Saturday, August 15, 2009

This book will change the way I shop.

I just read Cheap by Ellen Ruppel Shell and it will completely change the way I shop. I image it is hard to sell a book about the “high cost of discount culture,” in the middle of a recession. But the author draws a distinction between the old fashioned notion of thrift and “cheap.” She says that, “thrift connotes some level of sacrifice and self-discipline, of patiently weighing one’s options and forgoing the immediate for deeper satisfaction …cheap is about scratching the itch, about making real the impossible dream of having one’s cake and eating it too.” She also draws a distinction between good value and cheap which many of us disregard when confronted by a sales sign. We don’t care if something is poorly made or doesn’t fit quite right. We no longer need to save money for months or even weeks to furnish our homes or clothe ourselves. And when the cheap-lacquered ash veneer muddles with coffee spills or the paper-thin tee wears a hole, we don’t despair that we cannot sew it or sand it smooth again. It is simply time to go out and buy a new one.

She delves into the “cheap” psychology that makes us peruse the dollar shelves, picking up stuff just in case we might need it. Why we might spend more on gas to drive to the next town to save $3 on a pair of tube socks or buy a watch off the street (or frankly at Target) which is as likely to tell time next month as sprout wings and fly. Or my personal favorite, pick up a dress or a pair of shoes on sale which doesn’t quite fit right, is not the best color and is of marginal quality, wear it once and then throwing it in the back of our closet.

While I am familiar with many of the games retailers use to take advantage of this cheap psychology some of her examples were new to me. Like the practice of mattress discounters to inflate the price of all mattress to say $1,000 and then rotate the brand “on sale” monthly, selling that brand “on sale” at its proper price of $250. We probably aren’t fooled by the $1,000 price tag or the sale and we probably bought the mattress for $250 anyway. But maybe we were influenced just a little into thinking that a good quality mattress should be around $1,000. When an honest company decides to price their mattresses at the proper $250 price, we reject it. We don’t want a $250 mattress for $250 we want a $1,000 mattress for $250.

High/low retailing is another example. She uses the example of a discount jeweler. Turning over a diamond necklace she sees a suggested retail price of $3,329 but is assured by the sales clerk that at this store she can get it for the bargain price of $832. An appraisal after the fact showed the diamonds to be a step above industrial grade. And in fact she found the same necklace on Ebay for $299.

We might not have fallen for any of these specific tricks but most of us have rummaged through a pile of boxy, ill-fitting cashmere sweaters discounted to $75.99 and suspended disbelief that the $250 retail price might actually mean something.

A careful look at Wal-Mart shows that Wal-Mart heavily discounts 1 to 2 percent of its frequently purchased items such as apple juice and toilet paper, items where a few cents here or there will make us stock up. They may even price these below cost as “loss leaders.” But on other items the pricing is only marginally discounted or not discounted at all. She says that “Wal-Mart actually has higher than average prices on about a third of its stock. On those items in which prices are lower, the average savings is 37 cents with about one-third of items carrying a savings of no more than 2 cents.”

Of course Wal-Mart and other mega-discounters have helped lower prices. As they tell us on the ads all the time, they can probably take credit for the decline in prices on many consumer goods over the last 30 years. But Ms. Shell lays out in a stark, detailed analysis what the rise in these discount retail giants have cost us in terms of jobs and real wages as well as the environment.

Lower prices do not come from the pockets of shareholders, mangers or CEOs. Prices are reduced by among other things lowering wages and benefits of workers in the retail industry. A University of CA study found that from a national perspective thanks to Wal-Mart the total earning of retail workers declined by $4.5 billion. Besides lowering wages, discounters have also flattened the employment hierarchy. The traditional retail “career ladder” is gone. Minimum wage sales clerks rarely rise to the level of company management positions any more.

She has more examples of the exploitation of workers throughout the global market place than must of us want to stomach. And her examples of factory farming methods used to grow “cheap” food would turn most of us into vegetarians (at least for a day.)

But as the founder of a green products company, it is the environmental costs of this unsustainable mentality that I can not ignore. Her most telling example is IKEA which is called “the least sustainable company on the planet.” IKEA is the third largest consumer of wood in the world. The timber used by IKEA comes mostly from Eastern Europe and the Russian Far East where half of all logging according to the World Bank is illegal. The illegal Russian logs are milled into planks by low-wage Chinese workers and shipped to border towns in low-wage China. When Chinese workers demanded better wages, the head of IKEA flew to Vietnam and met with the prime minister to make a deal for lower tariffs, lower docking feed and “ensured access to wood” in exchange for employing more Vietnamese.

I am not going to recount the whole book here. I will just quote a paragraph:

“As citizens we recognize this “collateral damage,” deplore it, and frequently decry it. But as consumers we habitually downplay and ignore it. We rail against the exploitation of low-paid workers in Asia as we drive to the Big Box to save three bucks on tube socks and a dollar on underpants. We fume over the mistreatment of animals by agribusiness but freak out at the uptick in food prices. We lecture our kids on social responsibility and then buy them toys assembled by destitute children in some far flung shore. Maintaining cognitive dissonance is one way to navigate a world of contradictions and on an individual basis there’s much to be said for this. But somehow the Age of Cheap has raised cognitive dissonance to a societal norm.”

The book illustrates the problems in clear, unsettling terms. I wish she would write a second book to tell us what to do about it. But at least as a consumer, I will attempt to take responsibility for my actions. Rather than blaming Wal-Mart, the government, manufacturers and others for our economic, social and environmental ills, I will recognize that they are only responding to my “market signals.”

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