MIDWEST: Big Squeeze in the Middle
The Midwest—the West North Central states and the East North Central states from Ohio to North Dakota—is still feeling cautious when it comes to spending
ECONOMIC OVERVIEW
One of the regions hardest hit by the down economy, the Midwest has a populace that remains tentative about economic recovery—and their own spending.
JOB LOSS
Consumer confidence has remained low due to the harsh reality of this region's high unemployment rates, which hovered around 10 percent for the first quarter of 2010, according to the Bureau of Labor Statistics (BLS). The Midwest has the second-worst jobless rate of any region, with Michigan the hardest-hit state in the country, at 14 percent unemployment.
LACK OF CONFIDENCE?
Though the West has a higher jobless rate, the Midwest remains the least confident about economic recovery. According to the BIGresearch Consumer Intentions & Actions Survey, only 31.3 percent of people surveyed in this region feel “Confident/Very Confident” about the chances for a strong economy in the next six months. Still, unemployment fears appear to be waning—only 4.8 percent of survey participants were currently concerned with being laid off versus 7.7 percent a year earlier.
Chicago
Minneapolis
SPENDING OUTLOOK
With ample (but declining) concern about job security, it's no wonder that Midwesterners still have their spending in check. A full 46 percent say they have become more budget conscious, according to the BIGResearch survey, and over 60 percent say they focus more on what they “need” rather than what they “want.” Almost 35 percent plan to decrease their overall spending (slightly down from 38.8 percent a year ago).
RISING COSTS
While the overall U.S. Consumer Price Index (CPI/the prices paid by urban consumers for a representative basket of goods and services) declined by 0.1 percent in April 2010, the BLS reports that the CPI rose by 0.2 percent in the Midwest at the same time. Among the major expenditure categories, transportation costs (led by higher motor fuel prices) had the largest impact on the Midwest region's CPI, according to the BLS.
OPTICAL FILELENS MARKETThe Midwest is holding its own and reshuffling lens priorities this year. Free-form sales are up from 15 percent in 2009 to 27 percent in 2010. This region also opts for Trivex material usage—pegged at 21 percent—more than any other region. • SUN. Photochromic sales have dropped this year, coming in at 11 percent vs. 22 percent of lens add-on sales in 2009. Perhaps consumers opted to spend their eyecare dollars on a second pair of sunwear, since the Midwest was the strongest region for polarized sales at 10 percent and for AR at 79 percent of lens add-ons. • PALs. In terms of presbyopic solutions, the region dipped slightly in PALs this year, coming in at 69 percent, vs. 72 percent of lenses for presbyopes. Multifocals picked up one, from 26 percent to 27 percent. • KIDS. In the Midwest, kids are the fastest-growing specialty segment (24 percent) after computer vision (50 percent). |
FRAME FOCUSWhether buyers are tired of frugality, can't put off purchases, or are finding tempting price tags for frames, the themes for 2010 in the Midwest are new frames, more frames, and a wider price range of frames. MATERIALS: This year, plastic had a dramatic upswing, jumping from 16 percent of the frames sold in the region in 2009 to 29 percent. Metal still comprises nearly half of all frame sales (47 percent) and rimless gained slightly to hit 20 percent of frame sales. PURCHASE PATTERNS: The Midwest saw 86 percent of new prescriptions getting new eyewear as well as lenses. SECOND PAIRS: The casual eyewear message didn't resonate and these second-pair sales dropped from 13 percent in 2009 to 9 percent this year. Sunglasses, however, increased from 69 percent to 77 percent of second-pair sales in 2010. Other options included clips at 9 percent and computer glasses or readers with 6 percent. PRICING: The pricing dynamic is volatile in the Midwest, with only 40 percent of respondents noting their eyewear prices stayed the same in 2010. Instead, 20 percent expanded to higher price points, 19 percent expanded to lower price points, and 21 percent expanded to cover both higher and lower price points. |
EDGING STATSThis region processes the least amount of work in-office, with 66 percent of survey respondents saying that they don't edge. Those who do edge are holding steady at 16 percent, indicating that they are doing the same amount of edging work as last year. • 16%…same as last year • 10%…more than last year • 9%…less than last year |
RETAIL REAL ESTATE
The effects of the Midwest's slow-down in spending and consumer confidence has trickled down to affect the welfare of its commercial real estate market, from malls and power centers to shopping centers.
VACANCY RATES
Retail centers struggled in the Midwest as vacancy rates jumped from 10.2 percent in the first quarter of 2008 to 13.2 percent in the first quarter of 2010, according to Reis, Inc., a New York City-based firm that provides forecasts of vacancy, rent, and inventory rates in the retail real estate market. Again, the Midwest exhibits consistently worse conditions than the U.S. as a whole, which experienced vacancy rates of 10.8 percent in the first quarter of 2010.
“There are fewer dense urban areas in the Midwest,” says Ryan Severino, an economist with Reis, Inc., who points to better results in other regions that have affluent populations living in large cities. “In general, the economy in the Midwest is kind of decaying and probably not turning around anytime soon.”
RENTS
Not surprisingly, retail real estate asking rents have remained relatively flat here for the past two years. Rents hovered just around $16 per square foot in the first quarter of 2010 compared with $16.29 in Q1 of 2008.
Detroit
IN-HOUSE EDGINGNationwide, just under half the practices surveyed don't process lenses in-house. 50%…do not edge in-house 25%…same as last year 16%…up from 2009 9%…edge fewer jobs |
Low spots: Cincinnati and Columbus, Ohio, where vacancy rates spiked to 15.2 and 15.7 percent, respectively.
Bright spots do exist. The urban centers of Chicago and surprisingly, Detroit brought in slightly higher rents of $19.40 and $16.97 per square foot, respectively, during the first quarter of 2010. Both cities also reported a slightly lower vacancy rate for the same period—11.8 percent for Chicago and 12.4 percent for Detroit—than the region as a whole.
METRO MARKETS
Are there any silver linings in the Midwest? A few urban centers show some signs of hope for a turnaround.
CITIES TO WATCH
Beyond the positive signs shown in the retail real estate market in Chicago, for example (which also had an impressive amount of new retail construction), the urban centers of Milwaukee and Minneapolis also reveal lower vacancy rates (around 12.4 percent) in the first quarter of 2010. Additionally, asking rents were strong in Minneapolis at $17.60 per square foot, and Omaha also had a comparatively low vacancy rate (9.9 percent) in the first quarter.
FASHION TRENDS
The Midwest is behind the times no more. “Style-wise, everybody's getting a lot savvier, and the Midwest is getting hipper in general,” says Rita Nakouzi, director of Promostyl Americas, a fashion trend forecasting service.
FIRST LADY FASHION
Nakouzi notes, “You've got the First Lady from Chicago who has created this style and brought it to a whole new level for America,” she says. “The way she is influencing fashion in general has put us on the map again in a new way.”
The region's fairer sex is predicted to embrace First Lady looks such as the classic sheath dress, as well as her practical approach to dressing by mixing highs and lows. “This is very much the American way today,” says Nakouzi. “She is mixing J. Crew and Talbot with Lanvin and Commes de Garcon. She is showing us how to buy an investment piece and mix it with something already in our wardrobe.”
REALISM RULES
This dose of practicality is the perfect antidote to the region's flailing economy. “After people have seen what's happened economically, they will welcome a return to heritage,” says Nakouzi. “Today, people are living consciously, not excessively. It's about being smart and conscientious about what you need as opposed to just having things.”
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