NPR’s Sunday morning marketplace show featured a piece on back to school consumer spending. It’s down, in case you missed it. What captured my attention was the expressed hope that consumers will soon return to their former spending patterns. I certainly hope not.
The bubble burst for lots of reasons, and one of them was the profligate way we spent by racking up credit card debt for what marketing gurus told us were the essentials that one MUST HAVE for back to school, Halloween, Thanksgiving, Christmas, winter or spring break, and summer, not to mention the odds and ends of Easter, Fourth of July, Presidents‘ Day, etc. Nothing from last year would do. Nothing that failed to meet the test of ‘cool’ or ‘in’ or was not endorsed by the right celebrity would do. Nothing that reeked of inexpensive or utilitarian would do.
Those who could (or pretended to be able to) afford it bought the real thing from the right store with the right logo at an ego boosting high price. Those who knew they couldn’t bought the glitzy knock off designed to fall apart about the time the next season started. Some of the real things may have been just as cheaply made with the manufacturers wondering if the suckers would ever notice.
The truly hopeful signs on this morning’s show included the observation that parents were buying things such as basic shoes, basic clothing and the necessary supplies for school based on perceived value for the dollar. They appear to paying a little more for better quality but not a lot more for marketing hype. If that trend continues into the many marketing seasons to follow for a few years, it will change our economy at a very fundamental level.
Some businesses built on little more than a name and some advertising will be gone. Some businesses will have to pare back their offerings to only a couple of products that are currently offered as many that differ only by packaging. More medium size regional agribusiness operations will replace enormous factory farms, and they will be obligated to demonstrate the quality of their products. Big box stores will continue to do well, but their expansion will be slowed, and they also will have to demonstrate greater value for the dollar rather than just cheap prices. That will lead to a resurgence of local operations that can successfully coexist. It will mean higher prices for goods that last longer and perform better but not inflation. It will mean more modest profits for the largest firms, but profits nonetheless. It will mean increased satisfactory economic survival for small businesses.
That America would be healthier, more stable place, with more modest expectations for what a consumer driven economy can generate, and higher expectations for how we can be competitive in a global marketplace. How likely is it? Not very, if the marketing experts have their way. They are not interested in health, modesty or stability. They are not concerned about a bubble built on credit and debt. Those who engineered the last bubble and made out like bandits figure they can do it again. Those who lost their shirts figure they can outsmart it the next time. Both are supremely confident in their ability to inspire foolish consumer spending through their marketing knowhow. They may well be right.