China and Beyond: The End of “Cheap Crap” Global Sourcing

Kudos to Richard Brubaker over on the All Roads blog for recently putting into succinct words something my wife and I were recently debating on the low cost country sourcing front: It's not the end of the China price: It's the end of cheap crap. As Richard opines, the "cheap crap" approach only survived "because of a series of unique economic conditions and externalities...Call it inflation if you like. Call it paying the full cost of production as the next step. But either way, as firms like Walmart find it hard to maintain their prices, and McDonald's begin warning of inflation, it should become clear that this is a condition that is less about 'China pricing' and more about the end of an economic mode." Amen, brother.

I'm a firm believer that much of the problem in the US today is that we've shifted to a throwaway society based on the amazingly cheap prices of all the junk you can buy from China and other low cost regions. Yet if you add up the cost of this stuff combined with the short lifespan of much of it (e.g., a non-stick frying pan that lasts six months compared to a copper or cast iron one that last six decades), our own buying decisions in fact end up being completely wrong on a longer time scale. Yet like many companies faced with figuring ways of surviving as the global price takes over the local one, we make rash decisions -- even if they're the incorrect ones.

Just a few days before I read Richard's analysis, my wife and I had a conversation about what the end of the China price will mean for debtor (read: consumer) nations like the US. In short, we concluded that consumers would end up buying less and begin to place an emphasis on value and longevity over cheap prices and mass quantity. Such a change may also herald a shift in marketing and product designs aimed at consumers who are willing to pay a little more for a far superior product. It may be a slow process, but perhaps the best thing to ever happen to the Western consumer will be the elimination of the "China price." Granted, it probably should have never existed in the first place -- but owing to China's currency and export tariff rebate manipulation it did -- yet now is as good as time as any for all of us to cut back on buying cheap crap before it becomes, well, just "crap."

Jason Busch

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