Learning to Sell Again

All of a sudden, store ads and shop windows round the country seem to be bursting with welcome news for the battered U.S. consumer: prices of all sorts of goods and services are coming down, down, down. Inspired by Detroit's generally successful efforts to pull customers back into showrooms, retailers, builders, bankers and manufacturers have been attempting to outdo one another in offering sales, specials, discounts and, above all, their own variations on the carmakers' rebates:

> Whirlpool Corp. last week announced $20 rebates on all its washers, dryers and refrigerators.

> In Atlanta, Bendix Home Systems is mailing checks ranging from $100 to $600 to buyers of its motor homes, trailers and campers.

> Jetzon Tire and Rubber Co. of Bridgeport, Conn., is mailing customers checks for $12 after purchase of each set of four tires.

> In Riverdale, a residential section of New York City, promoters for a new 31-story apartment building named the Century are offering cash rebates of $1,400 to $2,800 to the first 100 tenants. The money is supposed to be paid, with interest, when leases expire.

Discounting, retailing's traditional tool for cutting prices, is spreading even to banks, where reductions on consumer-loan interest rates are running as much as 10%. Some businesses are lowering prices by offering stripped-down versions of standard products and selling them for less money, often with impressive results. Miami's Deltona Corp., a major builder of Florida retirement houses, tripled sales in January over the previous year by introducing a line of houses starting at $17,800; such once standard features as carports and fancy lighting fixtures are now offered as extra-cost options. Except for Chrysler, which plans to continue rebates on leftover 1974 models, Detroit's automakers let their six-week rebate scheme expire last week and began pursuing the less-for-less tack. General Motors, for example, has shaved $219 from the list price of its Olds Omega coupe by making such items as radial tires, day-night rear-view mirror and even the cigarette lighter optional.

At the very least, the marketing bustle seems to signify that sellers, faced with mounting inventories, are once again learning how to sell. In an acerbic editorial aimed at the auto industry but applicable to all of retailing, the Madison Avenue trade bible Advertising Age sniffed: "The fact is that the dealers and their sales staffs have started to remember, from the dim and distant past, the concept known as selling. It's different from taking orders or simply quoting prices."

The price downtick is a classic consequence of recession and rising unemployment. Says Harvard's Otto Eckstein, a member of TIME's Board of Economists: "By now, even the most rigidly administered price structures are showing cracks under the pressure of weak demand."

Though inflation continued at an annual rate of more than 14% during 1974's final quarter, the monthly rise in the cost of living began slowing noticeably; the consumer price index rose by one percentage point or less in October, November and December. In January the CPI'S rate of rise tapered to 0.5% for a compound annual inflation rate of "only" 6.2%--the lowest since April of last year. Reason: food prices, a major component of the CPI, peaked in November and have been easing since.

On the wholesale level, where future trends in consumer prices are foreshadowed, prices for raw materials and farm products have been dropping for months. Prices received by farmers, for example, peaked in October after a rise influenced by bad weather and mediocre harvests. In January the Wholesale Price Index actually declined at a seasonally adjusted annual rate of 3.7%. Last July, by contrast, wholesale prices were rising at a rate of 58% a year.

Wage Moderation. Economists both in and out of Washington expect further easing in the rate of inflation--perhaps to 6% by the end of the year and to as low as 5% if oil prices drop and farmers produce good harvests. Upward pressure on manufacturing costs is diminishing because of a slowdown in the rate of wage increases; hourly wages rose at a yearly rate of 7.4% in January, v. 11.3% last spring. The moderation in wage demands is most notable among nonunionized workers, who constitute 80% of the U.S. labor force and feel vulnerable to layoffs at a time of rising unemployment.

The big question is not whether inflation is moderating, but how long the lull can last. If it is enacted in toto, the Administration's price-oriented energy program could kick up the cost of living by 2%. Many policymakers, among them Federal Reserve Board Chairman Arthur Burns (see following story), are persuaded that the big tax cuts and massive easing in monetary policy that congressional Democrats, some Republicans and many economists are calling for could also return the nation to high inflation levels by next year. On the other hand, the eagerness of so many companies to cut prices powerfully supports another argument: the U.S. economy is so slack that it will take considerable stimulus to get it moving again.

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