>>is manufacturing set to head overseas?
When we launched The Grocer 33 survey in 1997, we found that our basket of commonly-bought items cost an average of £36.51. Today, as you will have read in our news story, shoppers can buy that same basket of 33 items for £36.17. I reckon this 34p difference equates to 1% price deflation in absolute terms in the past seven years and it will be a whole lot more in real terms.
Great news for shoppers, I guess. As our figures show, they’re getting a better deal than ever and who wouldn’t be happy paying less for more?
There are those who argue that such deflation is inevitable in any modern economy. They point out prices of popular consumer goods fall as suppliers and vendors take advantage of new technologies, smarter ways of working and volume hikes to take out costs from their supply chains. And they’re right: just look at the crazy prices we now pay for DVD players.
What these experts forget to tell you, of course, is that as the price of these lovely consumer electronics tumble, the suppliers eventually reach a point at which they can no longer find new ways of taking costs out of their already hyper-efficient operations. The only way to keep making a buck is to do the obvious: switch production to those countries where costs are lower.
In Britain, this pattern has been repeated time and again in virtually every part of the consumer goods market. Cars, clothes, electronics, vaccuum cleaners, toys; you name it, we tend not to make it any more. The little manufacturing that remains is largely niche and targeted at the premium end of the market.
Will food and drink go the same way? Well, the omens are not great. Whatever the market, when companies are faced with fierce competition, low growth and price deflation, their response is pretty much always the same.
First, they get more efficient: they re-engineer product quality, develop new manufacturing techniques, exploit technologies such as online auctions and look at ways of making their supply chain more productive. At the same time they go on a desperate search for that holy grail of the fmcg world: innovative products for which they can charge a premium and which will take them out of commodity areas. Meanwhile, they consolidate facilities, merge with rivals and, when all else has failed, they start shifting production overseas. It all sounds horribly familiar, doesn’t it?
deflation’s true cost
When we launched The Grocer 33 survey in 1997, we found that our basket of commonly-bought items cost an average of £36.51. Today, as you will have read in our news story, shoppers can buy that same basket of 33 items for £36.17. I reckon this 34p difference equates to 1% price deflation in absolute terms in the past seven years and it will be a whole lot more in real terms.
Great news for shoppers, I guess. As our figures show, they’re getting a better deal than ever and who wouldn’t be happy paying less for more?
There are those who argue that such deflation is inevitable in any modern economy. They point out prices of popular consumer goods fall as suppliers and vendors take advantage of new technologies, smarter ways of working and volume hikes to take out costs from their supply chains. And they’re right: just look at the crazy prices we now pay for DVD players.
What these experts forget to tell you, of course, is that as the price of these lovely consumer electronics tumble, the suppliers eventually reach a point at which they can no longer find new ways of taking costs out of their already hyper-efficient operations. The only way to keep making a buck is to do the obvious: switch production to those countries where costs are lower.
In Britain, this pattern has been repeated time and again in virtually every part of the consumer goods market. Cars, clothes, electronics, vaccuum cleaners, toys; you name it, we tend not to make it any more. The little manufacturing that remains is largely niche and targeted at the premium end of the market.
Will food and drink go the same way? Well, the omens are not great. Whatever the market, when companies are faced with fierce competition, low growth and price deflation, their response is pretty much always the same.
First, they get more efficient: they re-engineer product quality, develop new manufacturing techniques, exploit technologies such as online auctions and look at ways of making their supply chain more productive. At the same time they go on a desperate search for that holy grail of the fmcg world: innovative products for which they can charge a premium and which will take them out of commodity areas. Meanwhile, they consolidate facilities, merge with rivals and, when all else has failed, they start shifting production overseas. It all sounds horribly familiar, doesn’t it?
deflation’s true cost
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