As an investor, founder, CEO and business book author, I write about startups, design, how to build a good business, and I like to muse about culture in any form.

The (unseen) high cost of low prices…or, you get the type of culture and products you pay for

500x500-Hunter-Green-Woodstock-Adirondack-ChairLast summer, I bought two Adirondack chairs.  My husband had been talking about wanting this kind of chair for at least ten years.   He’d routinely stop the car to test out Adirondack chairs we saw displayed in front of garden centers and furniture stores.  He had very precise expectations for the curve of the back, the materials, the construction, and the ergonomics of the chairs.   He knew where the chairs would go (on the little empty deck that gets great morning sunlight).

This went on for many, many years.  The discussion.  The casual shopping.  And the rejection every time, on one basis or another:  “too expensive, uncomfortable, we can’t afford them, we don’t need them, we can’t get these home today, let’s think about it a little more.”

Last summer I was delighted when I saw a 40% off sign, in the peak of the season, at the very store my husband had previously declared to have the best Adirondack chairs.  I turned the car around, went straight to the cash register, and snapped two up, anticipating my husband’s happiness at the good deal.  But as I talked to the owner of the store, I began to feel a little different about the “steal.”  His shop was struggling.  Sales were down 50%.  He’d bought his inventory before the economy started unraveling. He had a cash flow problem.

I began to regret the purchase, while simultaneously thinking….yet this store owner actually needs me to buy these chairs more than ever.  But at this price?   He can’t be covering his costs.

Similarly, I saw a wonderful array of fresh household purchases at a friend’s house.  Candle holders, rugs, art.  Truly distinct and special things.  They were from a shop I’d just read about in the newspaper.  The article  hailed the shop owner’s for her consistency in supporting Fair Trade practices.  Why did my friend buy so much?   The store was going out of business.

It deeply concerns me that the combination of price-shopping on the Internet, big box stores, and the current economy is training us all to become inveterate bargain hunters.  That’s fine for old-line brands and products and shops, who have long since reaped profits from a particular product’s early heydays.  But when are the heydays for the new products, smaller retailers, and the young companies who haven’t yet gotten great distribution and scale economies?  Not everything CAN be sold on a deal.   Some products have to be sold at full price to ensure the shop or producer’s survival.  It’s not that these business people or producers are greedy….far from it.  We know this first-hand at Grommet.  Most of these entrepreneurial efforts are products of pure passion.  They just can’t be–economically speaking– WalMart or Sony or Procter and Gamble.  Nor would we want them to be.

There has to be room in our consumer behavior to support the new products and young enterprises.  Why?  Imagine a world full of what WalMart decides.  Or Amazon.  Amazon is wonderful on many levels, but it is also an extremely sophisticated financial machine–driving deep discounts in all of its major categories.  This is a key reason why my town has lost all four of its local bookstores.  A real loss to the fabric of our lives.   On its side, WalMart has no tolerance in its model for helping us discover the new, the unique, and the admittedly fragile young product suppliers.  They buy big, and conservative.   Period.

I “get” the tension, and the risk of total idealism, in this thinking.  I’ve lived on skinny household budgets for big chunks of my life.   And after all, I didn’t offer to pay full price for the Adirondack chairs!   But I’d like to believe that we could perhaps buy fewer items, but buy them well.  Sure, if you really need giant boxes of Cheerios, Costco has a place.  But I’d hate to see the rest of our product experiences painted with the same deep discount brush.  The cost of those discounts can be extraordinarily high–at least to those of us who want a world enrichened by the type of products and retailers that are the polar opposite of WalMart.

6 Responses to “The (unseen) high cost of low prices…or, you get the type of culture and products you pay for”

  1. Daniel Weinreb

    Everyone who frequently flies coach talks about how much they hate it, and one big complaint is that there isn’t enough leg room. One of the major US carriers changes some of their planes to have fewer seats, spaced further apart. For this they charged a small premium; airlines make their money from selling those last few seats on a flight, so having fewer seats costs them a lot. They publicized this widely. What happened? Nobody cared. The customers all go for the least expensive fare. The carrier undid the change (they didn’t publicize that, though).

    • julespieri

      Dan, this example falls into a different bucket for me. It’s not so much about product permanence or the social or the eco benefits of a purchase. (You could argue that the more seats on a plane, the more eco-friendly the company is, strangely.) In this example it’s “just” my own comfort affected by the purchase, which is transitory.

      I do see your example is pointing out a company who tried to create a “quality experience” and got no credit for it. That’s a shame…you would think those poor tall guys would find this small upgrade more than worth it.

  2. Heather Ledeboer

    Your post resonates with me as well. I have mentally struggled with this and because I have focused my business on “the little guys” (or moms in my case) I feel a strong desire to see the products that these women have worked so hard to make, succeed. Thank you for sharing your thoughts.

    • julespieri

      Thanks for weighing in on this. I have so much to say on this topic. I actually learned a bit about this kind of thinking by living in Ireland. I don’t want to idealize the Irish…they were in a totally mad consumerist phase when I lived there (2001-5) but their deeper values were not centered on consumption. And for me personally, living in a place that only had relatively small shops (anti-big box laws), only had sales twice a year, and had pretty high prices and less choice, was strangely refreshing. I bought less, and better. I’ll put up a piece I wrote about that when I lived there.

      The bottom line is we need to act against our values…if we care about supporting innovation, the little guy, the new (even from innovative big companies), the independent, we have to support them. It might mean buying fewer things, and even doing without, but we would be buying better and supporting the society we want to see develop.

  3. Daniel Weinreb

    Regarding acting against our own values, I think it’s a bit more subtle than that: it has to do with the conflict between what good for each of us individually, versus what is good for us collectively. The following article from last Sunday’s New York Times explains this better than anything I’ve ever read:

    — Dan

    • Jules Pieri

      As always, you see the nuances and complexities. Great article.


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