Free Essay

Consumer Is King

In: Business and Management

Submitted By rahul89
Words 739
Pages 3
How the Consumer Became King

Some 200 retailers nationally opened their doors on Thanksgiving Day, and a lot of others did so at midnight. Shoes, jewelry, sporting goods, flat-screen TVs, fancy chocolate—if you wanted it, you could buy it before the football games were finished.
This development provokes all sorts of laments. Family togetherness is getting short shrift. Commercialism has become an epidemic. The urge to buy has trampled more wholesome traditions.
The critics may be right. But what is most obvious in the expanding store hours is an item of good news: In America, the consumer is king.
This has not always been true. Producers once reigned supreme. When I took economics in college in the 1970s, my instructors continually highlighted the danger of large firms that could restrict production to keep prices unreasonably high. This was often taken as proof of the need for strict government regulation.
Monopolies and oligopolies were seen as a constant threat, and with some reason. In one major industry after another—cars, steel, oil, telecommunications, computers—there were only a few relevant firms, and they divided up growing markets without much fear of competition.
Fifty years ago, when you needed a car, you could choose from General Motors, Ford, Chrysler and American Motors, and that was about it. Steel? A handful of producers, almost all of them American.
For most goods, consumers had only a few options—and limited information about those. If they bought a radio or a pair of pants that proved unsatisfactory, they were often stuck. Sellers had the upper hand.
But no more. Consumers can choose from a dizzying array of options and prices.
"If you want to see product differentiation in action, go to PetSmart," advises George Mason University economist Thomas Hazlett. When he goes to get treats demanded by Girlfriend, his German shepherd, he sees food "for puppies, for old dogs, big dogs, small dogs, healthy treats, diet treats, multiple flavors of everything." When he and I were young, dog food was dog food.
Corporations are ever more eager to please their clientele. Money-back guarantees, no questions asked, used to be the exception; now they're practically mandatory. Auto warranties run as long as 100,000 miles, and Chevrolet has even offered buyers 60 days to drive new cars—and return them if they aren't happy.
A number of changes have transformed the economic landscape. Among them:
*International trade. The biggest spur to higher quality and lower prices has been the proliferation of competitors from abroad. In 1965, U.S. automakers had 90 percent of domestic sales. Today, the figure is less than half.
Toyota and Honda made huge inroads by offering better cars or lower prices, or both. Foreign makers of other goods have done likewise.
*Easier access to goods. In the old days, stores were few in number, and you had to physically enter them to make purchases. Today, there are towns that seem to consist of nothing but shopping centers jammed with retail outlets—which have to entice shoppers who can go online to get products delivered to their doors. Shipping is often free.
*More information. Want to know what people think of their smartphones? Hotel accommodations? Winter parkas? The problem today is not finding information but sorting through it all. Our parents and grandparents, by contrast, were largely dependent on what they heard from friends and relatives.
If you arrive in a town you've never visited and want a good meal, you don't have to take your chances. You can get instant, reliable guidance from Urbanspoon, Yelp, TripAdvisor and other online sources.
That's beneficial even to consumers who never go look at them.
"In a world of more effective word-of-mouth communications, especially via social websites, it's really easy for consumers to complain, and firms are so dependent for their survival upon repeat business that they go to extremes to make sure their customers are happy campers," says University of Chicago economist Allen Sanderson. "Firms that make shoddy products or provide inferior service to their consumers are soon known as former firms."
It's all proof that a free-market economy serves the interests of ordinary people. Stores don't open on Thanksgiving because they want to; they open because shoppers reward those that do, at the expense of those that don't. For consumers, it may be a reason to abbreviate the holiday festivities, but it's also grounds for gratitude.

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