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The Aldi alternative

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Wednesday, Aug 20, 2008

It seem as though the economic slowdown will last long enough to effect real change in consumer behavior, something that no amount of anti-consumerist blog posts seems likely to have accomplished. Some of this will play out at a macro level. Merrill Lynch analyst David Rosenberg argues that to eliminate the hangover of debt fostered during the credit boom, consumers will have to pay it down, meaning the “savings rate is going to be forced higher.” According to Rosenberg, that means “that fashions are going to change. It means frugality is going to set in. We’re going to be living in smaller houses, driving smaller cars and living more frugally. It’s not going to be the end of the world; it’s going to be a necessary process to truly embark on getting the balance sheets down to more comfortable levels so that we can actually embark on the next cycle.” (via Paul Kedrosky.) As David Roche declares in this FT editorial, now “it’s a Wal-Mart world rather than a luxury branded goods one.”


This shift to a more savings-oriented mentality will of course manifest most obviously where inflation has been most noticeable. As high gas prices have shown, traits long described as inherent to the American character actually prove malleable under the pressure of outrageous costs. Housing and automotive markets are indeed already changing, and even if oil prices drop precipitously—as they are now giving signs of doing, which incidentally, is not a sign that the economy is likely to improve, but an indication that overall economic growth has slowed, curbing demand—those changes may establish new definitions of what “normal” is. Extreme commuting will recede from the threshold of acceptability and be considered again to be way beyond the pale. We can only hope that these mental shifts stick even after we have begun to “embark on the next cycle” but that doesn’t seem to be the way of human behavior. Otherwise those “cycles” may not need to occur. But instead, consumers prove all too willing to be led into status-consumption trends that are as profitable for manufacturers as they are conspicuously wasteful an inefficient in use—like driving SUVs. Or they get caught up in expensive branding, whose use lies only in its signaling function. In a era of frugality, the need to signal one’s identity perhaps becomes far less pressing than we pretend it is in flush times. Does that mean that during recessions, everybody becomes more the same, since they lack the luxury goods with which to differentiate themselves? Shills for the “substance of style” would probably have us believe that is so.


I remember when I was a kid in the 1970s and our family started shopping at a discount grocery store, Jewel-T, where you had to bring your own bags for the groceries and everything on the shelves was some peculiar “no-frills” brand. No-frills goods came to be a kind of brand of their own, making a memorable appearance in the film RepoMan. The point there was that society was going to make you conform and be a no-frills person, but I think the opposite effect was achieved, in that the characters weren’t upstaged by brands. Perhaps the same could happen for us as branding is forced by recession to recede.


With regard to the future of identity-based consumption, it’s worth looking at the effects higher food prices will have on how we consume and what we regard as normal consumer behavior. Currently, it is normal to expect an exhaustive selection of foods, with competing brands in each category leading to the stocking of redundant goods. Middle-class consumers want the broadest selection, the thinking goes, as this allows them the greatest expanse over which to exercise their most cherished freedom—of choice. Economist James Galbraith mocks this concept of economic freedom in his most recent book, The Predator State: “Is the freedom to seek a wide variety of goods and services at wildly varying prices, from the upscale boutique to the mall to the factory outlet, really on a par with any other meaning of freedom?” The rhetoric distorted the significance of the Soviet Union’s demise: “A great many Westerners saw a yearning for ‘freedom’ in what was, for many, not much more than the wish for a better diet and stylish clothing.” Such a concept of freedom is not much freedom at all, as the current Russian and Chinese regimes would seem to indicate that you can have lots of good shopping in spite of an authoritarian government.


But the absurd-cornucopia model of retailing may be in for difficult times, as consumers begin to value price over brands and options. BusinessWeek has an article about American discount grocers this week, and the shift in consumer expectations:


TNS Retail Forward, which tracks retail trends, published a study in July that found at least one-fifth of consumers have switched their shopping to discounters for food and household essentials. They’re accepting less product selection in return for lower prices. As Todd Hale, a senior vice-president at Nielsen, notes: “Everyone wants value.”


Likewise, this Economist article details the headway so-called hard discounters like the German retailer Aldi have made recently in the U.S. The sudden appearance of an Aldi in one’s neighborhood is not a happy thing—it suggests the neighborhood is becoming impoverished, and that next will come Factory 2 U and MacFrugal’s and a bevy of 99-cent stores and perhaps some predatory payday lenders. Many bourgeois progressives would prefer an independently owned health-food store, or perhaps Aldi’s apparent antithesis, Wegmans. Yes, Wegmans has a huge prepared-food area with a sushi chef and the stores are the size of basketball arenas, but only Aldi has the potential to change the way we conceive of shopping on a mass scale, undermining the principles around which our ideology of shopping is currently organized. It may not reverse the damage that big-box retailers have wrought, but it synthesizes the irrevocable fact of Wal-Mart with a more aggressive approach to retailing to produce a potentially revolutionary shift, pointing toward an almost radically different kind of consumerism, maybe even a post-consumerism. That must sound like crazy talk.


It’s the hard discounters anti-aesthetic that has prompted my flight of fancy. This is how the Economist article begins: “It is as far from the charming ideal of French farmers’ markets and small family-owned shops as you could imagine: strip lights glare down on a narrow range of products in ugly packaging, displayed in cardboard boxes piled on the floor and on low shelves.” Note the shift from an shopping as experience, as end in itself, to shopping as a kind of utilitarian practice, unadorned and perfunctory. Play that out on a large scale, across retail markets, and perhaps a experiential space is reopened where fantasia shopping was once squatting. Moreover, retailers are finding it to be better business to provide goods rather than experiences:


“It’s the best business model for retail in the world,” says Philippe Suchet of Exane BNP Paribas in Paris. Discounters stock a fraction of the goods that a normal supermarket offers, resulting in fewer suppliers, a high volume of purchases and sales, and massive economies of scale. “You would find 16 brands of tomato ketchup in a normal big supermarket,” says Paul Foley, managing director of Aldi in Britain. “In my store you will find a choice of one.” Discounters mostly sell their own private-label goods, which are more profitable than branded goods, where the brand owner takes a big cut, and also more efficient—having bar codes in exactly the same place on every product, for instance, says Mr Foley, means faster checkouts.


A choice of one? That sounds like communism! No wonder the management at Aldi is “intensely secretive”—they are probably dirty Reds!


What Aldi represents is a kind of perverse top-down anti-consumerism, rejecting the consumption of brands and seeking to replace it with the consumption of goods again.

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