Product costs fall in soft economy
USA Today
Leading consumer products companies are lowering prices amid a softening economy and fierce competition for consumer dollars.
In soft economic conditions, consumers look for more than a few cents off, analysts say. Instead, they want super-size deals and buy-one-get-one free offers.
They are trying to hold on to market share at a time when consumers readily turn on brands, says Paul Kelly of Silvermine Consulting Group.
"They're focusing more on the competition than the consumer," he says.
What product makers are doing:
• Household products companies: Clorox shaved 10 percent off select household cleaning goods. Meanwhile, Procter & Gamble rolled back a price increase on Bounty paper towels. It planned to hike the suggested retail price 9 percent last April, but by November, had settled on 4.5 percent.
• Automakers: Sales incentives for autos are increasing over last year and more than they were even six months ago.
CNW Market Research says incentive spending per car in March is averaging $2,570 per vehicle, 42 percent higher than a year ago. General Motors, for instance, is offering $2,000 and financing as low as 0.9 percent on its GMC Jimmy four-door sport utility vehicle.
• Cruises: The world's largest cruise operator, Carnival Cruise Lines, lowered prices to drive demand for its additional fleet, leading to a 25 percent drop in earnings of $128 million for the first quarter ending in February.
A Royal Caribbean seven-night cruise from Miami to the Caribbean in January cost $730 for a standard cabin, compared with $1,124 a year ago, says Charlie Funk of Just Cruisin' Plus travel agency in Nashville.
• Personal computers: PC prices are expected to fall this year as manufacturers fight a price war.
Gateway and Dell will lead the way by lowering prices by about $50 for many models.
• Hotels: The average daily rate on a hotel room rose 4.9 percent last year but is slated for a 3.8 percent increase this year.
The lower increase was forecast because occupancy is expected to drop amid a glut of availability. About 118,700 new rooms will be added nationwide this year versus 127,700 last year.
