A Farewell to Good Quality (...the writing of)

[athletics]

I am doing a piece on the economic effects of the quality of goods. I have a few examples including some style references, but I would like to have some examples outside of my direct experiences.

The overall point is that as our economy continues its downward slide we will see the quality of goods go lower as well. Companies will try everything they can do to keep profits up and cut corners on quality.

If anyone has any input, I'd like to hear it.

 

[MrG]

I don't know if I agree with your premise. In recession, raw materials are cheaper, thus making manufacturing cheaper. As a consequence, manufacturers can produce the same goods at a lower cost, growing their profit margin (allowing them to sell goods cheaper without compromising profit).

Also, crappy clothes, like Wal-Mart, are an inferior good. Because of this, people will start shopping at Wal-Mart when their income is reduced. Those who do not start shopping at lower-quality stores are likely to have the means to continue buying quality goods at higher prices. I don't agree with the notion that there is a set of consumers who will not step down to inferior goods, but who no longer retain the means to buy quality goods.

 

[athletics]

Costs rarely go down and we are about to encounter high rates of inflation over the next few years (see Bernanke's history as an inflation hawk). We are already starting to see goods labeled as Influenced by Italy instead of Made in Italy. Nothing I have seen makes me think the cost of goods will go down tremendously.

 

[dopey]

Coach.

It is a great example because it illustrates not only a general trend but how it occurred, specifically, in the U.S.

It is not an example that illustrates the effect of a recession, but rather what happens when public ownership requires ever-increasing revenue growth. It would be worth discussing whether private companies are immune from this pressure - I would posit that they may sometimes experience the same outcome but that the forces that get them there are different.

 

[NorCal_1]

see this previous thread

 

[bmulford]

Originally Posted by athletics

Costs rarely go down and we are about to encounter high rates of inflation over the next few years (see Bernanke's history as an inflation hawk). We are already starting to see goods labeled as Influenced by Italy instead of Made in Italy. Nothing I have seen makes me think the cost of goods will go down tremendously.

+1 on Dopey's comment.

Question - Is your perspective considered from the US standpoint exclusively? I ask because the pressures of inflation from monetary expansion have different effects depending where you stand. What looks "bad" in the US, may look "good" in Taiwan.

Comment - Far too often there's an overt assumption that moving labor or manufacturing offshore equates to lower quality. While that's certainly true in many cases, its not entirely true. Because production value often increases in areas of concentration, the opposite may be true depending on the particular vertical.

 

[stilmacher]

I am sorry, I think you haven't got a point.

 

[ACACRefugee]

Originally Posted by dopey

...but rather what happens when public ownership requires ever-increasing revenue growth.
I am not an economist, and while in manufacturing, not the clothing industry. That said, I believe at this point in time most industries under pressure for revenue growth to shareholders have already willingly traded quality for margin -- it's low hanging fruit. Progressively sacrifice materials and labor, rack up and post numbers, take performance bonuses, and then rinse and repeat as long as the game permits. Restated, for those brands, there is no where left to go.

When one travels to Beijing, the first thing that strikes you is that nothing appears old or worn in the statistical mix we're accustomed to seeing. The roads are one huge traffic jam like the worst congested U.S. city, yet none of the cars appear over five years old. None of the mile upon mile of plastic store signage appears UV bleached. Drive to a remote region, you'll be on a flawless Interstate-class highway and see perhaps two or three other cars per hour. Pylons carrying shiny unoxidized 500KV lines festoon the landscape. The enormous transfer of wealth in recent years for that few percent of added margin is evident and mind blowing.

I'd posit that those few companies cognizant that their fortunes and market reside on quality goods will continue providing such. Everyone else appears to have already spiraled downward on the outsourcing bus. Some of it legitimate dollar-chasing lower labor; however underpinning that, all the more so in the clothing industry, being the public's blind willingness to accept crap quality, especially when proffered by an established "brand" name.

 

[Fuuma]

If the free market is making quality go away then maybe people don't want quality and it isn't that important. Remember the free market is perfect.

 

[Cary Grant]

Originally Posted by dopey

Coach.

It is a great example because it illustrates not only a general trend but how it occurred, specifically, in the U.S.

It is not an example that illustrates the effect of a recession, but rather what happens when public ownership requires ever-increasing revenue growth. It would be worth discussing whether private companies are immune from this pressure - I would posit that they may sometimes experience the same outcome but that the forces that get them there are different.

One of the most cogent points made on SF in some time. It's the ceaseless drive for profit growth that drives quality down.

 

[stilmacher]

However, not everyone is as true a capitalist to make quality appear alltogether. Especially here in Europe (and I believe in Japan) there is a strong culture of artisan/quality pride. I think that the current crisis is rather going to remind people of that.

 

[Film Noir Buff]

Originally Posted by Fuuma

If the free market is making quality go away then maybe people don't want quality and it isn't that important. Remember the free market is perfect.
Perhaps he thinks we should abandon free market principles to save the free market system?

 

[jefferyd]

Originally Posted by Cary Grant

It's the ceaseless drive for profit growth that drives quality down.

I disagree. It's the general public's inability to discern quality that drives it down. People who don't understand quality aren't willing to pay extra for it. If they think they can get a better deal next door, they will go, unless they are educated about what they are buying.

 

[Despos]

In some cases the marketplace determines value and sets the benchmark for pricing. Some manufacturers can stand apart and set their own prices and retain marketshare, others can't. Consumers uninformed of what defines product quality buy superficially. I know a boat builder who had to reduce his costs. He took away the chrome and the leather and boats did not sell. He learned to cut costs where it doesn't show. People would buy a lesser built boat that looks expensive on the surface. This is often the case in clothing.

 

[jefferyd]

Originally Posted by Despos

In some cases the marketplace determines value and sets the benchmark for pricing......This is often the case in clothing.

This is ALWAYS the case with clothing. The retailers set out very narrow pricing brackets into which manufacturers are expected to fit. If we do not fit into these pricing structures they do not buy. There are very few retailers which do not have any competition so there is always pressure on pricing.

On the low end, though, some things have improved. Peerless, a huge manufacturer of low-end suits had to start transferring some of their production overseas; since labor is cheaper they can afford to do better things. Their suits made in Canada take about 90 minutes to make (I see Despos' head popping off when reading this

so you can imagine what does or doesn't go into it. Some or all, I'm not sure which, of their Chinese-made suits are half-canvas with hand finishing.