Four Reasons the Retail Apocalypse Hurts Frugal Consumers

In our last post we talked about how the decline of physical retailing is great for the environment. That was the good news.

But there's bad news too, unfortunately: The retail apocalypse is not great for consumers. Not at all.

And for frugal, bargain-hunting consumers, it's going to be really not great. As the retail environment evolves, we're going to get less and less value for the money we spend. Here's why:

1) Retail will become more oligopoly-like and less competitive. If you've read Casual Kitchen's recent posts on inflation and how to beat it, this will be obvious to you, but I'll say it anyway: as more and more physical retailers close down stores and exit the marketplace, the players that remain simply do not have to compete as hard to earn your purchasing dollars. This means higher prices, fewer alternatives, and less value for consumers.

2) Amazon is the mother of all "meet or beat" pricing players. As we know, meet or beat pricing results in higher prices for consumers, not lower prices. When a store claims it will beat any competitor's price, it just gives the other stores in a market an excuse to raise prices. Since consumers shopping in say, Best Buy, can quickly check their phones to compare prices, Amazon has zero incentive to cut prices--after all, they are the benchmark everyone will compare to. Worse, Best Buy has zero incentive to offer any price significantly lower than Amazon either! Neither retailer wants to start a race to the bottom that no one--except consumers--can win.

3) Fewer truly attractive sales. A less competitive retail environment will drive second-order effects: there will be far fewer retailers offering truly attractive sales and doorbuster-type opportunities. Doorbuster pricing and inventory liquidation sales can offer extraordinary value to disciplined and patient consumers--admittedly at the expense of a physical retailer that planned poorly for customer demand. In the increasingly virtual world of retailing, it's much easier to manage inventory, distribution is less complicated, and companies know a lot more about you and what you want (more on this in a moment). Truly glorious sales--the kind that result when a retailer badly misjudges demand and later needs to liquidate unwanted inventory--will be far less common in the new retailing environment.

4) Worse informational asymmetry. Amazon and all the various online information gatherers know a lot more about us than we know about them. As their share of retailing grows, the informational advantage they have over us grows too. We will know less and less about what happens behind the scenes. Worse, we can't see--and most of us are hardly even aware of--all the informational trails we leave online. Online retailers gather this information relentlessly, and use it to their advantage.

Final thoughts
There will be other pros and cons to the new retail beyond the negative impact on consumers. For one thing, there will be lots and lots of job losses. But don't forget: at one time the USA's labor force was 95+% agricultural (it's less than 1% now), and buggy whip manufacturing, whale oil refining and 35mm photography all used to be gigantic industries. Our economy has handled bigger and far more wracking transformations--we'll muddle through this one as well.

It's probably too early to really forecast the cultural impact here, although I can speculate that the Amazoning of retail will further worsen the atomization of our society. I'm sure there will be other cultural impacts that we haven't even thought about.

Finally, remember that one of my central goals here at Casual Kitchen is to help consumers become better informed and more empowered. And there's a laughably easy solution for the coming consumer-unfriendly retail environment--and it's a solution anyone can adopt: just buy less freaking stuff. We have an absurdly consumerist culture here in the USA. Would it be so bad to tone it down a little? No matter how much market share or informational advantages online retail might have, they cannot take away our power and our psychological agency. We are the ones who willingly fish our credit cards out of our pockets and click "buy"--and therefore we consumers are the ones with ultimate power here.

What do you think?

Readers! Despite these secular trends (!), you can still help support the work I do here at Casual Kitchen by visiting Amazon via any link on this site. Amazon pays a small commission to me based on whatever purchase you make on that visit, and it's at no extra cost to you. Thank you!

1 comment:

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