Posted 1/22/2009

DOWNSIZING WITH DICK AND JANE

Upset over her parents' arguing about money, Jane ran off with Dick and eloped to save her parents the cost of her once-planned wedding. This resulted downsizing the incomes of the florist, the caterer, the band, the hotel and the dressmaker.

Newly married and returning from an inexpensive honeymoon, Jane discovers paycheck shock. Her employer has cut her pay 20 percent.

With less income, Jane finds she can no longer stock up on groceries at the superstore. Instead, she can only afford a week's worth at a time. The superstore's revenue levels off and starts a long decline.

Dick is supposed to go to the doctor for his annual check-up. Even though he is insured, he cancels the appointment because he cannot afford the co-pay. All over America, the incomes of doctors are declining because too many insured patients can no longer afford the co-pays. Over half the doctors say they plan to cut down or leave their practices in three years' time – a major downsizing in the pool of family doctors.

Dick and Jane are interested in buying a new home when the economy gets better. Looking about, they are surprised to find that builders are stuck with unsaleable McMansions. A few builders are constructing smaller homes – some 700 square feet smaller than before – but the builders of America find their businesses sinking. It now appears that homes will be downsized, going back to the moderate dimensions of the 1950s and 1960s.

Dick's wealthy father, badly hurt by the stock market, has put the hammer down on all frivolous spending at luxury stores, severely curtailing the sales at Saks, Coach, Nordstrom, Tiffany and other high-priced retailers.

Dick's mother has chimed in, refusing to buy fancy cosmetics and perfumes, resulting in a downsizing of sales at Elizabeth Arden, Estee Lauder and the upscale cosmetics sections of all department stores.

Dick's parents also postponed an expensive cruise along with a lot of other cruisers. Now the cruise lines, with shrunken bookings, are advertising 60% discounts and "two for one" tickets.

Because of lower mortgage rates, Dick went to the bank to see about refinancing at a better rate. But he was refused because the value of his house had declined 34 percent. Dick isn't alone. It is estimated that 78% of all mortgages are not qualified for refinancing.

Pinched by their lower incomes, Dick and Jane decide to save on phone costs by eliminating their land line and keeping their cell phones. As customers decline, the phone companies lay off workers.

Dick decides to keep his car an additional 20,000 miles before trading it in. This results in fewer auto sales, fewer dealerships and a hugely downsized auto sales and service force.

Last Christmas season, Jane decided to write a letter to all her friends and relatives instead of buying cards. As others joined in, greeting card shops closed, eliminating small businesses and retail jobs.

Friends Cindy and Ned returned from a month-long European tour and plunked a huge load of dirty clothes down on their dry cleaner's counter. She smiled and exclaimed, "Oh good! Now we can stay open another week!" As the world puts off dry cleaning, shops close and small business owners lose their investments.

To save money, Dick and Jane are doing more cooking and less eating out at their favorite family restaurants. As everyone follows them, restaurants are closing all over the country. Soon the restaurant pool will be severely downsized.

Even though Dick wanted a giant large screen TV, he put off buying one. Last season so many people acted like Dick that retailers were going out of business or selling TVs at incredibly low prices. Dick was tempted to buy a 47-inch screen for $895, but gritted his teeth and passed it by. As sales falter, the big electronics manufacturers throughout the world are cutting down on production and laying off workers.

Jane's parents have decided they do not want to be buried in caskets. "Why spend a fortune on something you put in the ground?" grumbles Papa. He and his wife have decided on cremation with their ashes spread over a lake. Now a third of the elderly population has decided on cremation, which is causing a major downsizing among funeral homes, embalmers, cosmeticians (for the dead) and casket builders.

But there is good news.

As America downsizes, there are people on the bottom of the economic triangle who are doing a whale of a business – far more than they did during good times.

Jane has downsized her expectations from Target to Walmart. But finding that insufficient, she is now visiting dollar stores, which are booming.

Jane has also learned a new shopping trick: visiting thrift shops located in expensive neighborhoods. She bought Dick three $125 shirts for $3 apiece. Thrift shops are doing a land office business in these harsh times.

Dick has begun to visit pawn shops, where the desperate rich dispose of their goods. He has picked up a pair of field glasses for 90% less than they go for in discount stores. And, as always, pawn shops boom when the fortunes of the rich mirror those of the poor.

The local disk jockey is holding his own because his lost bookings are being more than made up for by people downsizing from event bands to canned music.

Walmart continues to survive despite losing many of its lower earning customers. They have been replaced by the downsized, who are moving down to Walmart from Target, Macy's and Sears.

McDonald's is prospering in the worst of times as restaurant goers snap up its "dollar menus." Besides, you don't have to buy as much food at McDonald's due to the high calorie density of its offerings.

Knock-off goods do well, as Jane's aspirational neighbors switch from Coach bags to Coach knock-offs at a fraction of the price. Following the examples set by Shanghai and Hong Kong, American merchants are beginning to segment the market between "good Coach knock-offs (made with leather) and "poor Coach knock-offs" (made of plastic). In Hong Kong, there is a good knock-off outdoor mall ... and a poor knock-off mall for all kinds of European, American- and Japanese-made luxury goods.

Because of tens of millions of American's now living the life of Dick and Jane, we are seeing a long-term downsizing of companies, products, services and jobs.

Experts knew we were "over-stored" ten years ago.

It's just that there seemed to be no one who realized we were over-borrowed, over-spent, and over-housed.

It may take ten years for Dick and Jane to work all their overages out of the economic system.

When that happens we can grow and prosper once more.

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