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Why a Low Price Isn’t Always a Good Deal

Ellen Ruppel Shell, a self-described cheapskate talks about her new book, 'Cheap: The High Cost of Discount Culture.'

“All you can eat!” “Buy one, get one free!” “Thirty percent off everything in stock!” “Forty-eight-hour sale!”

Shop. Shop. Shop. Americans march to sales pitches. Many of those scurrying to be first in line don’t question whether they’re getting a good deal. And if they are getting a good deal, at what cost to others does it come?

Ellen Ruppel Shell is a self-described cheapskate. But one purchase—three pairs of tube socks for $5—made her begin investigating how anything could sell at such an incredibly low price. The result is her new book, Cheap: The High Cost of Discount Culture [read an excerpt from Cheap]. Shell, a correspondent forThe Atlanticand author ofThe Hungry Gene, not only uncovered dire consequences for consumers and workers in this country and around the world but also adopted a whole new approach in her own shopping. To start with, she now buys free-range organic eggs.

Shell spoke with AARP Bulletin Today about why $5 for tube socks isn’t such a great deal after all.

Q. What’s more important to a shopper—price or product?

A. Price is the biggest trigger, not the product itself. That’s what is really remarkable: We love the deal, we cherish the deal, we go for the deal, and often we care much less about the purchase itself. Studies have shown that there are actual psychological changes in our brain when we buy something. We get the biggest jolt from making the actual deal, and often when we bring that product home, we’re much less happy either with it or with the ownership of it.

Q. How did the price of tube socks make you question the high cost of discount culture?

A. I was buying tube socks for my kids at a discount store, and it just freaked me out that I could get three pairs of tube socks from China for $5. What does it mean when making fibers, producing socks with them, shipping the socks all the way from China, and then putting them out on the store floor—where the store space costs money and the employees checking you out at the register need to be paid—adds up to $5 for three pairs? How could these prices be so very, very low?

Q. Isn’t cheap good?

A. Well, no one wants to pay more money. I mean, I’m the biggest cheapskate that walked the earth. When I say that I adore getting free parking, I mean it! But I realized I was making a mistake by cruising for half an hour to find free parking. I was wasting gas and wasting my time. We really devalue our time. Marketers count on the fact that we’ll devalue our time.

Consider how long you spend driving to a discount store—which in the case of places like IKEA is an average of 50 miles. And then add the time you might spend assembling what you bought. And the fact that you got something that you probably won’t be able to pass down to anyone. All of that should be added to the cost of your purchase.

Q. Do really low prices come with social consequences?

A. Absolutely. I went to China twice while writing this book, and the conditions for workers there are not ideal, to say the least. I visited Taizhou, an hour’s flight from Shanghai, where thanks to low-cost production the air quality was so bad my eyes stung the minute I got off the plane. My guide, a high school teacher, showed me polluted ponds where frogs, mutated by the toxic metals and chemicals pouring into the water, had only one leg. In those same ponds, women washed clothes and kids played. Those kids also worked dismantling high-tech devices shipped in from the United States, Japan and elsewhere—computers, cell phones, et cetera—which they “mined” for metal. One way to do this was to use an acid bath to leach out the gold from, say, a pile of cell phones, resulting in extremely toxic fumes.

Q. What do American companies do about it?

A. While I was in Shanghai, I tried to get in touch with the American Chamber of Commerce [AmCham] to discuss their view on workers' rights. They declined to get back to me, but AmCham—which represents Nike, Intel, Microsoft and Wal-Mart, among many other companies—lobbied assiduously against regulations that would enforce worker protections. For example, one regulation would guarantee workers a binding agreement to ensure timely payment at a minimum rate. AmCham threatened to curtail investment and lay off workers in China if reforms were instated.

Q. Has discount culture contributed to the current economic crisis in this country?

A. Well, we live in a culture that insists that we can have it our way immediately, at all times, whatever it is we want. This culture encourages consumption, and low prices have made everything seem within our reach. That perception got us deeply in debt. Over 60 percent of us own houses, and we used them as piggy banks, taking out loans based on the value of our house or the projected value, all fueled by the idea that we needed objects and we could buy them cheaply if we just had a little more money.

Q. Was income increasing to finance greater consumption or repay new loans?

A. By 2008, the inflation-adjusted median family income had dropped by almost $1,200 from the 1970s. At the same time, spending increased by over $4,600, while corporate profits doubled. How is it possible that our inflation-adjusted incomes are going down, but we’re spending more and corporate profits are doubling?

Q. What’s the answer?

A. Part of that is that while consumer goods got cheaper, we were neglecting our wages and benefits. I can’t really emphasize that enough. What helped keep those wages and benefits low without us revolting and protesting was the decline in prices of consumer goods. We could get T-shirts for really cheap, so it seemed like everything was OK, when in actuality the price of many of the things we must buy, like education and health care, soared. We have these very enormous and growing costs on big purchases, and we’ve kind of been distracted by the low costs of small purchases.

Q. But isn’t high-quality stuff often priced beyond the reach of most people?

A. There’s this false dichotomy between quality and price, the idea being that you have to pay a very high price for quality. That wasn’t the case 30 years ago. You weren’t necessarily looking for the lowest price, but you’d get quality for a reasonable price, and you’d also get reasonable service at many places. Once, you could go to a mid-priced store and be served by knowledgeable sales people. You would stand in the dressing room and they’d bring you stuff, and they’d tell you what they thought—whether you liked it or not!

Q. Is that impossible today?

A. We could demand that kind of service for a moderate price, but we’ve been trained to assume that that level of service has to come with a high price. Our expectations have been lowered. Brent Hull, a Texas-based architectural designer [quoted] in the book, said to me, “We don’t think we deserve quality anymore. We think that’s only for rich people.” There’s some truth to that.

Q. How can we be smarter shoppers?

A. Well, my book isn’t a consumer’s guide, but I can tell you how writing it helped me. I completely changed the way I shop. I try to think first about what it is I want in a product, whether it’s a sweater or a chicken or a bicycle. What is it that I value? What do I want? Do I want this thing to last? Do I care? Am I thinking in terms of the environment when I buy this thing? Sometimes I am and sometimes I’m not. I’m not perfect.

I try to think about all those things before I look at the price. Then if I look at the price and it’s more than I want to spend, I rethink the purchase. Do I really need this thing? If I can’t buy something that’s of quality, maybe I should wait until I’ve saved enough to buy it.

Now, for example, when I buy eggs, I buy the free-range organic eggs. They are more expensive than the regular eggs, but only by a little, and for some people that would be a deal breaker. For me, I can afford it.

Q. What kinds of things should we be buying?

A. I would like people to challenge their assumptions about what gives them value in life. What gives them a kick? What do they really enjoy? And what do they think it is worth to them? People should also think about whether they’re being taken advantage of by this system. Are they getting what they want in terms of their benefits and pay? Are they feeding into the sweatshop mentality? If people were really informed about the personal consequences and the consequences for the world community because of these extremely low prices, they may think twice.

Krista Walton is an assistant editor at Preservation magazine.

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