Article: http://www.economist.com/business/displaystory.cfm?story_id=12481020
With the recent economic downfall, consumers are putting more thoughts into what they purchase. They are no longer buying things on impulse and instead take time to ask themselves the question “Do I really need this?” Big companies are hurt by the drop in demand and some small companies are close to bankruptcy. Retail companies cannot wait this economic downfall out due to the fact that retail revenues are quick to fall and slow to recover. Cutting labor cost causes problems in times like this when companies must struggle to get every sale. Even though prices are low, customers wait till the economy gets worse and for the price to dip even lower before making any purchases.
The article shows the operation of a market. The retail market is an interaction of buyers and sellers and it establishes a price for the goods. With more supply than there is demand for all the retail goods, the prices are reduced. In cases like this, companies usually have sales to bring up total revenue. But companies are discovering that many consumers are still not buying the cheaper product. They are often waiting for the price to get even lower before making a purchase. That can cause trouble for many companies. Also with less revenue, the less there can be spent for hiring workers, which may result in job cuts to be able to keep the supply price low. Today’s retail market is not of equilibrium.
