It’s a Price War. And it’s being waged in a country near you. From commodity exchanges to retail sales, prices are plummeting – and the fight is on to sell products at whatever price the market will bear.
While not all prices will deflate, the more cash-strapped consumers cut back on spending, the deeper the discounts will be.
On the retail front, holiday shopping this year in the US, the world’s largest economy, will be, at best, up just slightly over last year. Despite dramatically lower prices at the gas pump and deep discounts on popular product lines, the latest retail sales projections are, by most measures, disappointing.
Gallup, for example, has significantly lowered its sales projections. The polling giant recently reported: “Though up from 2013, the current spending estimate is well below the November reading in several earlier years, particularly in 2006 and 2007, when the figure exceeded $800. It is also below what Gallup found in October, when Americans predicted they would spend $781 this holiday season.”
Gallup now expects Americans will spend $720 during the holiday shopping season. This projection is consistent with one of the Trends Research Institute’s Top Trends for 2015 (available here): “Price Wars.”
As I wrote in a special digital edition of the Trends Journal published December 9: “Too much product is flooding the global marketplace, and there’s a chronic shortage of people with enough money to buy those products. Price wars will mark a new age of retail marketing.”
We are seeing the dawn of that powerful trend line this holiday season. Consider the facts…
When oil prices started tumbling this summer, “experts” anticipated lower prices would stimulate buying around the world, especially during the holiday shopping season. That was the way things had always worked; money not spent on gas would be spent elsewhere. But six months later, oil continues to drop and Price Wars across a number of commodity and retail sectors are revving up. Copper is at a five-year low. Silver is at a five-year low. It’s the same with corn. A ton of reinforcement rod (rebar) is selling for less than a ton of cabbage in China.
Simply, too much capacity and declining consumption are driving down prices. Unlike in recent years, prices can’t be artificially propped up; with real wages in decline across the globe, there is less money to buy the goods.
It’s a worldwide slowdown. With economies across the globe falling deeper into depression, recession and/or bordering on it, all while struggling to prop up stagnant economies, the consumer is handcuffed. Falling wages, unemployment, under-employment and pervasive pessimism are hardly incentives to shop.
“Price Wars” will continue to emerge with strength as a means to squeeze every expendable dollar, yen, yuan, euro or ruble left in the working-class pocketbook.