When I saw the clip of the opening of Saks Fifth Avenue (SFA) in Toronto, my immediate reaction was “I wonder how long they would last?” I guess this is a normal question given the recent experience of Target and the commonly known fact that Canadian consumers are not like their counterparts south of the border. But is it really a natural question or was my conditioning leading me to a less than optimistic outlook for SFA. Our life circumstances colors all our reactions and sometimes it does so in very predictable ways. Given my line of work it is natural for me to take such a stance. So today I try to look at both sides of the story and try to arrive at a logical and objective conclusion (as best as I can).
The first thing I have to do is recognize that, if I had grown up with copious amounts of disposal income, then luxury items would be a norm rather than an exception. Remember when Paris Hilton first heard of Wal-Mart. She thought they sold wall stuff. She had no idea what it was and why should she. There was no reason for her to know about, much less shop, at Wal-Mart. Similarly, most people don’t know of all the high end shops or restaurants. Nor it is common knowledge about the website for billionaires. On this site you could buy a French castles, yachts, motorcycles, helicopters and watches. The luxury market is not inherently good or bad. If one has the means and find value in these items, then there is no reason why one has to look for alternatives. One is entitled to pay obscene amounts of money for shoes, clothes, watches and whatnots.
The trouble arises with those who really don’t have copious amounts of disposal income. I am not talking about people who go into debt to buy a house or to fund their education, I am referring to those who make a good living and spend way beyond what they can afford. It is those who are living comfortably, but start to go beyond their means because they feel they have something to prove. I personally know many young people in their thirties who live lifestyles at least three times what they can really afford comfortably. This causes immeasurable amounts of stress on them, but they have convinced themselves that if they want to get anywhere in life they have to live like this. Fake it, until to you make it, by all means, but don’t shoot yourself in the foot in the process.
The demand for luxury items have been on the increase in recent years. The general reasons have been attributed to the internet and TV. Society’s fascination with celebrities and companies such as Apple, which focuses on the look and feel of their device more than the machine themselves, have led many to gravitate towards making choices that are way beyond their means. It’s all about the look, everyone wants a to be driving a bimmer or a benzes, or have a Chanel or a Birkin bag and have the latest i-gadget. The question is how many can actually afford it without going into debt.
The Royal College of Psychiatrists has found over 50 research papers which show that men and women with high amount of debt have higher levels of stress and depression. It causes a strain on relationships, especially between husband and wives and is one of the top predictors of divorce. Even for single people, resentment can also build up against one’s boss, other family members for either not paying enough or not fully preparing one to deal with debt. Interestingly, a study from San Francisco State University, says that with higher levels of debt reduces one’s ability to enough the pleasure of spending. That splurge no longer gives the same level of satisfaction as it did prior to high levels of debt because we are too stressed about our debt.
It seems to me that when we are concerned about having the right look and what others think of us, we end up really hurting ourselves financially and psychologically. Perhaps if we had a better sense of self, a more robust sense of who we really are, then the need to live beyond our means will not matter. It all boils down to affordability both financially and psychologically. If you can afford it, buy it. If you can’t afford it, don’t buy it. It is that simple. Let me rephrase that, it is that simple, if you are your own person and make your own choices and you are not persuaded by what others deem is right for you.In the end it seems that I am right back to the sentiments of my initial reaction. You weigh the evidence yourself and see what makes sense for you.