10 ways the new economy will look different
From the rise of the tightwad to the decline of the Sun Belt, American values and industries will be reinvented as the nation comes out of the worst recession since the 1930s.
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This is a given: the BC economy (the one we had Before the Crash) had too much of many important things. Too much debt. Too much consumption. Too much speculation in complicated financial instruments by bankers blind to the bubble inflating around them. That's not coming back.Skip to next paragraph
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Housing prices are not going to rebound 20 percent soon. The Dow is not getting back to 14,000 this decade, and maybe not the next. Circuit City, Linens 'n Things, Lehman Brothers – they're all extinct, like Studebaker. "We are never going back to the way we were," says Paco Underhill, chief executive officer of the retail consulting firm Envirosell.
You don't have to be a futurist to foresee that in the coming new economy just about everyone in the private sector, from consumers to financiers, will be looking to get the most they can for their dollars. You can sum the situation up in two words: "value rules."
In the old days of two years ago, the thrill was in the extras – the heated steering wheel or the size of the second shower in the master bedroom suite. Now it's in the percentage discount from the previous list price.
This change in economic attitudes could mark a shift in America's very way of life. Look at the Great Depression: It was a scarring experience that taught a generation to practice such acts of thrift as washing out plastic bags, to the puzzlement of their baby boomer kids. "The era of 'bling' is coming to a close," says Mr. Underhill.
2 RETURN OF THE TIGHTWAD
The new value rules have been reflected for months in that most sensitive of indicators of consumer attitudes – marketing. The sign of the times is a sign in the mall advertising "65 Percent Off!"
Those placards are going to be up for a while. Many retailers are desperate for cash as much as profit, just to pay their suppliers – and buy the next season's line of goods so they can stay in business. Having experienced those deep discounts since last November, consumers may now expect them as a matter of course, says Stephen Hoch, a professor of marketing at the University of Pennsylvania's Wharton School of Business. He thinks a new logic now pervades the US marketplace.
Remember those advertising campaigns that preached entitlement? They featured sailboats crashing through surf, or a team of climbers standing triumphantly atop K2. The people looked impossibly handsome and successful, as if they'd taken time off from modeling to run Google.
"You work hard, so you deserve this [auto or watch or necklace or power bar]!" the ads said. "Sure, it costs about the same as the GDP of Senegal. But aren't you worth it?"
Those pitches have all but disappeared. "That kind of theme doesn't fit the mood of the country right now," says Mr. Hoch.
Consumers realize they have been wasting money on products that weren't actually better, but were pitched as items that could improve their status. Now they find status in being discerning shoppers.
Ellen Frost wanders the narrow aisles of the Bargain Store in Northport, Ala., pushing past shelves where teddy bears share space with Gatorade, and faux china gathers dust. Six months ago, thrift-store shopping was only an occasional foray for her. These days, she's a frequent visitor, buying everything from household essentials to food. She grabs a 50-cent spiral notebook. "These would be $2 to $3 at WalMart," she says.