Article - http://www.economist.com/business/displaystory.cfm?story_id=12481020
Summary
The selected article talks about the effects on retailers as American consumers are lacking the urge to shop. The drop in demand by the consumers is shown in the significant decreases in share prices of major retailers. Some situations are not as serious as the other, such as Wal-Mart’s one-fifth drop in share prices compared to the 80% drop of Whole Foods Market. In the case of smaller retailers, this fall in demand is causing some of them almost bankruptcy. To counteract this problem, some ideas were thought of to minimize this downturn. Cuts in labour costs are one of them, but the retailer would have to ensure that it does not affect customer service in any negative way. Price cuts are also thought of, but the psychology of the consumer might be troublesome, as they might believe the price will continue to drop as the economy gets worse.
Connections
The connection between the chapter topic and this article is the concept of supply and demand. While the demand for products decreases, retailers must come up with ways to respond to this change. In the case of current American retailers, certain measures such as cutting down the price of products and production costs are being made to keep up with the sudden drop. The change in demand could be affected by the consumers’ views on their expectation of future prices of the products, as stocks on the stock market are decreasing in value.
Reflection
In the position of a consumer, these price cuts were indeed expected and were actually looked forward to. With the current status of the stock market, one would only think that prices would continue to decrease. However, the ever-worsening state of the economy would push the world into a global recession, which it already seems like is in. As much as one would try to avoid, this recession could and would lead into a depression, if nothing is done to prevent it. From what I learned about the Great Depression in the 1920’s, it is something that no one will look forward to.
