Thanks to falling oil prices and increased employment, consumer confidence is improved and pent up demand is in bloom. They have also adapted to a new socio economic normal: economic stability with less income. Unfortunately, in 2014 the middle class earned 4% less than in 2000 (Pew), and fell from 61% of earners in 1971 to 50% in 2015. Similarly, the US Census Bureau reported that median income fell 9% from 2007 to 2014. That means, heading into 2016, confident consumers may be working their way up from negative territory. But, there’s more to this story.
As a risky undercurrent to consumer confidence, the economic pullback in China has led US manufacturing and exports to contract, other economies to slow, and raised fears of a new global recession. While the US economy is believed to be less affected than others, the now stronger dollar is impeding exports and causing some to wonder if layoffs are far behind? While there is little belief the US is on the brink of another recession, there is plenty of disagreement about the economic strength of 2016 going forward.
The New Consumer
The recent recession shaped consumer attitudes and habits into a new normal: “If my income is flat or less, then what I pay must be flat or less.” With support from the digital age, price conscious consumers expect and demand discounts in everything they buy. Moreover, with the internet, consumers are faster, better, and more efficient at finding value, making most everything a commodity.
The new normal caused 2015 retail sales to drop 8%, and prices to fall 2.9% from 2014 levels (Bureau of Economic Analysis). Additionally, mid priced retail stores are losing sales to “off-pricers,” such as Kohls and Marshalls. Meanwhile, “fast design,” high production, low cost chains such as H&M and Forever 21 are expanding. Is dentistry seeing the same price pressures? This past Christmas, online shopping grew 20% while retail bricks and mortar sales fell 10%. In response, Macy’s will close 40 stores in 2016, and open 6 new low cost discount stores. Radio Shack, Staples, and Sears/KMart are closing a combined 1,800+ locations. Yes, in some ways, this is very similar to what we are seeing in dentistry: changes driven by consumers are forcing retailers to change or close.
Today, new technology provides consumers with consistently higher quality, mass produced (non distinct) products at lower costs. While we see this kind of innovative technology aiding dental labs, commoditized private practice dentists continue to operate without cost-saving scalability. Meanwhile, consumers often tell dentists the very same things they tell retailers: “Yes, expensive is nice, I would like it but I don’t need it, can’t afford it, and I’m not going to pay for it.” For many, dentistry has become a reluctant victim of consumerism’s commoditization.
The market, in general, isn’t as wealthy as it once was and doesn’t see dentists as it once did. Because the market is always 100% correct, dentists and lab owners need to see themselves as their markets see them and either provide what their markets want, or together, convince consumers they need and deserve better. That means, some dentists and lab owners might need to adjust their approach to how they deliver services and set fees. But remember, people pay for what they want. Dentists and their labs can provide what many consumers want, commodity care at a lower cost, or, help them to want something better. It’s entirely up to the professional team.
With pressures never before experienced, dentists, lab owners, manufacturers, and distributors need to look at new ways of collaborating and working together. To help, OPT-In is leading the way in building an alliance community of stakeholders. Nacera US, known for its high quality zirconia products, was first to provide financial support for the OPT-In national public relations campaign supporting private practice. We invite all dentists, laboratory owners, manufacturers, and distributors to contact us and participate.