Cheap

Table of Contents

 

 

ALSO BY ELLEN RUPPEL SHELL

THE PENGUIN PRESS
Published by the Penguin Group
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First Published in 2009 by The Penguin Press,
a member of Penguin Group (USA) Inc.

Copyright © Ellen Ruppel Shell, 2009

All rights reserved

 

LIBRARY OF CONGRESS CATALOGING IN PUBLICATION DATA
Shell, Ellen Ruppel
Cheap : the high cost of discount culture / Ellen Ruppel Shell.
p. cm.
Includes bibliographical references and index.

eISBN : 978-1-101-13547-1

1. Discount houses (Retail trade)—United States. 2. Consumer behavior—United States. I. Title.
HF5429.215.U6S54 2009
381’.1490973—dc22 2009009503

 

 

 

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TO JO, ALI, AND MART . . . PRICELESS

I do not prize the word “cheap.” It is not a badge of honor.

|
PRESIDENT WILLIAM MCKINLEY

This book is about America’s dangerous liaison with Cheap.

In a market awash in increasingly similar—even identical—goods, price is the ultimate arbiter; the lower, the better. I know this because I live it. I buy $10 bootleg watches from street vendors, repressing the suspicion that in six weeks’ time said timepiece is as likely to sprout wings as to tell time. I buy three-for-$15 underwear at Target, and discontinued glassware at the outlets. I graze the home section of discount stores to stock up on key chains and flashlights and “mini tool boxes” and other cool stuff too cheap to resist.

Like almost everyone, I have a wobbly budget to balance and a torrent of bills every month. But thrift doesn’t explain this behavior. How thrifty is it to buy a watch with a two-month life span, or a Lilliputian hammer “just in case”? I would drive an extra mile to save a few pennies a gallon on gasoline but wouldn’t dream of driving any distance to retrieve a fallen quarter from the sidewalk. No, this isn’t about thrift. The craving for bargains springs from something much deeper. Low price is an end and a victory in itself, a way to wrestle control from the baffling mystery that is retail.

Alas, that control is largely illusory and those “unbelievable deals” all too believable. The underpants shred in the dryer. The hammer is too small to bang in a nail. The watch stops. Still, these “deals” are irresistible.

Knowing that bargains are ephemeral doesn’t diminish our desire for them. It doesn’t keep us from leaving a warm bed on Black Friday morning to elbow through the post-Thanksgiving mob. It doesn’t stop us from draining gas and time to save two bucks on a case of diapers or Coke at the Big Box store. And it doesn’t prevent us from cluttering our homes, garages, and rented storage units with cheap stuff we may have forgotten we own.

As a nation, we’ve come to assume that low price powers both productivity and the gross national product. Under this logic, the ebb and flow of cheap goods underlies progress and rewards us with good jobs and bright futures. Historically, key economists have endorsed this view, as have legislators. And while a smattering of consumer advocates, labor unionists, and social scientists grumble, outside of the predictable jabs at Wal-Mart few have dared to publicly challenge this orthodoxy. In these trying times, who but a hopeless elitist would suggest that low price is not an unassailable good?

I plead not guilty to that elitist charge. For most of my life, the phrase “cheap thrill” did not constitute an oxymoron. My personal devotion to cheap stretches back to a college diet of ramen noodles and brown rice—bought in bulk. I cultivated a tolerance (though never a taste) for horse meat, thanks to its incredibly low price. Though I no longer eat palomino, until beginning this project I did comparison shop for chicken thighs, and rarely passed a jumble bin of half-priced anything—jeans, dress shirts, plumbing fixtures, gloves, coffee mugs—without giving it a good tumble. My bliss was driving into Manhattan late on a Friday afternoon and slipping into an unmetered parking spot free for the entire weekend.

What changed me was the boot incident. A couple of years ago I needed a pair of dress boots to complement a New Year’s Eve outfit I’d purchased on super sale at Bloomingdale’s (you would not believe how much I saved). I went to my local shoe store—a mini-outlet—and had a look around. The selection was just so-so. I asked the salesman whether he had anything special, and he brought over a gorgeous pair of boots from Italy. The leather was buttery, the look great, the fit perfect, but the price well out of my range. I settled for some Chinese imports selling for about one quarter the price. The boots were clunky and so uncomfortable that on New Year’s Day I tossed them to the back of my closet, where they landed in a heap of other unwearable “good deals” in bad colors or unflattering shapes: a bargain hunter’s pile of shame.

The footwear fiasco got me thinking about all those cheap gloves and socks and T-shirts and “Guess how much I saved?” gizmos cluttering my family’s life. How much of this stuff had we used once or not at all and then packed away, given away, thrown away? Why were we doing this? It was time to take a hard look at this behavior, a behavior that on its face seemed not quite rational. And why was there such a scarcity of things reasonably priced? It seemed that almost all consumer good were cheap, like the Chinese boots, or extravagant, like the Italian boots. Where, I wondered, was the solid middle ground that offered safe footing not so very long ago?

Ferreting out the answer to these seemingly simple questions led to a fascinating journey, from the hinterlands of Sweden to the back alleys of Shanghai to the shipyards of Los Angeles. I met with psychologists, economists, farmers, marketers, designers, historians, cultural theorists, mathematicians, and retailers large and small. I spent a couple of years wandering a world of consumer choices driven by a system that creates the desire it claims to sate. This book explores that world and what role we—as consumers and citizens—play in it.

 

 

 

LIKE ALL sensible journeys, this one begins with a look backward to history. Retail giant John Wanamaker’s inventions from the white sale to the price tag changed forever the way we shop. Also playing a role were Frank W. Woolworth, the sickly farm boy who built his “Cathedral of Commerce” one hairpin at a time, and appliance salesman Eugene Ferkauf and his wildly successful creation, Korvettes. The rise of technology-enabled globalism enabled a shift in power away from manufacturers and workers and onto giant retailers and their stockholders. Low price became king and the consumer its willing pawn. Simple but clever inventions like the shopping cart and the bar code abetted the shift from full service to self-service, further reducing the need for skilled staff and offloading more responsibility onto consumers. Over time, choice became restricted by price—what could not be sold cheaply, like the Chinese boots, became a de facto luxury, like the Italian boots. Discounting reshuffled America’s demography, hastening the collapse of cities and the flight to the suburbs. In the “distribution upheaval” of the early 1960s, hundreds of merchants were put out of business by the looming discount behemoths. By the late 1970s, discounting had infiltrated every market segment, and the emergence of “category killers” in hardware, toys, and furniture had killed off more than half of existing retail chains. Millions of jobs were shipped overseas as discounters leaped at every opportunity to buy from foreign suppliers. Prices crashed, consumer debt soared, and Americans put their futures on the installment plan.

What does this have to do with us today? Well, quite a lot. From the day we open our first lemonade stand, most of us understand that price is a relative matter, one that can infuriate, surprise, sadden, or delight. As Harvard Business School professor Gerald Zaltman told me, “Price is typically a number, but there is nothing more subjective.” Who knew that the way prices are positioned on a menu can influence what we eat for lunch or that some numbers trigger in our minds the flashing light of good deal, while others send signals of rip-off ? Looking deep inside the human brain, neuroscientists have discovered that the very anticipation of a “bargain” sets our neural networks aquiver. The manipulation of price can confuse us, block the thinking part of our brain and ignite the impulsive, primitive side, the part that leads us to make poor decisions based on bad assumptions. Ever wonder why you’ll drive five miles out of your way to save a buck on a six-pack of beer or, for that matter, a tank of gas? Or why you’ll snap up a sweater “marked down” from $150 to $50 but pass up the very same sweater selling for “full price” at $50? Or why you’d prefer to pay more for an item than witness someone else pay less? Ever wonder why your own closet is cluttered with ill-fitting shoes and T-shirts in unbecoming shades? As we will see, science has the answer.

Factory outlets are America’s number-one tourist destination, the fastest-growing segment of not only the retail industry but also the travel industry. In Las Vegas we see the point that outlets can be as dicey as the slots, treacherous places for those who don’t know the landscape. At the outlets a “designer” necklace, a pair of Levi Strauss jeans, a Coach bag are often mere decoys, name brands in name only. Who’s to know? And it’s not only outlets that lead us astray. Merchants of rugs, mattresses, jewelry, and almost everything else use similar strategies to make bad deals irresistible. Even Harvard University dilutes its brand to capitalize on the human penchant for bargains. When the price is right, what’s in the box seems to matter far less than what is on the label.