Retailing: More for More

U.S. consumers, spending $31 billion in December, set another Christmas shopping record. That was hardly a surprise; a record has been set and broken routinely for the past 15 years. What has surprised the nation’s merchants is how strongly consumers continued to step up their spending all through 1965 —and how clear the signs are that they intend to go right on doing so into 1966. “This is the consumption economy,” says Fred Lazarus Jr., chairman of the 83-branch Federated Stores chain. “It’s a retailer’s dream come true.”

Early surveys indicate at least another 5% rise in consumer spending during the first half of 1966, and signs that they are right are already showing up. In other years, post-Christmas shoppers mobbed stores mainly to return gifts or spend gift certificates. This year the mobs were bigger, and they were there mainly to buy. At Chicago’s Charles A. Stevens & Co., only the two days before Christmas surpassed the sales volume of the first day after. Coming after a 5.5% rise in Christmas sales, the after-Christmas rush trimmed store inventories to their lowest point in years.

Less Quibbling. While the stores cleaned up, the auto industry, another key to the consumption economy, closed out a record year in which production rose to 9,320,000 units, 20% above the previous year. Because they expect that production in 1966 may lag slightly in unit numbers, all three major companies are considering slight first-quarter cutbacks. Even if they do occur, however, the unit losses will be recouped by bigger sales. More buyers are not only choosing higher-ticket ’66 models, but are also adding expensive accessories. Auto air-conditioner sales alone now top $600 million annually.

“Unit sales,” says Federated’s Lazarus, “no longer tell the whole story.” Nowadays consumers quibble less over prices, instead insist on quality. As a result, stores are upgrading even bargain basements, and discounters must stock more expensive merchandise to compete. Few stores had a better Christmas than Tiffany’s, where sales rose 30%. Explains Chairman Walter Hoving: “The excise-tax cut made people feel more prosperous. They spent their money on jewels.” The A. & P. is grading up its image with the ultimate symbol of affluence: its own “A.& P. Champagne” (cost: $2.49).

And More Credit. As consumer spending continues into 1966, only two small dim spots concern merchants. One is the effect of this month’s $5.5 billion rise in social security taxes for medicare (offset in part by another $1.6 billion excise-tax reduction). The other is a rise in prices—generally about 3% —that will be most noticeable on such items as jewelry, furs and leather goods; last week higher costs of goods and services pushed the consumer price index to a new high of 110.6. With consumers both affluent and confident, even these rises are likely to be offset by another phenomenon of the consumption economy: greater credit spending. Installment credit has risen to $66.8 billion, but consumers are paying their bills promptly, thereby making credit a push for the economy instead of a peril.