Goodbye to the golden age of consumer choice

Anyone who has entered a supermarket recently knows that groceries are more expensive. The prices of many items, from cat food to coffee, are rising and they are more difficult to transport around the world in a high-inflation era and snarled supply chains.

There was a subtler consumer warning this week as investors were scared. “In times of uncertainty, investors look for safety. . . Channelling Jerry Maguire, we need to show them the money, ”Dara Khosrowshahi, Uber’s chief executive, told staff.

Shoppers have enjoyed a wonderful bounty for more than a decade – not only in the price and availability of everyday goods and services, but in the explosion of consumer technology and innovation. That experience is in doubt now: if the golden age of the consumer is not yet dead, it looks quite poorly.

A combination of high inflation and rising interest rates, which are puncturing many high-risk investments, from cryptocurrency to venture capital, are already having an effect. But the impact of the latter has yet to work its way through, and will create more pain.

Inflation and the crisis of affordability have pushed many shoppers back to basics. With energy bills rising sharply, the question is not which brand of coconut milk yoghurt or craft beer they will try out, but how to feed their families or heat their homes.

More are now shopping at discounters, from Walmart to Aldi and Lidl. They also favor the ordinary and familiar over the experimental. Shares in Beyond Meat, a pioneer of plant-based burgers and sausages, tumbled below its 2019 flotation price this week, while Kraft Heinz and Campbell Soup have risen in the past month.

Even Danone, the multinational food and drink that has expanded in healthier ranges, is adjusting. Antoine de Saint-Affrique, its chief executive, told me this week that it would re-emphasize its essential products, such as the yoghurt from which it got its name. “We’ll go back to fundamentals, rather than what was fashionable at one time or another.”

This implies that the proliferation of groceries and other goods – with greater space in shops and occupied by innovative products and smaller brands – faces a reckoning. As more shoppers retrench, start-ups will find it harder to push or pay their way on shelves.

But there is a distinct threat to the ecosystem of new products that have grown around us – not just groceries but grocery delivery, online fitness apps, maps and entertainment. Many investors have been able to emerge in time.

Cathie Wood at Ark Invest. She’s trusted in the displacement of incumbents by innovation, and “a constellation of connected devices that will inform us, entertain us, relate us, protect us, and mediate our perceptions of the world,” as Ark’s Big Ideas 2022 report put it.

It felt like a plausible bet until recently, and it could still come one day, but Ark’s funds have gradually fallen heavily in value amid the tumult. Khosrowshahi told Uber’s employees: “Market size is irrelevant if it doesn’t translate into profit.”

Uber is still burning cash, along with Rivian, the electric pick-up truck company that has dropped to less than a quarter of its market value at its initial public offering last November. In contrast, Ford, which has just launched its own F-150 Lightning electric truck, has been around since 1903 and has billions in free cash flow.

Uber is mature enough to adjust and survive, and Airbnb is producing cash. But the rupture will make life harder for start-ups with bright ideas that would take time to flourish. Tiger Global, a hedge fund that is eagerly pumped into early-stage companies, has lost $ 17bn in value and valuations of venture capital portfolios are down.

Bounce, a US start-up that offers travelers short-term storage for luggage at shops and offices through a phone app. Andreessen Horowitz, the Silicon Valley venture capital group, raised $ 12mn in a funding round.

Bounce will not change the world in itself, but consumers have gained thousands of such tiny inventions, backed by eager investors, over the past decade or more. They have made travel, shopping and entertainment easier and more convenient, at a price that was invisibly subsidized by cheap capital.

It is hard to appreciate things in the moment, and the wealth of innovation that has been targeted at some consumers has not always been available. But empty shelves have appeared, and we may one day pick up our phones and notice that the app store looks thinner. When that happens, remember the boundless choice we once had.

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