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Are We in a Race to the Bottom?

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As consumers, are we in a race to the bottom when it comes to trying to get products for the cheapest price?

I’m starting to notice a trend. This trend has been exacerbated by the latest snafu with Lumber Liquidators. If you haven’t heard, there was a 60-minute piece about the flooring company selling products (specifically laminate flooring) that were labeled as CARB2 compliant.

This is a standard in California dealing with toxicity levels, particularly formaldehyde. Now, I don’t know if this information is specifically true or not, but what it does show is that companies might be willing to pull out all the stops to increase their profit margin and cut costs.

A Race to the Bottom?

 

If you haven’t heard this phrase before, it’s really around how many of us are looking for cheaper and cheaper products in order to save money. In turn, companies and manufacturers have to cut corners to make products cheaper. This is probably the case with Lumber Liquidators. I mean, they do have “Liquidators” in their name. What does that mean to you?

Now, a race to the bottom is really a socio-economic trend where companies slowly lose regulations, which allows them to reduce wages, lower working conditions, and many other things. If you look at the grand scheme of it all, this can all be attributed to our desire for the cheapest products. I wrote about how our quest for lower prices could be hurting us. This is what I mean.

When we demand items at the lowest price, we are asking for items to be made cheap. We get what we pay for! This has a side effect of turning us into a ‘throw-away’ culture. We don’t expect things to last as long as we used to and perhaps don’t see that it is at least in part connected to the fact that we don’t make things the way we used to. One of our problems as a culture is that we not only want to pay very little for items, but we also want them to be of high quality.

Unfortunately, this is not how things work. You can’t have it both ways my friends. You either get high quality or low price. There is a happy medium, but most people want the best price. They want a lot, but want to pay a little. I see it everyday.

Who Wins the Race to the Bottom?

 

If you think about it, no one truly wins. But if you had to declare a winner, it wouldn’t be the consumers. We are slowly forcing companies to push their prices lower or get less demand. In order to keep pace with our desire for low prices, more and more companies are off-shoring their manufacturing and creating inferior products. Those products come right back to us and we gladly pay for them.

What we forget is those prices are cheaper for a reason. Many times the ingredients used are sub-standard or the process of making them is done by cheap labor. We’ve all seen it happen and have heard the stories.

In the end, the winners are the companies that are providing products to the consumers. They are figuring out how to cut corners to lower their cost. They then can sell their products at a lower price than their competitors. This typically results in more sales.

Running a business off of low priced products is all about demand. If you have a heavy demand, then you can make money. Low prices and low demand are ingredients for instant failure.

Are we in a race to the bottom? With consumers pushing for lower prices, companies are making cheaper products, and no one is winning.

I wish I had a solution to this problem. Unfortunately, the only thing I can do is change my spending habits. Instead of focusing just on price, I have to focus on affordability and quality. If I want something made in the US, I have to be willing to pay more for it. I can’t have both in this economy and business environment, at least not very often.

I’ve learned over the last few months that I have to stop focusing on the upfront cost. Most of the time I end up paying much more over time because I have to replace a bad product. In my quest to save money, I have overlooked the overall cost of ownership. I have just tried to keep my wallet fat and my money mind at ease.

 

Have you noticed if you have been in a race to the bottom? Have you seen the quality of products drop as we look for cheaper and cheaper products? Are you willing to pay more for a high quality product, made right that will outlast its lower-priced competitors?

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Grayson is the owner of Debt Roundup and Empowered Shopper. He also co-owns Sprout Wealth and Eyes on the Dollar. After going to battle and winning against consumer debt, he decided it was time to learn how to use credit wisely and grow his wealth. He discusses all things personal finance and is not afraid of being controversial. He also is a freelance writer and blog manager.

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15 Comments

  • I think you bring up a great point here. I’ve found that cheapest isn’t always best. Like you said, there are absolutely times when it makes more sense to pay for quality. Being able to “buy it for life” is really appealing to me. We’ve definitely spent more on things like kitchen implements, socks, etc so that they’ll last longer. But, it’s always a balance.

    One of my favorite strategies is to buy nicer things used–cheaper and better quality than I’d care to pay for new. In my experience, this especially holds true for cars, clothes, and furniture.

  • We have a store here that sells a lot of very cheap things like clothes, home equipment and etc. but the quality of the products are very low. For me, I prefer to buy an expensive one, but worth it to buy, in that case, I’m not just throwing my money away.

  • I definitely think there is a race to the bottom. It seems like everything is junk these days! I just got a new coffeemaker for Christmas and it is already having problems doing the one job it is meant for. It makes me crazy. I’m definitely buying a more expensive model next time.

  • Mike Collins says:

    The cheapest price is not always the best deal. I’d rather spend a few dollars more and get something that will last longer and not break so easily. Typically, when you go for the cheapest option you end up having to replace it sooner and end up spending more than you would have if you just went with quality in the beginning.

  • You are SO right, Grayson. I love a good deal as much as the next person, but I refuse to pay for crap just because it’s cheap. I’d rather wait and buy it when I’ve got the cash, or not have it at all, than to get a “great deal” on a piece of crap item that won’t do me nearly as good as it should. Great post.

  • Kalie says:

    I’ve absolutely noticed a drop in quality of products. I have kitchen appliances my grandmother gave me that still work, but some gifts from our wedding registry had to be replaced within 5 years. This is one reason I like buying used goods and fixing what you already have. Those items may outlast the new lower-quality item.

  • I remember when I bought my house, I went to Wal-Mart to buy things I didn’t realize I needed, like rugs and mats for my bathroom floor. I bought the cheapest ones they had. Fast forward 5 months and I pull the mats out of the dryer and the rubber backing had completely ripped apart from the mat! I ended up going out and buying a higher quality (and priced) bathroom mat.

    That mat has lasted me over 5 years now and it taught me the saving money is good, but you can never overlook quality. As you put it, you can’t have high quality and a cheap price. It’s like eating pizza all day long and thinking you will lose weight.

  • I remember stuff from my Grandparent’s generation and things lasting FORever! Growing up their stuff was so outdated but it worked. I can’t even tell you how many DVD players I’ve been through over the years. They just don’t seem to hold up. And what bugs me most is how we are filling our landfills with junk and electronics (I at least bring things back to best buy to recycle-hopefully they do). I think this is why I’m very cautious about what I purchase now.

  • We notice it most with toys since that is the phase that we are in right now. Our oldest is 17 so we have long since decluttered his childhood toys. However with a 3 and 5 year old there are lots of toys coming into the house. You can hold something and feel that it is poor quality. Toys that we had 10 years ago and are buying again for the little boys are clearly lower in quality. Makes me sad.

  • Lauren says:

    This is exactly why I have stopped shopping at Walmart. I don’t want to support a company that is the epitome of “racing to the bottom”. Paying for a quality item is the smart financial choice, because you won’t be shelling out cash to replace it every few months/years!

  • Lower retail prices do not mean lower cost. The real costs of that cheap “Made in China” item are exported to China in the form of low wages and poor working conditions for the people who make these items. Here at home, the ‘low’ prices at Wal-Mart are also paid for by the low wages of its employees. There is no free ride.

    As you aptly mentioned, Grayson, savvy consumers know that you get what you pay for. Oftentimes the best value is not the lowest price. Informing ourselves about the true cost of the items we purchase is key to us making intelligent buying decisions.

  • You raise a good point. I recently have been looking into laminate flooring to replace our carpet, and honestly price is a huge factor for me. If it looks good and is less expensive than a competitors, I almost certainly will go with the lower price.

  • Money Beagle says:

    I agree with this. Cheaper isn’t always better. The problem with paying more up front is that the up front cost is often prohibitive. I saw a recommendation on another PF blog to buy a top of the line blender. When I looked at the cost, it was $400. So, not having $400 that I could drop on a blender, guess what we have? The $25 blender.

  • I agree wholeheartedly, Grayson. We want the cheapest, but that always comes at cost, with companies cutting corners or moving jobs overseas. I don’t like overpaying but I also don’t want to sacrifice safety/quality either. It’s a tough balance because I am fortunate to be in a position where I can pay a bit extra for a higher-quality product but I know not everyone is that position either.

  • Excellent points. We have definitely moved to a generation of cheap stuff that breaks more easily. I’m having to remind myself that quality is worth paying for.

    This means we’re slowly going to have to pay for higher quality furniture — no pressboard like we have now — and just realize it’s better than buying replacements as the cheap one dies.

    I’ll just keep repeating this when I see price tags.

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