How prioritising prices has hurt businesses, consumers and the planet

Price wars push manufacturers to produce more for less, at the expense of employees and the environment, and often result in products that consumers are ultimately unhappy with, says Mei Xu, author of Burn

When I set out to look for a niche in the home fragrance industry, national big-box retailers like Wal-Mart, Best Buy, and Bed, Bath & Beyond engaged in heated competition for consumers. These stores offered everything from diapers and shampoos, to fashion items, competing for the same middle-class American demographic.

Trying to find a space in this daunting, pre-Amazon-dominated, global retail landscape meant that I had to contend with price. How does Target compete against Walmart when selling the same box of Tide detergent and bottle of Pantene Shampoo? The answer, of course, is price. Over the years, retailers advertised more and more discounts and coupons on core products, even if it meant losing margin on those items. They figured that if they could lure consumers through their doors to buy the detergent or shampoo, these customers often stayed to purchase other staples as well as impulse items like fashion, toys, and even candles.

Retailers’ race to the bottom

While national brands in the US, like Tide, have more established retail pricing, smaller brands which lack consumer brand recognition often can’t compete. Consumers expect to purchase their ‘go to’ brands at discounted prices, making their everyday purchase an impulse buy.

Retailers’ race to the bottom has meant that manufacturers are forced to ‘value engineer’ their entire sourcing and production processes. When retailers offer a discount of 20% or more, often to stay competitive during seasonal or holiday promotions, global factories must race to find cheaper suppliers to save on packaging materials, accessories, and raw ingredients.

Consider the example of candles, a product that has five essential ingredients: wax, colour, fragrance, wick, and vessel (or ‘holder’). When competing on price, factories could substitute refined petroleum wax for unrefined alternatives; switch quality fragrance oil formulas – the results of long hours of R&D – with cheaper alternatives; and replace pure cotton wicks with blended synthetic wicks that cost half the price.

Unfortunately, consumers cannot detect these manufacturing decisions when shopping. Factories know how to make cheaper products look appealing on the shelf. It is only when consumers burn the candle at home that they can appreciate the differences. As they often discover, candles with low-quality wax emit a gassy, almost petroleum-like odour. Rather than having a predictable flame that evenly consumes wax, non-cotton wicks have trouble trimming themselves, resulting in large, sometimes dangerous flames, or candles self-extinguishing as their wicks become submerged in pools of melted wax. Instead of diffusing beautiful fragrance notes into the home, such candles can send dark soot into the air and damage walls and ceilings.

Over my career, I often saw consumers returning those candles to retailers, demanding reimbursements. This represented a financial and reputational loss for retailers, factories, and supply chains, but there was little recourse if they wanted to remain in business.

Repercussions of a relentless focus

As large retailers competed with one another on price, factory owners squeezed more production out of each shift, creating a stressful and toxic work environment, while securing lower-priced raw materials that degraded the environment. This relentless focus on lower prices has been driving manufacturing into developing countries where abundant labour and a lack of worker and environmental protections enable this global low-price manufacturing and retail system.

We often hear stories about fires in garment factories that claim human lives, or waterways near textile mills becoming so polluted that residents suffer long-term health problems like cancer. When factories produce goods with the cheapest possible materials the result is that workers, communities, and the environment ultimately suffer.

I founded my company, Chesapeake Bay Candle, not to compete on price, but simply to create wellness-oriented and fashionable products that were creative and affordable. After pursuing this for more than 20 years and establishing three factories in Asia and the US, I feel that I have discovered a formula that benefits workers, protects the environment and serves the consumer. It was the best choice for my business and could hold the answer for many more retailers as well.

Mei Xu is a Chinese American entrepreneur and the Founder and CEO of three global companies – BlissLiving Home®, Chesapeake Bay Candle® and Yes She May, the latter of which is an e-commerce platform designed to help women-owned brands survive and thrive.
Xu is also the author of the memoir, Burn (Wiley, 2021).

BGA members can benefit from a discount on the RRP for Burn, courtesy of the BGA Book Club. Please click here for details.

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