I just finished reading a fascinating study on our economy titled Cheap: The High Cost of Discount Culture by Author Ellen Ruppel Shell. Shell is a correspondent for the The Atlantic and has written for several major publications including National Geographic, the New York Times, Washington Post and Time magazine. By day she is professor of science journalism at Boston University. As the title suggests, this book documents the true price we pay for our love of everything cheap (or should I say inexpensive?). The book runs through a history of discount retailing and the progress of mass production up to our current time where a large portion of our economy has been given over to massive discount retailers such as Walmart. The book also includes a very interesting study on the psychology of buying selling and pricing. We live our lives believing we are in tight control of our actions and decisions. In fact we are not so in control as we like to think. A very detailed science has developed which studies this aspect of human psychology and how we make decisions especially with regard to how we decide to spend money. After reading this portion I felt less like buying stuff.
The basic thesis of the book, however, is that cheap stuff has hidden costs. We already know these costs of course. Cheap for us means a ‘throw away’ society where products are no longer designed to last. Cheap for us means that places like Buffalo have lost thousands of good paying jobs to low wage countries like China. Cheap for us means workers laboring under conditions which would be considered unacceptable in this country. Cheap for us means that many of the practices we don’t condone here are shipped to other countries which don’t have those pesky regulations that protect children, families, and the environment. The book focuses on several specific businesses as examples of how cheap is actually expensive. It takes a detailed look at iconic ‘high design-low budget’ furniture retailer IKEA. It notes that unlike Walmart’s cheap and frumpy image, IKEA has developed a deep discount market of highly trendy but not so long lasting products. The book also suggests that IKEA has also cultivated a reputation for being good to their employees and environmentally responsible. The book notes that, as the world’s third largest buyer of wood products, IKEA’s corporate policy is to only purchase wood from sustainably managed forests. Of course most of their wood is purchased from countries such as Russia and Vietnam which have little to no regulation or inspection of forestry operations (or anything for that matter). IKEA admits in the book that they employ only 9 forest inspectors world wide to enforce their policy (and lets you draw your own conclusions). The book documents many other hidden costs of discount mania – from the loss of local retail to the dangers of our industrially produced food.
Interestingly, the book reserves high praise for WNY’s own retail icon – Wegmans grocery stores. As a privately run company Wegmans has had a certain freedom to operate outside the rigid ‘quick return on investment’ mentality used at many public companies. Wegmans has shown that a company can be successful and profitable over the long run without subjecting every corporate decision to meeting the lowest possible cost. The company is annually listed among the best places in America to work. Their policy is to treat staff with respect by providing good training, good benefits, and general respect. Wegmans employee attrition rate is in the range of an extremely 6 %. The industry average is about 30% and Walmart is said to have an attrition of between 50 to 70%. The result has been Wegmans reputation for a high level of service which has helped them develop a dedicated (almost cultish) customer base despite higher than normal pricing for its industry.
While everything may appear cheap these days, and we have more money to spend on items that we don’t necessarily need… unlike generations before us that spent a large part of their income on necessities such as food, we need to step back and ask, What is important?” A good start would be to read this book – it’s a real eye opener.