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Is Amazon Lowering The Global Rate of Inflation? (businessinsider.com)
An anonymous reader quotes Business Insider:
Another investment bank analyst has signed on to the idea that the internet is holding down the rate of inflation. Bilal Hafeez, the global head of G10 FX strategy and head of EMEA research at Nomura, published two notes last month on whether the value of the dollar was being held down by Amazon and its ilk. In one note he called it "the Amazonization of inflation"... [O]nline commerce typified by Amazon is making the supply and distribution of goods so cheap that "Amazonisation" itself is now a deflationary force at a macro level, Hafeez argues. He writes: "While globalisation was the meme of the 2000s, this decade's has to be the 'Amazonisation' of commerce. Given the bulk of the cost of goods is distribution costs, Amazon's unique distribution model and widening range of products could impart a new disinflationary impulse on goods prices."
This idea is becoming more popular among analysts as the months roll by. Back in September 2016, we told you about the "Spotify problem," in an interview with HSBC's James Pomeroy. His theory is that the internet allows consumers to shop around and compare prices incredibly easily. It also substitutes cheap digital goods over more expensive physical ones. For instance, people stop paying £20 every month for a CD when they start paying £10 a month for endless music from Spotify. The result is that businesses are aggressively driving down their own prices because consumers simply won't go to the ones that charge more, and are no longer trapped into shopping in their own neighbourhoods. Sweden is so advanced as a digital economy that it may be importing its own deflation via digital shopping, Pomeroy argued.
This idea is becoming more popular among analysts as the months roll by. Back in September 2016, we told you about the "Spotify problem," in an interview with HSBC's James Pomeroy. His theory is that the internet allows consumers to shop around and compare prices incredibly easily. It also substitutes cheap digital goods over more expensive physical ones. For instance, people stop paying £20 every month for a CD when they start paying £10 a month for endless music from Spotify. The result is that businesses are aggressively driving down their own prices because consumers simply won't go to the ones that charge more, and are no longer trapped into shopping in their own neighbourhoods. Sweden is so advanced as a digital economy that it may be importing its own deflation via digital shopping, Pomeroy argued.
Restaurant food prices are going up, but food price are going down. Restaurants are for special occasions and rich people. Learn to cook, you can easily make restaurant quality food for a fraction of restaurant prices. You can save thousands of dollars per year.
1. Walmart isn't always the cheapest.
2. There are things that Walmart just plain doesn't sell. At least, not at their retail stores.
If you're buying something like an XBox One bundle, the console you'll get at Walmart is no different from the console you'll get from anyone else, so there's no reason to favor or avoid Walmart if you're buying one.
If you want a Denon or Yamaha home theater amp, you aren't going to be getting it from your local Walmart store AT ANY PRICE, because Walmart doesn't stock expensive niche items in retail stores at all, and is rarely price-competitive with Amazon when they have them online.
Likewise, the products sold at Walmart aren't necessarily identical in quality to seemingly-identical products sold elsewhere. For example, a TV manufacturer might have a model -- let's call it the "QZX65Y" -- that everyone at avsforum.com worships, and has 99% 5-star reviews everywhere from people who think it's the greatest TV, ever. That TV might wholesale for $520, and sell for $599 at stores like Best Buy. Now, let's scrutinize its seemingly-identical cousin, the "QZX65Y3" (sold only by Walmart). See, Walmart balked at the $520 wholesale price, and threatened to walk unless the manufacturer sold it to them for $507. But Walmart doesn't really care if their model is literally 100% identical, as long as it has the same advertised specs. So, the manufacturer grudgingly agrees to Walmart's lower wholesale price, then manufactures Walmart's run of TVs using cheaper, lower-binned backlight LEDs, and gives it a slightly different model number to avoid harming all the 5-star reviews the "real" model has gotten. Then Walmart advertises it for $589. On paper, the two look the same -- especially to a clueless consumer who doesn't even know what to look for. But if you put the two models side by side displaying uniform 50% gray, the "good" model might display a field of relatively consistent gray, while the "Walmart" model might have patches with a blue or yellow twinge, or slightly different brightness (because low-binned LEDs aren't guaranteed to be as consistent as high-binned LEDs).
Sadly, the same kind of "quality fade" can happen if, a year later, you go to some regional electronics chain (like Brandsmart in Florida) who sells mostly "last year's models, at rock-bottom prices". For the last manufacturing run or two of a given model, the manufacturer might just switch to low-binned LEDs so they can reduce the wholesale price and scrape up a few more buyers. The "good" stores won't buy the cost-reduced models anyway (they're waiting for next year's models), and by that point the manufacturer has piled up enough 5-star reviews for ANYONE who bitches about getting a late-version model with inferior low-binned LEDs to look like a wacky outlier. Companies like Linksys and Netgear do this so often, they've practically turned quality-fade into a performance art.
It happens. All the time. Every single manufacturer with models specific to Walmart does this. And it's not just TVs... a Lawn Boy or Toro lawnmower from Walmart might LOOK like the lawnmowers sold by more expensive stores, but if you scrutinize the model numbers, you'll see that they differ slightly. And if you tore down two seemingly-identical models (with slightly different model numbers) side by side, you'll find at least a few insidious differences, GUARANTEED. Maybe it's something as simple as polishing off the injection-molding burrs from the starter handle on the "good" model, while leaving them on the "Walmart" model. Or using stainless-steel screws on the "good" model, and cheaper galvanized screws on the "Walmart" model. Regardless, the differences are real, and they're there if you look hard enough for them.
There are two main reasons why houses are so expensive today: because women don't stay at home anymore, families disposable income nearly doubled, but because you can't easily create more land, house prices nearly doubled from that alone, the rest of the difference in price can be easily be explained by the insanely low interest rates and ease of credit available today. Back when my grandfather bought his house, he couldn't get a bank loan, and had to ask a financier with a lot of cash to give him a loan with a signed and registered contract.