LCCS: You Get What You Pay For (and in Consumer Markets, Expect to Pay More)

For all of the parents in the Spend Matters audience, if someone asked you to suggest a premium you'd be willing to pay for safer toys, what would it be? 5%, 10%, 20%? According to a recent Chicago Tribune story, in 2008, "shoppers can expect price increases up to 10 percent next year to pay for increased vigilance by toymakers and stores after more than 3 million lead-tainted toys from China were recalled worldwide since June. That means a $6.99 Barbie doll could go up to about $7.70, or a $70 child-friendly digital camera could retail next year for almost $80.A 10 percent average increase would be the biggest one-time price hike in toys in several years, analysts say. And it's more than twice the government's measure of consumer inflation of 4.7 percent during the first seven months of this year." The article notes that the costs for fish and children's apparel will likely rise as well.

As I look at rising prices for cheap imported items like this, I find fascinating how long it's taking our expectations to catch up with market realities. Mattel and others have given us precisely what we’ve wanted from China and nothing more. And that's cheap prices. In industrial supply markets (e.g., automotive, A&D, etc.) China quality has amounted to exactly what the buying organization is willing to invest in. If they've wanted just cheap prices -- like toy importers -- that's what they've gotten. But the majority of those who have invested in quality, audit and supplier development programs have realized not only lower prices, but acceptable -- and in some cases exceptional -- quality levels as well. After all, you get out of China sourcing -- and global sourcing, for that matter -- exactly what you invest in it.

Jason Busch

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