Are We Heading For a New Economic Frontier?
inOctober 4, 2010 - 3:37pm
You’d almost have to be a hermit not to acknowledge economic matters happening all around you today – whether it’s gasoline or food prices, your kids’ tuition expenses, parent care, or postponing retirement because of gaps in health insurance or income. My husband, who is a Ph.D. in Economics, often discusses these matters pertinent to all of us, both socially and in his professional life. One day over lunch, he posed one of his open-ended comments to me, stating he just didn’t understand why inflation wasn’t climbing as it had in the 1970’s, and that he felt it was inevitably coming. The most recent bust in the market of September, 2009, the high unemployment rates, shrinking production – this is a climate ripe for inflation, wherein by definition, prices of goods and services generally and progressively increase (and interest rates for borrowing follow). However, something counter-intuitive is happening in our economy. Demand for new goods has not increased significantly, shortages of goods and services are generally not occurring, prices are generally not soaring, and borrowing rates of interest remain low.
As a layman, I offer my theory as to the reason why inflation has not taken center stage in our economy. There is a HUGE secondary market growing in our economy, and it is the market of used, or second-hand, merchandise sales. Since 1995, online community sales have sprung up, whether by auction or fixed price sales, offering buyers and sellers a new means of transacting business – one in which each player has a say as to how things are done in the economy, including setting prices. And in one of the most popular online communities, recent published financial statistics prove its new way of conducting business must be working, as annual sales have grown five-fold in a span of just three years! And there’s Ruby Lane, which was founded in 1998 by Tom Johnson and Jim Wilcoxson. It has grown immensely since its beginning, boasting some impressive metrics, including over 1.5 million items listed by over 2,000 shop owners. Ruby Plaza, just launched in April, 2010, has already grown to over 700 shops and more than 150,000 items – and it’s still in Beta mode! Ruby Lane is an S Corporation, so its financial data is not as highly visible as its online competitors’, but one can reasonably conclude with its demonstrated growth that financial results are highly favorable over the past several years.
With statistics like these, is it any wonder why we (whether buying or selling), who share in this secondary market of auction and fixed pricing, are helping to hold down inflation in our economy? Is it because we simply don’t demonstrate demand for typical new retail offerings? Or is it because we are most content in the world of recycled, gently used and/or highly collectible goods? Whatever the answer, it makes sense whether you’re a lay person or an Economic scholar, that without the demand on newgoods in the economy, lesser demand creates a surplus of goods, and surplus of goods impacts pricing of these new goods in the market. Prices tend to rise when demand exceeds supply, and prices tend to decrease when supply exceeds demand. That is the basic economic theory of the law of supply and demand. So, could it be that the online business model will go down in history as the one that generated a new economic frontier? All you scholars out there – why not take my theory and run with it (it could be the basis of a great thesis!)? And all you buyers and sellers out there – pat yourself on the back for doing your part to keep inflation in check!
Ruby Plaza Shop: Panoply
Ruby Plaza Shop URL: http://www.rubyplaza.com/shop/panoply
Rita is mostly retired, now employed part-time in her husband’s consulting firm, and enjoys the hobby of buying and selling in the secondary markets of fleas, estate sales, auctions (live and online), bricks-and-mortar antique stores and, most recently, in her own online shop (Panoply) on Ruby Plaza. With an MBA and undergrad degree in Accounting, she enjoys the world of business, and finds fun and challenge in mastering the mechanics of running an online shop on Ruby Plaza. She is most impressed with the technological support, particularly the reports, that Ruby Plaza offers shop owners, and uses them daily in her business.