Wednesday, March 24, 2010

Econ 101: Recessions and Luxury Goods

Photo Credit: Doug Beghtel/The Oregonian

Saks Fifth Avenue is closing its two Pioneer Place locations.  Recessions are tough on purveyors of luxury goods - which economists define as goods on which you spend proportionally more on as incomes rise.  But this works both ways, you spend much less on them as incomes fall - they are often the first things to go out of the budget when belt-tightening is done.  And so Walmart thrives and Saks suffers as Oregonians average incomes plunge.  In fact, Saks is apparently close to inking a deal to open a "Saks off Fifth" discount store in Bridgeport Village.

But don't feel too badly for Saks, when the economy finally returns to robust growth, guess which sector of the retail trade will thrive?  

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