Talk Story
‘Hourglass effect’ points
way for Hawaii economyAMERICANS crave excellence. I remember shopping for a bicycle in my mid-30s. My last bike had been the balloon-tired Columbia I rode on my paper route as a kid. I didn't know much about 10-speed lightweights, let alone Campagnolo component groups, double-butted tube sets, sew-up tires or quick-release pedals and hubs.
"You can really get into bikes," the salesman assured me. "Lots of guys are doing it because it's a lot cheaper than cars or motorcycles. You can put together a really excellent bike for about $2,000."
I wimped out and bought a $250 Raleigh.
Still, my mother collects translucent bone china teacups, a cousin in Nebraska restores classic John Deere tractors and my college roommate collected precision Leica cameras. Classic cars, Harley-Davidsons, Martin guitars and handcrafted mahogany speedboats all have their aficionados. Possessing the best of breed is irresistible.
A DECADE after big-box retailers revolutionized shopping in Hawaii by offering low-price, bulk and "value" merchandise, we're told that American consumer attitudes are shifting again, moving from midrange products to high-end goods.
Sales of inexpensive products remain strong while luxury brands are booming, both at the expense of middle-market goods. The Wall Street Journal calls this phenomenon the "hourglass effect." Auto dealers who used to sell middle-market Oldsmobiles, Mercurys and Dodges know all about it. So does Kmart, which chose to take the middle road between low-price leader Wal-Mart and its upscale rival, Target.
That road led to bankruptcy.
Consumers once strove to emulate the middle class, to move up from a Chevrolet to a Buick, for example. Today, they either chose the cheapest model that has the features they need, or they are increasingly willing to pay top dollar for a luxury brand.
Aristotle theorized that something in human nature resists reason. He concluded that it's one thing for us to know what is good, but it's another to make our desires conform to reason.
GLOBALIZATION and free trade have made more and more feature-laden, low-price products available, but buyers increasingly ask themselves: Why pay more for a familiar, middle-market, brand-name model with the same features? Why not go for a premium brand with better quality, style, more features or durability?
Today, Americans may not be as wealthy as when the 1990s boom peaked, but we're still well off. The 2000 census found median household income nationally at a record $42,148. In Hawaii it was $48,026. Moreover, now that their kids are leaving college and heading off on their own as consumers, well-to-do baby boomers are feeling free to splurge.
Market researchers say nobody aspires to be middle class anymore -- we're all becoming quality conscious, whether it makes sense or not. That's why the airways are crammed with ads for $50,000 Porsche Boxsters and forged Nike golf clubs priced at $500 a copy.
Ford saw sales of its midprice Taurus slip away, while by 2005 the luxury brands it snapped up in the late 1990s -- Aston Martin, Land Rover, Jaguar and Volvo -- may generate a third of the company's profits.
THIS PHENOMENON bodes well for Hawaii's tourist economy. The Hawaii brand name continues to have cachet and high-end appeal.
Hotel occupancy continues to lag but is recovering, particularly at high-end properties. The posh Halekulani, for example, was sold out last weekend while its sister hotel, Waikiki Parc, was turning away local customers trying to book reservations for Easter brunch.
Airlines that cut costs last year to survive the Sept. 11 fallout should soon begin competing again on the basis of comfortable seats, attentive service and convenient schedules.
People want to feel they are moving up in the world. Providing a first-class travel experience should keep Hawaii competitive as a destination.
As we build and diversify the economy, we can try to be the cheapest or we can be the best, but a middle course is doomed.
John Flanagan is the Star-Bulletin's contributing editor.
He can be reached at: jflanagan@starbulletin.com.