered in the affirmative, the larger question consumes him as the screen goes black and the titles begin to roll....."Can we (humankind) come back from this?" 

In short, I don't know?

Now that's how you let the beat build.

The Economy's War on Children

I have been reading a number of interesting developments in regards to companies that service children and young adults.

Hopefully you have already had that talk with your kids about the New Economy, because if not, some of their habits are going to be broken for them.

From the obvious (you can't charge 55.00 for the right to walk in the door and expect to get away with it forever!)...

Ahead of the Bell: Six Flags bankruptcy fears grow

To the tragic (can there be a more telling sign of the times?)...

Sesame Street’ Producer to Reduce Workforce by 20%

To downright disastrous (careful, this is a very sore subject for me. How can this be an option?)...

Economy may force school for autism students to close their doors

To the unthinkable...

Police chiefs: Failing economy could lead to child abuse

The economy is having a big impact on the world our children have come to know.

But since there is no way I am leaving my first post on kids on a downer note, read this article and  know that we can do better and will be just fine:

Kids Market Sale Aimed At Helping Families Through Economic Slump

This idea is so inspiring, so New Economy, I hope we can see this instituted in communities across the country.

Let's make it happen America!

Banking on Sin

These are indeed dark times.

And in dark times, sometimes, cloudy judgement can catch on and go from shameful whisper to shout, then ultimately, a full-throated rallying cry.

This seems to be the case in the first forays into how we jumpstart the bad economy. There seems to be a growing outcry for solutions involving one form of business. Nothing innovative, or particularly visionary, for that matter. It is really an idea that has sat on the shelf waiting for times like these; when weakened souls and those with weary gazes see no way forward, leaving themselves open to accepting the preposterous as normal.

The business is sin.

Not religious sin, but the oft-mentioned societal sin industries.

Over the last decade we have heard nothing (or almost nothing) from any of the business constituencies I will discuss in this posting. However, since early-October what started as a trickle, has become a veritble dam-bursting wave of positive media, all giving copious quantities of airtime to interests representing the business of sin.

There have been a number of articles, news stories and forums on making the business of sin work for the American taxpayer. The government needs tax revenue, so the theory goes, so lets:

1. Legalize land-based gambling in more communities accross the country.


2. Make prostitution legal in more communities accross the country.


3. Lower the age for legal alcohol consumption in all 50 states.


4. Make drugs, such as marijuana, legal in certain states.


5. Allow alcohol to be sold 24 hours a day, seven days a week in states where the practice is prohibited.

I am not making this up. Here are a few atricles that argue the merits of each of these as a solution to dwindling tax revenue.

Issue 1:

South Carolina Senator Seeks to Overhaul Gambling Laws

Texas Casino Gambling Bill Coming Tomorrow

Kansas Gambling Debate Begins, Even Though Lawmakers Say No

Issue 2:

Vegas pilot program for legal brothels killed

Should prostitution be legalized?

Issue 3:

Campaign on to lower drinking age

Minnesota Considers Lowering Drinking Age

Boulder police chief to advocate lower drinking age on '60 Minutes'

Issue 4:

It may be time to legalize marijuana

Ground breaking bill to legalize and tax marijuana in California

Los Angeles Daily News: “Time Has Come To Legalize Pot!”

Issue 5:

Georgetown OK's Sunday Drink Sales

Lawmakers Debate Sunday Alcohol Sales

Arkansas Eliminates Blue Law That Banned Sunday Alcohol Sales

As you can see, these are really being looked at as viable answers to our problems.

Anyone with a brain can deflate these arguments without much effort. Here are my reasons:

More land-based casinos - Here is a sentence I will hear the day after pigs fly, "My wife and I just got back from our summer home in Gary, IN." Enough said, as gambling was supposed to turn that city around.

Make prostitution legal in more areas of the United States - Have you lost your %&$# mind? Prostitution is, wait for it....wait for it.... HUMAN TRAFFICKING!!!! Also, whatever tax benefit your state could gain would be offset by the increase in expenditures for medical care to throngs of uninsured streetwalkers. Get a grip (pun intended)!

Lowering the legal age to drink - Why not lower the age to runaway? Why not lower the age to sign legal contracts? Why not lower the age to legally work in the U.S.? Why not lower the age for advised consent? I know my 10 year-old son would give his kidney for fair trade. Something like say, Mario Party for Nintendo Wii. This is s State's Right's issue, and I know the age varies regionally, but the idea of moving the age downward opens the door for further revision, which is scary.

Legalize marijuana, or other drugs - Doing so will IMMEDIATELY FREE between 800,000 and 1.2 million inmates from correctional facilities across the country, which is not the main issue. Mind you, these will be mostly unemployable, markedly different people than entered the system, even if they were only there for a short time. 

The real problem relates to one of America's dirty little secrets, small town America's financial dependence on the U.S. penal system for jobs and tax revenue.

Why are prisons dotting the landscape of so many small towns in America? Because those towns allowed themselves to buy into the "increased tax-revenue" argument during the last major economic downturn during the early-mid 1980's.

These small towns have seen everything else in their local economies wiped out during the massive corporate consolidation of the "Booming 90's", and now stand totally dependent upon the prisons to provide low-paying jobs and a pittance in taxes to sustain their rapidly eroding communities. 

So you see, halving the prison population is not going to help jump-start anyone's economy, as the unintended consequences are too great to consider.

Round-the-clock liquor sales - really the same argument as lowering the age for minors. As soon as this is allowed, look for the major distributers to start offering alcoholic "breakfast products". Think I am insane? Well think again, how do you think Bloody Mary's came into existence? 

The real problem is these are ALL Old Economy solutions. They have been stewing for their shot at daylight for the last 30-some-odd years. 

These people lack imagination, don't they?

When  applying New Economy thinking to the problem of sin, I think not of giving more access to the "sins" that already plague our society, but of exposing and eradicating ancient, entrenched ideologies that hide behind the banner of "righteousness." Let's review a few and see if you agree with me that positivity and inclusiveness would serve as better roads to travel on the road to recovery, economic and otherwise.

Gay Marriage

There is no reasonable reason two people that want to spend their lives in matrimonial bliss (or hell) should not be allowed to do so. "But the Bible says"..."But the Constitution says"... Well the Constitution said (still may say) I am "3/5 man." Which is no problem for me, but when I go to pay my income tax and only send 60%, I get a call from the IRS each and every year.

People that oppose the right for same-sex couples to engage in the ritual practice of marrying one another are not "thoughtful", "pragmatic" or " holding on to tradition", they are simply prejudiced, fearful fools. holding onto something that left their grasp the nano-second people started standing up for themselves.

Can anyone name an occasion where people spend more money than weddings? I thought not!

Letting millions of people know that, hey, by the way, your citizenship allows for you to pursue your happiness in whichever way you find most befitting YOU, is not just practical and economically sound, but is inevitable. Do this now, superstitious dogma is Old Economy.

Universal Healthcare 

To keep this short, a sick mind is only capable of  sick thoughts.

As long as we continue to deny 90% of Americans the access to everything the medical establishment has to offer, we are killing off generations of great, innovative ideas. 

An individuals health is not a personal responsibility, unless you believe the individual has the power to conceive themselves. And I am talking totally free, too. Not pay as you go, or any other ridiculous option on the table. Finance does not belong in the world of medicine. 

A healthy, fully-engaged populace can only bring about the radical creativity needed to pull the country forward. Best of all, every unintended consequence of this policy is positive.

Now if you want a boob-job, or Viagra, you are going to have to come out of pocket for that.

Members of the United States Congress (both Senators and Congressmen) are paid $174,000 per annum and receive FULL COVERAGE health and dental benefits for themselves and their families AT NO COST, how can they, in good conscience, vote no when the median income for a family with 2 working adults is just above $50,000? They cannot, and should not be allowed to get away with it any longer.

So there it is America, two quick ideas from a list of many. Sin may forestall a free-fall, but is never the way out of a mess. Utilize the principles of the New Economy and kill off dogmas to tap into new economic opportunities that await, while improving our society at the same time. 

It just makes cents.

The Difference Between Coal and Diamonds is...

Pressure!

In our case, let's call it "Downward Pressure."

As a result of: 

being heavily inventoried

awful Holiday sales results

shrinking access to credit

Large retailers, especially those of the high-end variety, have not been able to order goods in their usual quantities from vendor partners.

This has created a boom in luxury goods at what I have coined as "echo-sites", defined as reputable retailers, usually restricted from carrying the brands due to the retailers discounting policies.

If one regularly reads the Oasis, this comes as no surprise, as the post-Thanksgiving business (or lack thereof), presaged this inevitability.

Last August TJX , the Marshall's and TJ Maxx parent company, announced plans to designate special floor space at each of it's locations to better spotlight the new collections previously unavailable to them.

And if that is not enough to convince skeptics, my trip to a Oasis fave, Costco, should do the trick.

While shopping at my neighborhood Costco in Chicago yesterday, The first table I encountered in the clothing area was stacked high with Ed Hardy t-shirts. These were not clearance peices, sent as one off, but piled high and 12 different shirts to chose from. 

What makes this development even more interesting was the price, an astonishing $31.99 for your choice of the shirts! The Nordstrom website has Ed Hardy t-shirts (while not exactly the same) for $106.

After collecting my usual food, book and hygiene needs, I noticed another table in the clothing area with an unusual amount of activity. Only this one had several women sorting though Seven Jeans. 

While the Neiman Marcus website features denim by Seven Jeans for prices ranging from $155 to (gulp!) $275, Costco sells 4 styles, all at $99.00! 

With the realities of the new economy becoming more clear each day, which of these three retailers seems better suited to deliver on their customer's demand for fashion and value?

Me too.

Psychology in the Economic Marketplace, Part I

Ben Bernanke needs some help. This is my contribution:

In 1969 Elisabeth Kubler-Ross described, with great specificity, the five stages human beings go through to cope with tragedy and grief, especially in regards to terminal illness. This led to ground-breaking research and new treatment models throughout the medical diaspora, and is now taught as an essential part of any Psychology 101 class.

The following are the five stages, more universally known as DABDA:

Stage 1 Denial "This isn't happening to me"

Stage 2 Anger "Why me?"

Stage 3 Bargaining "I'll do anything if I can live on."

Stage 4 Depression "Why should I do anything? It wont matter."

Stage 5 Acceptance "This is inevitable. I will make the most of what's left."

Before reviewing current economic conditions through the lens of these five stages, understand the terminal patient in our model is the old Western Financial Model, not America, which will re-emerge. 

Stage 1 - Denial

It is quite simple to point at Summer 2008 as America's "period of denial", though I have a differing theory.

The Denial Stage started in September of 2006, a month after home prices peaked, sending lenders (Banking Institutions) into an industry-wide panic as to how to fight off the inevitable fall in the Housing Sector/Recession, sure to occur during that year's 4th Quarter or the 1st Quarter of 2007.

The solution these lenders came up with was to open up the housing market to the only people in America that did not currently own the housing they lived in, people unable to afford to the costs of making such a large purchase, many of which where low-income racial minorities.

As ridiculous as it sounds (Literally giving money to people that CANNOT repay the loan), the rush of new home buyers had the duel effect of: continuing the home building boom in the country (intended), while simultaneously causing prices of existing housing inventory  to rise precipitously (unintended).

The bad loans were securitized (bundled, chopped up and re-bundled) by the lending institutions, then sold to others on the world financial market, thus leaving the lenders with zero risk for the very risky, highly predatory loans.

The endgame was set before the first loan was made. The system's death sentence was set before the first loan was made. This was the ultimate form of denial.

Stage 2 - Anger

The Anger Stage set in as you started to hear reports of "waitresses buying million dollar homes." Although the wider public had no idea of what was coming down the road, the lending institutions started putting the onus of impending doom on the people at the bottom of America's totem pole, the working-class.

"Why did they take such big loans?", they asked. "What were these people thinking?", newspaper headlines screamed. The term "sub-prime" entered the lexicon of American public as a negative connotation for, not the predatory lenders, but instead, the borrowers.

False outrage from the banking institutions gave rise to real outrage in communities throughout America, as home-owners began to find it harder to sell their homes.

Whether the  difficulty arose from lack of interest from new home-buyers, sliding home values due to unkempt or abandoned vacancies in their neighborhoods, or the lack of loans available to those that truly qualified, home-owners with inventory to sell found themselves at the front line of a problem they could never have seen coming.

To home-owners, anger was the only rational reaction to the unpredictable circumstance which had befallen them. To lending institutions, faux anger was the only way to keep the public eye off trail of the actual culprits.

Stage 3 - Bargaining

The Bargaining Stage is perhaps the most perilous stage in the process. In is the stage the full extent of the problem crystallizes, which in turn often leads to drastic measures being taken to improve the diagnosis.

The Bargaining Stage for this financial crisis was characterized by the Federal Reserve making steady cuts to the Interest Rate, all the way down to virtually nothing, to help reverse the future which was set in motion so long ago. Additionally, the TARP ($700 billion) bill was passed in haste by Congress and signed by the President, and an additional $2 trillion dollars in "emergency loans" was issued by the Treasury Department to the same lending institutions that brought the crisis to bear. The thinking being, everything was on the table to save the old system.

For home-owners the bargaining stage was disastrous, characterized by actions that only worsened their collective situations.

Upon the first evidence of a slow-down in the housing market, instead of reporting the origins and culprits of the problem, media cranked up their output of their perceived solution to the problem, home improvement. The HGTV network best exemplifies the new attitude, changing the majority of it's programming from a theme in line with What You Get For the Money - a show built around sharing how much home you can buy for the same price in several different cities, to more programming like Curb Appeal - a show about enhancing you ability to sell your home by making minor changes to your home. And for the most part, home-owners went for it wholesale.

Even with a downturn in the housing market, retailers such as Home Depot, Lowes and Menard's saw brisk business through the entirety of 2007 and the very early part of 2008.  Americans decided a new marble kitchen and/ or luxury bathroom would change their fortunes, with many taking out equity loans to make the necessary changes. 

When home improvements did not work, home-owners turned to incentives in hopes of unloading their unwanted property. Covering closing costs, down-payment assistance, new paint budgeting and assessment deferrals became the norm. The problem with incentives was individual owners could not compete with Developers, who were giving the same incentives, in addition to free scooters, cars, upgraded appliances and gift cards. The problem remained unchanged.

Lastly, and begrudgingly, home-owners started to accept their ability to sell their homes at asking prices was illusory, so they started to discount the prices of the houses.

This is what the media called the "bubble" bursting.

With home prices peaking in August of 2006, many major cities had not seen an even 10% correction (price drop to reality) as of April 2008. However massive discounting across the country led the national average to see a drop in the high teens by June of that year.

Two months later, in August of 2008, banks had stopped lending money, even to qualified applicants, and the die was cast.

Home-owners were left with a home the did not want, at a price they could not pay, worth  a lot less than was paid for it, and a home equity loan taken out to pay for the improvements and incentives offered to the increasingly shrinking home-buyer pool that found it virtually impossible qualify for a loan of any kind.

This led to the Stock Market failure in September and then, ultimately, to...

Stage 4 - Depression

In many ways, this is the stage we are currently in as of this writing. 

There is so much confusion about what happened, why nothing is seeming to have an impact on the situation and how to move forward, Americans for the most part have chosen to just tune out.

We would rather just ignore this mess, not talk about it. "This to shall pass", seems to be the refrain of the moment.

The is unanimity in the understanding of where we are in our history, however there is no real mobilization by the leadership. Has anyone asked of us to sacrifice anything since this crisis began? We were told to, "get out there and grab those bargains" for Christmas.

The collective depression has led to stagnation in the housing market, with sellers holding firm on prices at hat are admittedly overly-inflated, buyers looking for new homes at foreclosure pricing, financially overly-extended families literally packing up and walking away from homes their kids grew up in, and banks too busy predating themselves to open up the credit instruments necessary to get the economy moving again.

We are all collectively stung...and depressed.

Stage 5 - Acceptance

The very final stage before transition, though it is not necessarily guaranteed that everyone makes it here, as depression can be a mutha!

The Acceptance Stage is so critical, in that it is made possible by accepting the idea of transitioning from what we have known and grown comfortable with, to something unknown, yet inevitable. The peace that comes in this stage derives from gaining the knowledge that what we have experienced is no longer possible.

For the American public, acceptance will come when we decide: 

• That things cannot go back to the way they were in the 1990's.
  
• The house we own is going to be worth about 30-45% of it's 2006 value.
  
• Owning a home in their lifetime will not be a reality for a large number of people.
  
• There will be a rise in unemployment and an (almost) across the board reduction in wages in the near future.
  
• The ability to buy a new car, let alone every 4 years,  has already been altered for a large number of the populace.
  
• Volunteerism, social activism and local purchasing decisions are going to be required to assist in this turnaround, and I mean from everyone.
  
• Government is not gong to solve this, at least not exclusively.
  
• Wild expansion & profiteering is a thing of the past, slow growth is the new way forward.
  
• Rampant consumerism does not have to go away, but needs to at least slow down in the interim.
  

All things that I would never hope for, but are required to find the peace we need as a country to move forward and regain our footing.

Four decades ago Elisabeth Kubler-Ross changed the way the medical profession deals with the aggrieved, including those with terminal illnesses. Perhaps, using her ingenious model, we can find our way, as a country, out of the darkness of our current situation.

Can we do it?

With apologies to Bob the Builder and the President-elect, Yes We Can!

Slipping Into Darkness

I promised  today, Thursday, would be a hot day for the press, as retailers reported December figures.

Here are a few stories to illustrate the point (Click Headline to read entire story):

Deep  Discounts Fail to Help Retail Sales

Family Dollar Sees Boost This Year from Use of Food Stamps

The Grinch Stole Christmas: Retail Sales Plunged 4% in December

Macy's to Close 11 Stores Nationwide

Retailers Confirm, 2008 Holiday Season Worst in Decades

Saks December Same-Store Sales Plunge 19.8%

Neiman's Has a Lousy Christmas

This may seem like a lot to read, so I will ask that you only read this one in it's entirety:

A Brutal December for Retailers

Now that we have looked back, barring something spectacular being revealed, I only plan to look forward.

If one is a regular reader of the Oasis, these headlines are not surprising. There seemed to be no question this past holiday season would be horrible, the only question was how bad. 

By Thanksgiving the picture, literally (CLICK HERE), crystalized.

Our new goal, moving forward, is to discuss how to get through the coming downturn, both for retailers and consumers. Additionally, I will spot trends, spotlight innovative practices and continue to provide a lens to the retail marketplace for you, the reader.

Let's Get It Started!

Many Happy Returns

I was reading Ray A. Smith's article (U.S. Retailers to Report Grim Results)  on the Wall Street Journal website regarding the much anticipated December retail numbers due out Thursday and something sparked a memory of an unusual experience I had yesterday. 

Allow me to share and expand.

I went to my neighborhood Costco (a retailer who's praises I have sung on numerous occasions) yesterday and, as I approached the doors, saw something I have never witnessed before, a line to get in.

Mind you, yesterday's weather in Chicago was in the upper 20's, maybe 30, maybe.

Yet and still there were about 8-12 people standing in an orderly line outside the store. As I moved closer and closer I noticed the line extended some ways inside the store as well.  While walking and searching my wallet for the always misplaced membership card required to enter, I started wondering if the few items I needed was really worth standing in freezing weather.

Just as I resigned myself to the idea, I noticed the line was not to get inside the store, but an extension of the "Returns" line that was now, literally, winding outside the store.

The sight of that line and the thought, sparked by Mr. Smith's article, drove home a point I had not considered, how tough January business is in the retailing business.

This January, much like this December, is sure to be perhaps the worst month for retailing in, excusing the hyperbole, modern history.

Three things are needed to make a Perfect Storm in retailing:

• First, an uncertain economy. A bad economy is one thing, but "better the devil you know", they say. In bad economy, people have already made adjustments and pared down their spending habits. In uncertain economy, which is really a bad economy where people refuse to accept that reality, people attempt to maintain their lifestyles regardless of how difficult the reality of doing so is. This leads to large spending expenditures, followed by mass returns, pawning and borrowing. Sound familiar?

• Secondly, you need swollen inventories. Swollen inventories take up room needed to show new goods, inhibit buying teams from investing in newer, more relevant merchandise and forestall payments to vendors, banks and other creditors. If you consider we just came through the worst holiday season on record, and 4th quarter is when retail inventories swell to their highest levels, inventories are now HUGE, everywhere. This is why you are seeing, "Buy 1 Get 2 Free" signs in place of, "66% Off" signs popping up in stores. They seem to be the same thing,and while the latter gives customers merchandise for 1/3 the price, the former gives customers merchandise at 1/3 the price, but additionally removes two more items from the store's inventory. Inventory is a major problem at virtually every retailer right now.

• Lastly, you need reduced consumer foot-traffic. This point is not as obvious as it seems. Of course January is going to be infinitely slower than pre-Holiday business. However this January is sure to be slower than most because of something I wrote about in November, the greatly reduced number of gift cards sold this past Holiday Season. Gift cards ensure future business, period. When customers decided to steer clear from purchasing gift cards over the holidays, the message was clear, "We are not sure if we will be back, or if you we will be here when we do." The combination of loaded gift cards and huge discounts would have made for a festive January in retailing, instead we have the opposite effect.
  

Coupling these three factors with record rates of merchandise returns brings the problems many retailers face more clearly into focus.

A Perfect Storm has descended on the entire retail landscape and will have a disastrous impact on this, the last fiscal month of the calendar year. Look for Thursday's numbers to be bad, and this month's numbers to only accelerate the inevitable thinning of the retail herd.

Best of Inbox 01.02.09

Here's the best nugget I found in my box today:

I can't believe I am saying this, but NOW is the time to make your move. 

95% off is less than free. Here is the math on my theory.

If item a is $100 and tax is 10%, then your cost to take it out the door is $110.

If that item is 95% off, the math is as follows:

$100 - 95% = $5 and 10% tax of $0.50, so you are paying $5.50.

That is 45% less than the tax you would have paid on the item at the original price.

So as Jean Luc Picard said best: "ENGAGE!"

Another Reason To Run...

From retail stocks.

The natural squabbles that arise in crisis are starting to play themselves out. However, this one is huge. Primarily because it deals with what has already happened, as well as the future.

A little known side of retail are the guarantees that vendors make with large stores for their profit margins. Retailers are more likely to buy more merchandise if they know vendors will cover the difference for the items that are sold under the agreed level of profitability, usually in the neighborhood of 40%.

This article (HERE) spells out the "war" playing itself out now between vendors and retailers, due to the tremendous, and early, markdowns taken this holiday season. The thing that makes this so critical is, this is the time of year retailers usually await checks making up the difference in the margins from vendors. This year the opposite is happening, with vendors negotiating to receive re-payment for the unprecedented discounting of their goods by several major retailers.

As Cotten Timberlake at Bloomberg reports:

If vendors succeed, they could recoup $1.2 billion from Macy’s, Penney, Kohl’s, Nordstrom, Dillard’s and Saks Inc. alone, based on analysts’ average estimated fourth-quarter sales of $24.2 billion for those six chains.   (emphasis is mine)

Which means, not only will retailers be hit by much smaller profit margins than anytime in the last 40-50 years, not only will there be no gross margin dollars flowing to them from vendors that usually guarantee those profit margins, but the retailers, after all this bad news is sorted out, will be making payments to these vendors, further reducing profits.

That may be the biggest story in retail so far to emerge from a season of big stories.

Keep an eye out.

Best of December Windows

Tiffany - North Michigan Avenue

Somehow, every month, Tiffany manages to pack more punch in their little 24" x 16" windows than most others get out of space 10-20 times in size.

Always different, always new and forward and always, ALWAYS brand worthy, meaning it meets the standard of "wow" Tiffany customers anticipate.

Take a look (click images for better detail):

Thinning Profits (and the Herd!)

The following are photos from my monthly walk along Michigan Avenue, Rush and Oak Streets. This two mile stretch has every store, covering every niche, in the entirety of the retail marketplace. What I decided to do is document what I saw, where I saw it and, just to get 2009 on everyone's mind, share what I think the fate of the particular retailer holds in the near future.

Before we start, please understand this very important fact:

With VERY few exceptions, when a store sells something for 50% off, they are losing money on the item. Yes, I know all about margin builders and the like, but those are a very rare exception in the overall assortment.

The reason for the loss is simple, here is an example:

Store A buys a dress for $40
Store A decides to sell the dress for $100 (a 55-60 mark being about industry norm).
If they sell the $100 dress for 50% off at $50 it would seem they made $10 profit, right?

Wrong!

Store a had to pay for the trip to New York for it's buying teams.
Pay for the paper to write the order on.
Pay the salary of the buyer that makes such decisions.
Pay for advertising, in-store signing and and the like.
Pay for medical, dental, 401k and other retirement benefits for their employees.
Pay for the real estate costs, insurance, design and fixture costs for their stores.

There is more: loan repayments, legal fees and market research, but you get the idea.

Such costs cannot be covered from that $10 profit, unless you sell hundreds of millions of those dresses (which is what Walmart is so good at).

That being said, the signs you see below should read as something out of SAW IV, not Happyland.

While this will bode very well for the consumer, it, quite literally, means the end for more than a few of these stores.

As always, all images can be clicked to get a larger, more detailed view.

Let's get it started:

This is Aldo, the shoe store that competes against 9 West when their goods are full price and Payless once they put their goods on sale. They are over saturated and overly dependent on mall traffic to drive sales. When was the last time you heard a friend say, "Hey, let's go to Aldo." I thought not. I see this chain closing 50% of it's locations, and/or seeking bankruptcy protection by May 2009.


Brooks Brothers will be fine. When the economy goes sour, people dress better. Even during the Great Depression this was the case. People without jobs wore suit and tie, just to feel a part of society. Brooks Brothers is an iconic brand that more than a few people will discover a other options from overseas start to disappear. Don't look for expansion, just look for them to make it through the economic downturn in one piece, which is sort of an A- or B+.


Walt Disney stores. During the Great Depression this company was hit so hard it had to do something radical just to remain relevant. What they did was start doing live action films, s Snow White and the like were not really meaningful after the war. This time, Disney is better suited for the though economic climate ahead. The acquisition of Pixar Studios two years ago gives Disney a foothold on smart, cutting edge filmmaking that not only deals with tough issues and ideas, but seeks them out. That being said, they SHOULD close their stores, but won't. Tourism to the Disney family of theme parks will plummet, so giving your child a little piece of Disney, if even in the form of a Happy Meal, may become all the more important. We'll see, but Toys, as a category, took a bath this holiday.



Sak's Fifth Avenue is going away. If not altogether, much like the sign below, 75% of it will. Someone has to convince me why not. See, you can't, can you? Saks has long thought itself Neiman's and run itself like Enron. If someone peeped behind the curtain, OOPS! you got us. This holiday season should pretty much end what has been a 6-7 year flirtation with a $5 stock price. Credit is tightening, so look for investors to pull of their roots and  go elsewhere. Sak's is nice, but not necessary. This will be one of the biggest, in name, casualties of this economic downturn. Obama Stimulus, or not.


Neiman Marcus is really in a class by itself. The brand represents the pinnacle of the American retail marketplace. They will benefit more from Saks' demise than anyone beside, perhaps, Nordstrom. Without the presence of Sak's, Neimans should see better gross margins due to not having to price match/ compete in many of their markets, which will lead to more profitability. Neiman's would be one of my real winners for 2009, save for one mistake...and it ain't small.

Why they decided to open up so many of these CUSP boutiques is beyond me. They are aimed at just the market niche that is most impacted by, first the housing collapse and now, the Great Recession. The combination of $600 blue jeans, $1800 driving jackets and long-term mall leases does not make for a good recipe for the future we face. This ultimately will be a VERY costly drag on the company and expect them to exit the idea entirely by the beginning of 2010.

BCBG, the retailer that never really was, will go back to selling it's goods in stores exclusively. For the life of me I cannot think of a more gracious thing to say, other than the sooner the better. 50% reduction by the beginning of 2010, perhaps entirely. They still have a strong, desirable brand for young adults, though.


Juicy Couture, in short will be in big trouble. Rapid expansion, usually means rapid reduction. Juicy has a great brand, but they are waaaaay overextended as far as different balls in the air. Look for them to rapidly shift to licensing, if that is an available option. Store closings and a return to being a vendor, not a retailer.



Yves Saint Laurent will be fine. I just wanted to illustrate the point that EVERYONE is on sale.



Children's clothing boutiques will be one of the first to get wiped out. Over the last decade no category has had faster growth and prices within this category have not been tied to anything sane. $100 shirts, $125 jeans and $70 t-shirts have become the norm from NEW DESIGNERS, not even luxury brands.

All things related to children will see growth, as people will think of their kids before themselves, but most Childrens boutiques will take a back seat to the Target's and Kohls's of the world. This has actually already started, evidence being the bath toy's took this December.



Home related stores are already in deep trouble (see Home Depot), though few really know by how much. To get a grasp of the outlook for this segment of retailing you need only one fact: January is the second most important month of the year for furniture-makers. So many home stores will go under within the first half of this year, survival will come down to how long you can hold on? If you can make it to July, and less than 50% will, you may have a chance at getting through the year flat. Habit will drive people to stores in the first quarter of the year, but I cannot think of a segment of retail so heavily dependent on credit, save automobiles. This obviously is a recipe for disaster.



Bye-Bye...



Those in the know understand why I included this photo, as a "sale" sign at this company is virtually unheard of. The early part of this economic downturn will benefit "stay-at-home" stores which related to: cooking at home instead of going out, watching dvd's at home as opposed to going to movies and buying liquor for home gathering as opposed to going out to bars and clubs.

What happens after the summer within these categories is anyones guess at the moment. If things start to rebound (which I don't see) they will maintain their balance. Though should there be no clear vision of an end to the downturn, look for them to be hit hard by September, complete with lots of closings and bankruptcies.



Not enough stores at MaxMara to have mass closings, but they will feel the realities of the economy, hardcore. Light inventory and staff cuts are in their very near future.



When you sell everything in your store for $20, as H&M does, you cannot survive by selling everything for $10. Margins are too thin at this company to help pay for what has been a very rapid expansion. Look for LOTS of store closings for this European company, same goes for Forever 21 and Charlotte Russe. Bankruptcy is not out of the question for any of them.



Let's be real. Borders is in big trouble. Not liquidation trouble, but trouble nonetheless. Immediate store closings after the new year, staff reductions at other locations and possibly bankruptcy protection for reorganization purposes. The good news for them is they have been putting out fires for 6-8 months at the company, so they are a bit further along in their planning than other retailers.



Ralph Lauren is on SALE!!!!! Run, don't walk!!! Their strong department store business will carry them for the next few years, one of the few companies with such a luxury.



Banana Republic (Gap and Old Navy) are in some very big trouble. Over-saturation in every market, irrelevant fashion assortments and long-range turnaround plans aimed at fashion, not efficiency mean bad news. Look for lots of closings, lots and lots of corporate lay-offs and a possible split of the company, which might be best. Banana, however, will be hit the hardest. It participates in the niche with the most competition, 20-40 year-old new professionals. Zara is going to dominate this market once it gets set with it's expansion, Express has more money and focus (though they are already suffering) and their clientele is already starting to dip into the XXI's and Junior departments at larger retailers in search of discounted merchandise.



Bye-Bye Talbot's! I don't see how they will emerge from this in one piece. Immediate store closings, immediate mass lay-offs and perhaps even liquidation.



As I stated earlier, Limited Brands (Express, Limited, Express Men) is going to take a significant hit. They have too many stores to begin with, but the fact they control the entire process (from design, textiles, maufacture and shipping) of everything in their stores may save them in the long run. Wexler is smart and visionary, so we will see if he was able to make the necessary adjustments to his machine before September, if not....ouch!



Very hard to write these words, but Crate & Barrel may not make it. I am a Chicagoan, so I grew up alongside this company. Going to the first store with my mother when I was small boy. That aside, the company has become less relevant with each passing year due to more copycats, with lower prices. In the movie It's A Wonderful Life, Clarence the angel tells George Bailey, "every time a bell rings, an angel gets its' wings." Well in the non-celluliod world, every time an Ikea opens a Crate & Barrel loses it's wings, or appeal.

I am pulling for you C&B, I just don't see how you emerge from this unscathed.



Ann Taylor closing are a given. Too many stores, reduction in clientele (less job holders means less clothes needed), loads of competition at every conceivable price-point and bloated inventory levels all point to bad times ahead. Look for quick moves to bankruptcy protection and, ultimately, a BIG downsizing by the middle of next year.



These types of stores (H20 and Bath and Body) are basically gone. They can only operate profitably when selling goods at full price, which is no longer an option. So take this test, will you spend the $15 you have on a new shirt, sweater, groceries or six ounces of green-apple bubble bath. Thought so!



The question for retailers like Levi's becomes, will their customer base continue to buy jeans from their boutiques at $90-$145, or start buying the lesser-weight versions from Kohls for $19.99-$40.00? I think the latter is more probable, so that is not good news for the store side of Levi's.



Ditto for Kenneth Cole. This is value-brand that has never been priced at value. So as a retailer, good-bye! As a vendor, you have a bright future.



Ditto Emporio Armani. The good thing for this company is there are not many of their stores to close, but close they will.

Stores that are not on Michigan Ave. that face major problems:

Sears - Kohls is kicking their butt and will continue to do so. Tightening credit means far less major appliance sales, less home-building means fewer tool sales. How can they withstand a double-hit like that in their two main areas of strength?

Macy's - Contraction is inevitable. Look for closings of 75-200 stores rather quickly. Bankruptcy is not out of the question, as they have massive debt payments due in the first half of 2009. Swollen inventories and lease obligations spell bad news.

All Jewelers - Contraction in this market will be unrelenting. A bad 4th quarter (-35%) will only make the thinning less merciful. Look for the elimination of 25-50% of all mall-based jewelers by June.