As sophisticated as we academics like to see ourselves, there are just some things that defy statistical modeling. Take, for example, the Waffle House Index. Now, the name alone may cause you to think that the number of Waffle Houses in existence, the number of new store openings, or even their P&L statement, are important components of this opaque yet almost promotionally named indicator.
Turns out, though, that none of those things matter, and all that really matters is whether theyâre open at all following some kind of natural disaster. When it comes to retail resilience, Waffle House is the best. They are the canary in the coal mine, and if theyâre closed, you know itâs bad. Really bad. But if theyâre open, you know thereâs hope.
Coined by a FEMA employee after the 2011 Joplin tornado, it recognizes a chain that can turn on a dime because of its simple menu and ability to mobilize Waffle House Jump Teams in response. The index works time after time.
But thereâs another index we use, and specifically among economists and other business academics and practitioners: The Lipstick Effect. No, it doesnât mean that everyone, men included, starts wearing lots of lipstick. It refers to the phenomenon that has happened numerous times during economic downturns: women look for a small indulgence, and lipstick is often that item.
I am not sure what the men do, even though I am one of them. Maybe theyâre like me. My only small indulgence is a pint of beer, but who can have just one, right? Everything else I do is expensive, and I really donât want to track that.
While the economy was tanking earlier this year, 1Q lipstick sales soared 48% over 2021. But now they have declined 10%, signaling another important economic shift. Either things are getting better, or people are spending on other things to medicate their minds.
As it turns out, it is the latter, as the experience economy takes center stage. This phenomenon has been around all this century, but is growing rapidly, both in a general sense, as well as among Gen-Zers and Millennials who prefer experiences over tangible goods. It is the older population, though, that worries analysts, because we are now all focusing on travel, dining out, and otherwise just having a good time. The numbers are good.
You can put lipstick on a pig, too, but thatâs not going to make retailers any happier as we go into the holiday season. A pig is a pig, and no matter how you dress up your economic stats, if people are spending their money on something else, or not at all, itâs going to have an effect. And you might be eating bacon and ham for a while. A long while.
Everyone from fast food to AirBnB has been experiencing robust sales of late. People are splurging on things, like their seasonal PSLs, but also fancy overnight digs. You have nothing to show for it other than memories, photographs (maybe), and the credit card statement. But those may very well be worth far more than something that sits on a shelf or hangs in a closet. And given yesterdayâs blog about recommerce, this all fits together: Bearish on the tangible, bullish on the thrills.
Which may help explain my upcoming plans to take in that Dallas Stars game with my daughter and her husband. I havenât been to an NHL game in about a decade. Theyâre fun, and especially if you know the game, you know where the puck is just by watching the movements of the players. Itâs kind of like walking a beam: donât look where youâre at; look where youâre going.
And then off to Florida for the holidays. I see some bike riding and photography in my future, along with quality family time. You canât put a price on those things.
All of this points not only to changes among younger generations, but also a coping mechanism that serves a short-term purpose for all. Both generate feelings of self-worth, albeit in very different ways.
This then leads to my observationâand perhaps a little self-serving, but thatâs my prerogativeâthat there is a silver lining to all things marketing. We sell stuff to make people happy, whether it is in meeting basic needs, or catering to abstract psychological ones. We may not need the product or service, yet we want it, even if it defies mass understanding. Women will still be women without their lipstick or other beauty products, but their personal identity may suffer in the process. And while many women scratch their heads at how a man can derive happiness on a solitary bar stool, letâs just say it happens. I get some of my best work done at Pondaseta Brewery.
As for travel and experiences, they produce a euphoria hard to pin down. They are a release, an escape hatch. And while some prefer to just chill when on vacay, I am of the mindset that if you donât return home dog tired, you havenât played hard enough. To each their own. Maybe your valued experience is just lying in the sand at Playa del Carmen.
Meanwhile, Iâll be watching for the women with unglossed lips, men with souvenirs from the brewery, and everyone with winter sun tans. SâAll good, man. As long as we keep spending it one way or another. I just hope that none of us has to start paying attention to whether the Waffle House is open.
Dr âCounting Down To Decemberâ Gerlich
