The ART Of Business

The End of the Era of Cheap

If you grew up in the 1980s or before, you can likely remember conversations in which people bragged about how much they paid for something. To have paid more for a product or service indicated that a higher-quality item had been purchased.

Not so recently. For the last twenty-plus years, bragging rights have gone to the person who got a good price, a fabulous discount, a great deal. Price sensitivity- resulting from discounting, sales, or everyday low prices- became the norm in much of America and around the world.

Drive down any suburban street on trash-collection day and simply observe how much cheap stuff was bought and is now finding its way to the landfill.

Now, because of the current malaise, it seems we might be entering a new era, where consumer spending is no longer the Holy Grail and the mantra "working harder to buy more" is out of vogue.

Americans appear to be re-shaping and re-tooling their lives, moving away from debt-fueled binges and towards a much more moderate level of consumption.

Because of plummeting home values, uncertainty about the future, and far-too-high-unemployment, there simply isn't the cash, credit, or will to buy more stuff.

We are holding onto our cars much longer to save money, and staying put in our homes because we have little choice, except to stay.

In the short-term, this will make economic growth anemic at best, both here and around the world, as the American consumer still represents about 20% of all global GDP.

Still, in the long run, the ending of the Era of Cheap will ultimately be better for us all, as capital investment levels rise and we lay the foundation for steady, solid, and sane economic growth.

TAGS: Supply Chain
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