Consumer Confidence

Cruising along at 30,000 feet, you peer out the window. Nothing to see here. Just limitless pale blue sky and the glare of the all-too-close sun hitting your eyes. The in-flight movie is silently playing out in front of you. You’d hoped to catch Iron Man in the theater, but the idea of paying $7 to see it in its edited-for-airlines glory isn’t as appealing.

There’s nothing free to do on airplanes anymore.

Even the peanuts and the soda come at a price. The ticket is more expensive, the flights are less frequent. Somehow, flying has become even less fun. For the more experienced travelers, whose miles are being voided as they spend the majority of their days sitting idly on a tarmac, this probably doesn’t seem possible. It is.

But wait — there is good news. There is still one ounce of fun that hasn’t been drained from your flight. It’s still free, and even a slowing economy can’t ground it. You know it’s there. It’s been right in front of you the entire time. Just reach into the seat pocket and pull it out. Right behind the racially and gender-ambiguous cartoon safety instructions and right in front of the People magazine the previous passenger left behind.

It’s the SkyMall catalog, and it’s all yours for the rest of the flight.

196 pages filled with the latest in gadgets and gizmos. The products you assumed did not exist, but now can’t resist. Your tickets to a quasi-futuristic world await. A world where digital cameras come on key chains. Where movies are projected inside your sunglasses. Where watches wind themselves — in cherry oak cases with silent motors.

And everything has a sensor. There’s no need to ever use your hands again. This is the life you’ve imagined for yourself, and SkyMall will help you get there. While you’re crammed into your ergonomically incorrect seat, wishing you were anywhere else, SkyMall opens the door to an easier, luxurious, and better life.

In case you haven’t been on a domestic U.S. flight in the past two decades, SkyMall is a catalog that sells “innovative merchandise” manufactured by a consortium of producers. SkyMall prints 20 million catalogs per year that are annually seen by more than 620 million travelers. The products in the catalogs range from inventively practical to laughably unnecessary.

Back on the ground, the economy is still in a slump. As you furiously rip through your catalog, most Americans are going through a period of conservation and saving. Gas is expensive, food is expensive, and more and more people are unemployed. That’s no secret. We see the headlines every day.

So why are people still buying frivolous items? Many retail chains around the country are closing stores and cutting back staff, and some are even filing for bankruptcy. Yet somehow, SkyMall has gone through one of its most profitable years. Estimates put SkyMall’s 2007 revenue at over $100 million.

Maybe things aren’t as bad as they seem. Over the past month, gas prices have begun to come back to Earth. Demand is down, and consumer confidence is actually nudging its way up. Sure, gas is still expensive, but maybe consumers are just accepting that. Maybe they can afford $4 gas. If they can’t, how can they afford to buy snow cone makers from SkyMall?

Airlines are in trouble. Fuel prices have destroyed profits, and tickets are more expensive than ever. On the ground, shipping rates have risen because of the high fuel costs. Yet SkyMall, a company whose target market consists almost entirely of airline passengers, and whose products are available only through delivery, is flourishing. Maybe consumers have more money to spend than we think.

Sure, a lot of people are cutting back on little expenses here and there. Starbucks has been forced to close a number of its stores because people are learning to live without $4 lattes. But can they live without the Dough-Nu-Matic home doughnut maker ($129.99)? Or what about the Double Chocolate Fountain ($119.99)? You never know when a spontaneous wedding reception might erupt.

So what should we believe? Should we look at the consumer confidence index and infer that the economy is at an all-time low? Maybe we should look at SkyMall’s sales, which tell us that consumers still have plenty of disposable income to blow on unnecessary impulse items. After all, what do consumers know, anyway?

Most consumers are not economists, and the majority have absolutely no clue what is going to happen. So why do we care what they think? Instead of assessing how consumers feel about the economy, we should be looking at how they contribute to it. They’re still spending their money, no matter what the headlines say.

Historically speaking, consumers polled for confidence indexes are mostly misguided. In 1992, confidence numbers were about as low as they are now. But that was after we had pulled ourselves out of a recession and poised to enter a sustained period of growth. Consumers might not have seemed too confident when asked their opinions, but their feelings and emotions had little effect on the actual economy.

Speeding through the air at 500 miles per hour, the average consumer may not feel very confident about the economy. They may perceive the current situation to be as shaky as the ride, but SkyMall sales show that they do have pretty high self-confidence. They’re confident they can afford impulse purchases on an already expensive flight. Confident that $89.99 isn’t too much for a pen that can hold 1,000 MP3 songs.

And SkyMall’s consumers also show a life-affirming confidence in airlines themselves. SkyMall’s sales may come from impulse purchases, but customers have to put up with some delayed gratification, waiting to receive their orders. They may think that the economy is in a free fall, but they have faith they’ll touch down safely and be able to enjoy their new purchases in the future.

Now, that’s confidence.

Regards,
Jamie Ellis
August 15, 2008