Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=95141
Story Retrieval Date: 5/22/2013 5:44:55 AM CST
Porsche, Mercedes, BMW: These are the names commonly associated with status in America. However, with the slowing economy, the names might be changing.
Replacing the flashy cars could be names such as Conklin, Krone, or Waterman, all makers of fine pens.
That is the trend that Ed Hamilton is seeing in his store, Century Pens, located at 231 S. LaSalle St. in the Bank of America Plaza. The specialty retailer has seen a boost in sales of 37 percent so far this year despite the softening economy.
Hamilton sells 35 different brands in his store, ranging in price from $3 to $7,000, and he said everything is selling.
“My June equaled my December,” Hamilton said. “How many people do Christmas business in June?”
Hamilton says he doesn't know why June was so strong, but he said it wasn't because of June graduations and Father’s Day. His two biggest weeks of the year to date, in fact, were the two weeks after Father’s Day.
One Chicago economist has a hunch about the sudden popularity of designer pens and it has to do with the weak economy.
“People are not comfortable spending money on the very expensive items,” said Adolfo Laurenti, senior economist for Mesirow Financial Inc. “They are still spending; they are just doing a substitution.”
According to Motor Intelligence, sales for luxury cars were down 14.9 percent in the first half of 2008. All three of the iconic brands are seeing the stress. The Italian car maker’s sales were off close to 28 percent, while BMW was down nine percent. Only Mercedes was holding steady with sales up a scant 0.9 percent so far this year.
“Maybe they can’t go out and buy a BMW, and who would want to with the price of gas. So they come in and buy a three or four hundred dollar pen,” said Hamilton.
It is a trend that not only occurs in luxury items, but in more commonplace areas such as restaurant sales. People are dining at home, and when eating out is unavoidable, they are trading down from more expensive restaurants to fast food, Laurenti said.
This appears to be just one of the characteristics of the recent slowdown in the economy.
“Wage growth has been slowing, unemployment has been rising,” Laurenti said.
According to data released by the Bureau of Labor Statistics, the decline in wage growth started at the beginning of 2007 in the Midwest. While wages have continued to grow, they have done so at a much slower pace. Salary and wages in the first quarter of 2008 were up 2.6 percent versus 3.3 percent in the second quarter of 2006 which was the high point of the last four years.
It should not be assumed that the trend carries to all sectors of smaller luxury items despite the increase in sales that Hamilton is experiencing.
For example, watch retailer Tourneau Inc.’s store at Water Tower Place is not seeing an uptick, according to a manager there. While the high end sales remain strong, the middle market has dropped away, he said.
This was echoed by Michelle Kovach, a manager at the James and Sons jewelry store in Lincoln Park. “It’s a little tougher in watches, but we’re still selling Rolex,” Kovach said.
The company’s sales have remained fairly flat overall because of its jewelry sales, especially engagement and wedding rings.
“We’ve been really lucky because we’ve been hearing that other jewelers are having problems,” Kovach added.
However, the Mont Blanc store in Oakbrook is also seeing an increase in pen sales.
“I know we are seeing an increase in pens specificially,” said Jeff Lee, assistant manager of the store. Pens sold at the high-end retailer range in price from $325 to hundreds of thousands of dollars. But the Oakbrook store only carries models priced up to $30,000.
Back at Century Pens, Ed Hamilton is smiling as he serves a steady stream of customers browsing at his glass cases.
“One woman spent 2,800 bucks; she bought several things. One guy spent 4,300 bucks; he only bought one of the Krones…Another guy bought one pen that was almost $1,000,” Hamilton said.
“There’s no way of explaining it. I’m just happy its happening.”
Laurenti offered one explanation. He said this is just one more manifestation of the overall lagging consumer confidence which, as measured by the Conference Board, is at its lowest level in the last 10 years and its lowest point since March 2003.
“Overall it is a sign of caution, a sign of strain,” Laurenti said. “But it shows that people still have some disposable income.”