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.
3 comments:
I agree that the price reductions in stores are quite nice but in this situation the price reductions will not lead to much profit. I, as a consumer know that the economy isn’t doing as great as it was before, so every time I go to a store and purchase things I ask myself “Do I really need this?” I am assuming that most people are like this when purchasing stuff due to the economic crisis we are in right now. If people are more cautious now, this would mean that the price reductions on things that are not necessities like games and mp3s wouldn’t be selling as well as before. This will lead to lower sales, which will probably lead to bankruptcy or workers getting laid off. At this rate we will probably fall into a depression and we can’t do anything about it but we can hope for the best.
E.Li
Block F
As a consumer myself, i realize that the economy is not as great as it use to be. Prices on goods are constantly dropping and if everyone avoids impulse buying, then that means there will be a greater price reduction on items that are not important like electronics such as video games or ipods. Since the demand of the products decreases, retailers would have to lower their prices. If this happens, it would lead to bankruptcy and eventually, it could turn into a depression.
K. Lau
Blk F
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