Blender wars: Why sellers of stuff are stuffed

WHEN a blender costs less than a juice, and a toaster costs less than a loaf of bread, something is up. Which is why JB Hi-Fi’s latest play doesn’t make sense.

APPARENTLY we’re about to witness the start of the “Blender Wars.”

JB Hi-Fi and Dick Smith are taking on Harvey Norman by muscling in on the world of small appliances.

JB Hi-Fi once mainly sold CDs. Now it has a whole series of HOME stores and they’re going to be “smashing prices” in the world of toasters, blenders, etc.

Retail consultant Brian Walker told Fairfax media Harvey Norman and The Good Guys “are going to respond on price and they’re going to respond on discounting and volumes, and they’re going to be very, very aggressive.”

There will be no winners in the blender wars.

Stuff is already incredibly cheap.

— A toaster ($7.50) can cost less than a loaf of locally baked bread ($7.90).

– A vacuum cleaner ($39) can be worth less than a cleaner cleaning your house ($50).

– A blender can cost $14.95 while a smoothie with goji berries can be $15.

Imagine explaining that to your grandparents. A single cup of juice can now be more expensive than a blender.

What on earth has happened to make this possible?

The answer is partly China. Partly production lines. Partly robots.

But partly the problem is we’re tired of stuff. We’re over it.

When stuff was expensive, we craved it. That’s how people’s minds work. Now, anyone can easily afford stuff? Pfft!

The less we want it the more they discount it.

Yes, people need stuff still. But they don’t want stuff. Our cupboards are full. Our kitchen drawers have no more space. We may even pay for a storage unit we really should get rid of.

When people dream of being rich, they’re not imagining buying a fridge or yet another blender. The idea that we are getting more “materialistic” might have been true in the 1990s. Not now.

Now people want to spend up big on real estate and experiences. Things like:

• Health care;

• Education;

• The footy;

• Going to see a show or a band;

• The movies;

• Travel.

This graph shows how big the trend against buying stuff has been.

We’re now spending way more on services than we are on goods.

For example we increased the amount we spend on medical care by over 40 per cent in just six years, and had almost as big a spending increase in recreation.

Source: ABS

But in that same time the increase in household furnishings was about 13 per cent — tiny by comparison.

So JB Hi-Fi is in a tough corner. They’re starting their silly blender war because the market they’re in — selling stuff — is shrinking. They should instead be looking at services.

There are people who think a service economy is a burger-flipping economy. They think if you’re not stamping steel in a factory, it’s not a real job. Those people are wrong. Doctors, lawyers, airline pilots and architects are all examples of good service economy jobs.

When robots are taking over jobs inside all our factories, the fact we want to consume more services is actually very lucky. It means there’ll be jobs in the future.

Some of those service jobs will, in fact, be in selling stuff. And this is where JB Hi-Fi has a chance.

If you could add enough “service” value to the experience of buying stuff, it could become desirable again.

The blender wars they should be starting are not on price, but to offer the most amazing blender buying experience.

Maybe they could try serving up $15 smoothies along with every purchase?

Jason Murphy is an economist. He publishes the blog Thomas The Think Engine. Follow him on Twitter @jasemurphy.