Exporters must do more

wotsthat

Graham_Devon wrote: »

You've just claimed that I took the argument to the extreme, and have then come back with the suggestion that skint people can't buy premium goods.

Firstly, no where have I mentioned skint people. Secondly, my point was as a whole.

Premium products are increasing. British products appear to be making a little comeback. I'm sure the recent horsemeat issue will increase british based food sales.

These are classed as premium products. I never referenced skint people buying these. Rather as a whole, these products are seeing an increase in sales.

All my point started out with is that if inflation keeps increasing, people will be able to buy fewer products or make their money go as far.

I personally don't believe there is any evidence that if you punish people for saving, they will go out and spend more in the economy. I've asked for that evidence, yet none has been bought forward.

I believe that the more people feel threatened by inflation, the more they will reign in spending. At least theres outright evidence for that.

Skint people can't buy premium goods. If the sales of premium goods is increasing it's not being driven by skint people. Your view is that people are threatened by inflation and therefore will be buying fewer products - yet at the same time you're explaining how well premium products are doing. Can you see the paradox?

If you want evidence just google "thrift paradox" - it's only a theory but seems pretty mainstream.

You could probably find some evidence in your own shopping habits. Say we take the bog rolls again - I buy 16 because they offer a discount over today's price for 2. Also, and importantly, we live in an inflationary environment so I'm willing to bring forward spending for stuff which I won't need until the future because I expect that the price may well increase too.

I think you'd quickly agree that if we had deflation it might make sense to delay purchases so what's the problem with suggesting the opposite may well be true.

grizzly1911

HAMISH_MCTAVISH wrote: »

Drop the savings rate from the current 8% to more like 4%, and the economy immediately goes into growth.

Which has a number of positive effects for society....

-Businesses regain their confidence to invest.

-Jobs are created and unemployment falls.

-Wages start to rise

-The welfare bill is reduced, and tax revenues increase

-State borrowing falls as a result

-The tax burden can then reduce

Leading to more people having more money to either save or spend as they see fit.

It's the virtuous cycle of economic growth, Graham, and it all starts with forcing people to spend.

That only works if people buy products largely manufactured and services provided from within the UK.

If we merely consume more imports that aren't necessarily needed and depreciated faster than a Wartburg. More so if they are fulfilled by internet retailers or providers offering the NMW or consumed by overseas travel. As water leaks out of the bucket and we can't fill it by revenues generated by exports.

OK VAT revenue will increase but the idea that tax will reduce for Jo(e) Punter is disingenuous. The government will simply absorb the increase we will end up with 14 fighter jets, brought from the USA, for our aircraft carriers, brought from France, rather than 10.

If people do save and purchase as and when necessary then we would get away from this economy that thrives on hot air and debt.

grizzly1911

wotsthat wrote: »

Skint people can't buy premium goods. If the sales of premium goods is increasing it's not being driven by skint people. Your view is that people are threatened by inflation and therefore will be buying fewer products - yet at the same time you're explaining how well premium products are doing. Can you see the paradox?

If you want evidence just google "thrift paradox" - it's only a theory but seems pretty mainstream.

.

Where do you get your data to suggest premium goods are on the increase and how are you defining it?

The fact that people might buy 12 toilet rolls rather than 2 is irrelevant just suggets people are manageing their money much more rigorously. If they can see the price per roll is 50% of the double pack they are simply being prudent. The fact that the perceived budget retailers, particularly in groceries, are doing well would suggest that people are just wising up.

I do think we are seeing a polarisation of the retail space.

Certainly the mid range retailers seem to be going under and that share is being split between budget and premium. That is no different to society where the waistline is being squeezed from overweight to hour glass with a bigger bum..

wotsthat

grizzly1911 wrote: »

Where do you get your data to suggest premium goods are on the increase and how are you defining it?

Graham told me. I sell into grocery retail and it's something that's generally accepted. Premium means different things to different people but I'm defining it as a price point separation rather than quality.

grizzly1911 wrote: »

The fact that people might buy 12 toilet rolls rather than 2 is irrelevant just suggets people are manageing their money much more rigorously. If they can see the price per roll is 50% of the double pack they are simply being prudent. The fact that the perceived budget retailers, particularly in groceries, are doing well would suggest that people are just wising up.

I do think we are seeing a polarisation of the retail space.

Certainly the mid range retailers seem to be going under and that share is being split between budget and premium. That is no different to society where the waistline is being squeezed from overweight to hour glass with a bigger bum..

I don't think the toilet roll example is irrelevant when explaining the thrift paradox. The price per roll may be 50% lower in a multipack today but people also buy based on what they think future prices will be. I could buy 2 years supply today and taking into account loss of interest that may well be a good deal because there's an expectation that prices will rise before I need them.

As you say there is a polarisation of retail space happening and it's based on perceived rather than real value. There's no rocket science to it - if you get lower prices in home bargains it's not because they're any more efficient it's because supplier and retailer both take lower margins.

Suppliers tend to, but not always, supply 'disposal' packages into the discounters because of production over-runs, cancelled Tesco orders, label run-outs etc. To an extent it's unattractive business but is a way of recouping some costs and doesn't tend to interfere too much with mainstream business. Without the mainstream the supply chain for the discounters is limited. In the mid-nineties I heard of one major retailer that had a policy of not using factories that also supplied discounter so that they could limit supply. That's not allowed so they started introducing their own discount ranges.

Even within the discount sector there are many different approaches. Home Bargains tend to be quite nice stores laid out like a small supermarket where the products are retailed as single items in nice packaging. They're doing really well in attracting people looking for low price points as well as more affluent bargain hunters. Price point is obviously everything to Poundland and they don't disguise the fact that they sell distressed packages.

Main retailer discount brands are interesting. Even they take a lower margin and I reckon some suppliers make a loss but piggyback the business on their other business. The quality is ok but Tesco would prefer you buy a branded or own-label can of mushy peas because they make more money. They only want people who would otherwise go to, say, Netto, to buy them - that's partially why they have unattractive packaging so you have to deal with the shame at the checkout.

Main retailers really want you to trade up so they might add some value to their mushy peas like adding mint at 1p cost per can but 10p on the retail.

Shoppers are becoming savvy but there's a long way to go yet. Retailers, in the early part of the recession at least, managed to increase margins; I still see people in my local Co-op doing a big shop and you just need to glance at people's baskets to see they're buying stuff they don't need or probably really want.