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By the U.S. government's inflation tally, $100 of goods in 1995 would have cost $130.71 in 2005. But you'd never know it if you looked at apparel, electronics, furniture and other wares whose bargain, made-in-China prices offer cheap thrills to Americans who shop with a consuming passion.

Is the new stuff as good as the old? Wrong question. Consumers aren't looking for long-term relationships, but rather the chance to buy stylish, well-priced merchandise that they can toss when their tastes or lifestyles change or technology improves.

Quality, measured by attributes like features and technology, is improving even as prices in many categories fall.

Mark Bils, a professor of economics at the University of Rochester, has painstakingly studied productivity in the consumer-durables category and found consumers are paying less in real dollars for many durable goods today than in years past after factoring in technological improvements and the explosion of choices.

The Consumer Price Index, calculated by the U.S. Bureau of Labor Statistics, fails to account for much of this product improvement, Mr. Bils says.


Any way you cut it, products that are new and improved-in features, if not in the built-to-last mold of the past-give Americans lots of incentive to toss the old and buy anew.

Mr. Bils's research doesn't make this leap, but clearly product improvement coupled with declining prices are accelerating the disposable nature of Americans' consumption habits. After all, a recent Consumer Reports survey revealed its readers repaired 16% fewer products than those surveyed in 1977, noting: "It makes no economic sense to have professionals repair many products that are out of warranty and more than 3 years old."

Price deflation is radically altering consumption in other categories as well, most notably apparel. According to the U.S. Bureau of Economic Analysis, the percentage of household expenditures on apparel dropped to 4.2% in 2004 from 11.5% in 1950.

This doesn't seem to make sense. After all, our closets are stuffed, and shopping remains the great American pastime. But our fast-paced consumption culture has been pushed along because overall apparel prices have, in fact, declined by a whopping 31% since 1995, according to the Bureau of Labor Statistics. It begs the question: Without deflation, just how well would consumer confidence really be faring?

This deflationary pressure is in part the reason for the unprecedented success of the cheap-chic phenomenon, epitomized best by Target Stores' "Design for all" mantra.


Call it democratization of quality, or, at least, good-enough quality. Not surprisingly, this shift from exclusive product quality for the elite to mass product equality for all-everyone can afford cashmere, everyone can get a flat-panel TV-is causing unprecedented angst among the traditional purveyors of high-end goods.

In fact, the Italian cashmere industry recently held a conference to address whether cashmere's luxury status is in peril. Note the semantics: It's the status, not the quality, in peril.

"Luxury is a moving target. Today's luxury is tomorrow's necessity, and cashmere is a perfect example of that-it's now for the masses," says Pam Danziger, president of Unity Marketing and author of "Let Them Eat Cake: Marketing Luxury to the Masses-as Well as the Classes."


"The rich still want to get the bragging rights for something that is a bargain," Ms. Danziger says. "Status in America isn't about aristocracy, it's about proving something."

Even the "Made in Italy" quality aura is being undermined by its most famous brands. Prada and Gucci are slowly moving to offshore manufacturing, and industry watchers don't seem to think consumers will perceive the shift as a decline in quality.

"At play here is an aristocratic vs. democratic view of quality," Ms. Danziger says.

This distinctly American view of quality means there don't seem to be any extra points for a brand based on where you might buy it or who might have made it. That "Made in China" label lost its stigma a long time ago. So, too, have designer-goods knockoffs.

Consider "The Look for Less" on Style Network. The show takes a fashion-runway look that may cost upward of $3,000 and proves you can re-create it with as much pizzazz for just $150.

Fair enough, but how do you reconcile that with the rise of massclusivity marketing? It's the next logical iteration of the cheap-chic Target "Design for all" revolution, after all.

Call it cheap chic vs. fast-fashion, or for comparison purposes, the Target strategy against that of European discount fashion retailer H&M.

It's ubiquity, not scarcity, that reigns in today's apparel market. That's a problem for retailers. The only way left to get a premium price and stir up any real passion from consumers is to get the shopping-obsessed to wait in long lines, pay a premium and stampede-the Holy Grail emotion of a fashion apparel brand.

Early November's stampede for the limited-edition Stella McCartney line at H&M in Manhattan was a different kind of stampede from the ones on Black Friday at Wal-Mart Stores for those specially priced $398 Hewlett-Packard laptops.

But you can expect marketers to stoke this latest frenzy. J.Crew, for example, offered $500 limited-edition shawl-collar camel-hair cardigans over the holidays. Ironic, considering the idea behind a 159-store chain used to be about reaching the masses.

In no other retail category does the idea of disposable cheap chic seem to play out more dramatically than in home furnishings. Just consider the success of Ikea and even Target's expanding market share in furniture.

You don't go to Target and buy with the same point of view or expectations that you would when buying furniture at Ethan Allen. This is disposable furniture.

Demographic shifts explain the explosion in this market. With young people delaying marriage, why buy heirloom-quality furniture? This disposable view explains why Williams-Sonoma, parent company of Pottery Barn, moved downstream with its upstart West Elm retail brand. West Elm targets young professionals ready to trade up from Ikea but not yet ready to drop five grand on a bedroom set.


The dramatic deflation within the $75 billion home-furnishings industry, where offshore manufacturing is now commonplace, makes this all possible. In just the last five years, the furniture industry has seen prices decline 20%-40%, especially in the wood category that's been saturated by Chinese goods, says Britt Beemer, chairman of America's Research Group.

"The quality level of imports has risen so much that consumers don't even know the difference," Mr. Beemer says. "If you ask the average consumer, would they pay $2,000 for an American-made bedroom set vs. $1,199 for a foreign-made set, they almost always go for the cheaper set."

He points to the success of the Hemingway Collection at Thomas- ville Furniture Industries, which operates 430 retail outlets. It was sold as a distinctly American brand yet entirely manufactured offshore.

"Consumers don't look at furniture in the same way," Mr. Beemer says. "It's something they may keep for five or 10 years and move on. And surely I don't hear anyone talking about heirlooms anymore, maybe with the exception of someone buying a cedar chest for their daughter."

Just the place to store Target's $39.99 Isaac Mizrahi cashmere sweater.

Average no. of vehicles per household 1.9

% of households that own homes 68%

% that own home free and clear 26%

% with mortgage 42%

Avg. monthly payment for households with a mortgage $898

U.S. personal saving as % of disposable income

Spending data from 2004.

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Source: American Demographics analysis of data from Bureau of Economic Analysis, Bureau of Labor Statistics and Census Bureau

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