The rule of thumb is correlation does not equal causation. If ice cream sales increase simultaneously with the crime rate, obviously one is not causing the other. As the newly admitted recession continues, fingers are wagging toward one cause or another, democrats blaming republicans and vice versa.
It’s at least safe to say the economy is the direct cause of belt-tightening at giants like Google and Yahoo, but what about a spike in purchases of affordable luxury goods like lipstick? Bill Tancer at Hitwise looks at Estee Lauder’s Leonard Lauder’s “Lipstick Theory”—the theory that in tough economic times affordable luxury sales like lipstick increase—via the lens of Internet search activity.
Indeed, at about the same time Wall Street began shedding banks, a massive spike in searches for lipstick occurred. How disappointing for Lauder it must be to look back and notice the famous “lipstick on a pitbull” controversy occurred at roughly the same time.
Especially during rough times it’s natural for humans to invoke what Tancer refers to as the “narrative fallacy”—others may call it “attribution error”*—by grasping at discernible, orderly patterns emerging from the chaos. Stuart Fagg, for example, reports the world financial crisis could be legendary rock band AC/DC’s fault. After the band formed in 1973, a global oil crisis ensued; 1980’s hit album Back in Black coincided with runaway inflation and unemployment; comeback album The Razor’s Edge was released among 20 percent interest rates in Australia; and here in 2008 we have Black Ice.
Maybe it’s time for Angus & Co. to retire. Then again, previous theories asserted that every time an AFC football team won the Super Bowl, economic bad times were directly ahead. The Giants, an NFC team, won in 2008, but in light of the government’s recent admission that the recession actually began in December 2007, we may have to pause and consider the Indianapolis Colts’ victory over the Patriots the February prior.
It would seem at least safe to say that, instead of pointing toward anomalous patterns of synchronicities, businesses could soothe their worries this year by heavily promoting their lower shelf items during a holiday season mired by poor economic outlooks. After all, Wal-Mart has been the sole benefactor of bad times, returning positive sales growth as the rest of the retail world aggressively discounts.
You think that tragic stampede in New York was the result of plain old greed or otherwise good people desperate to give their kids a comparable Christmas to last year? That’s a discussion that could go on all day, but in the end, for whatever reason the harsh result is that people are hunting for bargains more aggressively than a year ago.
The current Hot Trends on Google seem like evidence of this. Craigslist tops the charts this morning, along with a Staples free gift giveaway and other free gift giveaway (mostly spam) sites, lotteries, dog poop calendars (wow, thank you), affordable electronics like digital photo frames, fantasy purchases like Moller’s flying car, and, high on the list, the federal electronic tax payment system because while one might walk away from a mortgage, the feds will always find you.**
Comparing this year’s Cyber Monday to last year’s, there is also a stark distance. Last year, people seemed way more concerned with Jennifer Love Hewitt’s butt and what was on TV than they were with Cyber Monday deals and sales.
All we’re left with for sure, then, in terms of correlations, is that the weak economy is driving bargain-hunting behavior among consumers. Now is the time, especially for small and specialty online retailers, to offer extra-special promotions, coupons, discounted, and low-end merchandise. It might not help grow the profit margin, but you could at least grow your customer base.
*I take issue with the concept of “narrative fallacy” and therefore prefer “attribution error.” Recently I gave a lecture with perhaps the longest title ever: Anything Anybody Ever Told You Was a Lie, Including What I Just Said: Capturing Reality, If It Exists, in Fiction, Which Is All There Is Anyway. In that lecture, I discuss the painful realization historians and journalists come to that we are all reduced to narrative in the end, our best version of actual events which is nearly always disputed. It’s not that events don’t occur, it’s that our understanding of said events, how they occur and why, is not infinite enough.
**These same feds, while constructing silly too-big-too-fail, trickle-down bailouts, conveniently ignore the idea that if the dwindling middle class received a reprieve from, say, property taxes, they may actually be able to make a few mortgage payments.
