The title of this New York Times article is bold and definitely an eye catcher; but the authors tweak the definition of gentrification to better fit what's happening in the economy right now. Wealthy people aren't pushing poorer consumers out of the market, the producers are. The word premiumization has been the new term used to describe how companies are making their products more desirable to wealthier people by focused marketing and raising the prices of their products. Since the economy has cooled off and the Fed has been increasing the interest rate, companies have found that this process is the way to keep a high profit.
One of the groups effected heavily from this is the poorer consumers. An example of this given in the article was American Express, who was open about saying that they choose to accept people with more wealth for their business. The "premium consumer base" is handling the economic downturn better than anyone else, so the credit card company is limiting their focus to likewise individuals.
Another group effected could be the economy as a whole. The Fed is raising the interest rate to battle the ever rising inflation. If companies continue to raise their prices to get as much profits as they can from wealthy consumers, it could lead to a slower economic growth and less overall demand. The goal from these companies is to produce less while still holding the pricing power in the market.
Competition could always come into the market and compete with the companies doing this with lower priced products, but this takes time. Unless a current company decides to break of the market trends and produce lower priced products, we should expect to see higher costs, interest rates, and inflation.
https://www.nytimes.com/2023/03/04/business/economy/premium-prices-inflation.html?auth=linked-google1tap
1 comment:
The idea that companies can focus on the wealthier individuals during the ever-increasing inflation feels like monopoly power for those companies, but it makes clear sense as to why companies would choose to do so. High rates of inflation disproportionately impact low-income individuals because they were already struggling to purchase the necessary goods before inflation set in. Given that wages do not increase as fast as inflation, those low-income individuals will struggle even more to buy basic goods and services. During recessions, wealthier individuals are much less likely to suffer and may only choose inferior or substitution goods rather than normal goods, but even this change is unlikely. Despite being highly irritating and frustrating, I believe companies like American Express are doing what is expected of them--increase profit and shareholder value above all.
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