Watch Out For That Cliff

I get asked these questions daily now, what will happen if we do go over the fiscal cliff and more specifically what will happen to the fashion retail business?

At the moment sales in fashion are doing fairly well with women’s and men’s apparel up 4 percent (12 month end October 2012, Source: The NPD Group, inc. / Consumer Tracking Service). In general, retail shows signs of life and holiday is off to a healthy start. The lull that we get post-Thanksgiving is upon us and the retailer’s strategy is how to get the most out of the lack of new and exciting merchandise.

So what about that cliff?

If the politicians fail to come to an agreement we will likely see a dip in spending as a result of the media distraction and consumer confidence will drop due to the fear of the unknown (how will this affect their paycheck?). They will without doubt pull back on discretionary spend and for the tail end of holiday put a halt on self-gifting which will stunt holiday growth.

Even though the ideal scenario will result in an agreement amongst the politicians the more probable one is they will extend the decision deadline to later in 2013. This will create a slightly positive distraction for consumers but purchase habits will pretty much stay the same as they are now. So the good news is holiday will show up this year. Let’s just hope the politicians have the good sense not to spoil it for all of us.

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