Plunging Prices Follow The Crash

October 5th, 2009

Times are good for bargain-hunters, but a price-slashing culture could be disastrous for retailers and their employees.

Prices around the country are dropping in a retail campaign to win back buyers who put their wallets away when the stock market crashed and thriftiness became the norm.
Shoppers are staying away primarily because they’re broke, but also because the consumer culture has changed since 2007: conspicuous consumption just isn’t as okay as it used to be.
Because consumers are now holding out for the discounts they know desperate retailers will offer, companies are forced to cut prices even as their profit margins shrink. Lower prices mean lower profits, which often translates to hiring freezes and layoffs. This is the same cycle that affects the Japanese economy, which has been battling deflation for decades.

70% of the U.S. economy is made up of consumer spending, but following the stock market crash in 2008, total household wealth decreased by 11% in less than six months.
On average, prices have decreased by about 20% in the hotel industry and more than 30% in the real estate market.
The Consumer Price Index dropped 1.5% between September 2008 and September 2009 – the largest decrease since 1950.

“This is the new normal. We aren’t going back.” – Donald Keprta, President of Dominick’s (a supermarket chain in the Midwest)