In today’s Exponential Investor:
- A Miller & Carter steak night
- Observing millennials
- Property prices and Nike?
On Wednesday night I went out for dinner with my wife and a cousin of mine who’s visiting us from Australia.
We went to a local Miller & Carter restaurant – not that one that sank into the lake!
A fine restaurant that did not sink
Anyway, I was quite surprised at how busy it was on a Wednesday night. That was good though, as it meant that the place had a bit of atmosphere about it.
There were a number of birthdays as well. I could tell because I was using my highly tuned instincts of social observation. Also, there were a lot of birthday balloons at different tables…
Side note: when did big lavish balloons at adult birthdays become a thing? Is that an Instagram thing?
Anyway, thanks to the said balloons, I was also able to deduce the age of many of the birthday tables. And all of them were under 30. Maybe the size of the balloons and the age of the birthdays is no coincidence…
However, I do love a bit of social observation and consideration, as it makes me think about things. It helps me understand social dynamics which is critical to understanding pockets of the market.
What I noticed in particular with every single one of these tables was the kind of attire they were wearing.
Now, being Miller & Carter, the management does actually repeatedly go on about the smart casual dress code. It’s on the booking form, the website, and in the restaurant at the entrance.
On their website, the company says,
We like to think that dining at Miller & Carter is a bit of a treat, and many of our guests like to dress up to celebrate their special occasions. Therefore we have a smart-casual dress code and kindly request that no sportswear is worn when visiting Miller & Carter.
Sportswear… now that’s a broad term. But it’s clear that they mean no tracksuits, sport jerseys, etc.
Arguably it would also mean no sneakers.
At least 20 years ago it would mean no sneakers. But sneakers today aren’t like what they used to be. When I was younger, sneakers were knock-about shoes. They were the epitome of “casual”. There was nothing “smart” about them.
And I’d argue that not too long ago, going into a place like Miller & Carter in sneakers would have seen the people at the door suggest “not in those shoes”.
But when I looked around the tables of all the millennials and their birthday parties on Wednesday night, I noticed something interesting.
All of them… and not just a couple, but all of them… were wearing sneakers of some variety. Even more specifically they were all wearing variations of Nike sneakers. Not a Reebok in sight. No Under Armour here. Forget a Diadora or Fila or Adidas. It was wall-to-wall Nike.
And that really got me thinking…
Fast fashion up top, luxury down below
Last week I wrote to you about the alternative markets that may be worthy of consideration if you’re prepared to consider some eclectic asset classes.
Specificially, I explained how, if you were willing to look at assets like sneakers (seriously), there was some money to be made from those shoes.
In some cases you can even beat the performance you might typically find from the stock market.
If you missed that essay, check it out here before reading a single word more.
It’s important to get that little bit of sneaker context because today I’m expanding on that idea a little further.
I believe that there’s an opportunity in the regular stock market thanks to the kinds of consumer behaviours we’re seeing play out in society today.
While the mainstream media may have you believe the economy is in a very bad way, the reality may well be different – and better.
And that while the UK is most definitely in, and will stay in, a recession, that doesn’t mean that all industry or all companies are struggling. In fact, some are absolutely thriving.
What matters is this: the reason that those companies are thriving is that there are young people with cash to splash.
My social observations on Wednesday night solidified a view I’ve had for a while, that the formerly humble sneaker is no longer humble. It lives no longer in the realm of sportswear: instead, it is a part of the world of luxury.
What I also noticed on Wednesday night was that a higher proportion of “fast-fashion” apparel. Think of the kind of clothing you’d find from ASOS or Boohoo. Nevertheless, the other guests at Miller & Carter were still wearing Nike sneakers, the cost of which usually starts at around £100.
So you have this dichotomy of more affordable clothing, but a “splurge” on footwear.
The more I thought about it, the more it made sense to me. And the more I started to get interested in the prospects of a company like Nike during a recession.
Property prices = disposable income
There’s a lot to consider with regards to the impact of property prices on social dynamics and economies. There’s also a lot of negative coverage of rising property prices, the unaffordability of housing and how that impacts everything from demographics to population growth (or decline) to GDP and so forth.
One thing I don’t think gets that much coverage is the positive nature of high house prices on demand for luxury consumer goods.
You see, if housing is highly unaffordable, and people are living at home with their parents for longer periods, there’s a knock-on benefit to consumer goods companies.
Let me break it down simply…
If you live at home, because it’s unaffordable to rent or buy a house, then by definition you have more disposable income to spend. I believe it’s folly to believe that the only thing people do when living at home longer is only save. They also spend more because they can.
And the things they spend on are the things that provide satisfaction and social status – a mix of fast fashion but also luxury fashion.
When you wonder why millennials can afford £100 or £200 shoes, the answer is because they’ve got the disposable income to do so.
How they pay is an interesting question in itself: think about Buy Now, Pay Later (BNPL). Nevertheless, the millennials still pay, and they buy from “achievable” luxury brands like Nike.
And therein is where the conversation around Nike comes in again. I believe what Nike has continued to do over the years is a beautiful evolution of brand marketing. It is by no means a rival to Louis Vuitton. But it’s also not another Reebok either.
Nike has evolved into an achievable luxury brand. Its price points hurt just enough that the products are not cheap. But the products are certainly not out of reach either. Its partnerships with notable influencers and celebrities enhances that achievable luxury image.
It is not a sneaker company, it is a luxury brand for everyone, without the high price tags. And that means even in a recession, I believe it will come out pretty well because it won’t see a drop-off in spending – if anything, it’ll see an acceleration as it becomes the “feelgood” luxury buy for people that continue to work and spend in the economy.
Until next time…
Editor, Exponential Investor