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Low-cost Trend Troubles: Daily Deals, Netbooks, Cheap China goods

November 15, 2011

Low-cost Trend Troubles: Daily Deals, Netbooks, Cheap China good
By Oregon Small Business Association

As the economy continues to sputter, U.S consumers have increasingly cut spending and embraced bargain shopping as a way of life. New data, however, suggests that recent fixtures of American frugality may be on the way out.

Daily Deals hitting peak

Studies indicate that the once booming “daily deal” industry by Living Social and Groupon may be losing steam. Facebook and Yelp once aggressively embraced the business model are now cooling to or spurning it altogether. And major players like Groupon and Living Social have experienced sharp declines in unique visitors in recent months. Living Social, for example, saw its unique visits decline by nearly 30 percent from June through July 2011.

According to a recent survey conducted by PriceGrabber, the proliferation of players in the “daily deal” market may have induced consumer fatigue. Of those surveyed, 52 percent of U.S. “daily deal” users say that they’re overwhelmed by the volume of deals they receive, and 60 percent believe the industry is too crowded.

The pace at which enthusiasm for “daily deals” is declining may largely be a consequence of too much market noise. It nonetheless offers insight into the willingness of even cash-strapped consumers to sift through multiple solicitations in search of a bargain.

Netbooks decline

Enthusiasm for relatively inexpensive personal computers (PCs) also appears to be waning. Despite ongoing improvements to PCs—portability, size, sophistication, and cost—sales are trending downward in leading countries, including the U.S. Alternatively, consumers are increasingly willing to spend more money for the convenience and power of tablets, like the iPad, even though they cost twice as much as a netbook, its PC rival.

Last quarter likely marked a turning point in the tablet/PC competition and established a “new normal” for the future: for the first time ever, tablet sales surpassed netbook sales, jumping 112 percent to nearly 14 million. Sales of netbook PCs, which on average cost half as much as tablets ($300 versus $600), declined by more than one million (7.3 million) over the same period.

As with certain kinds of technology, U.S. consumers are also paying more for clothes, toys, and other household items. That trend, however, is less a function of choice than global economic forces driving costs to figures not seen since the early 1990s.

China goods see price increase

Domestically, few things have been as economically predictable as the abundance of cheap Chinese goods. But that may be changing, as well. China’s growing prosperity and accompanying wage increases in recent years have driven the prices of many products upward. Price inflation appears to be accelerating. Clothing prices, for example, were still 9 percent lower this past spring than in 1991. Six months later, prices are now only 5 percent lower—a sharp rise in an overall upward trend beginning in 2007 when clothing prices bottomed out.

If the trend continues and the days of inexpensive Chinese products become a thing of the past, consumers who hope to save money on a range of everyday goods may be forced to look elsewhere for savings. “Daily Deal,” anyone?

  
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