Growing up in the 2000s and 2010s, big tech made big promises: everything would be disrupted, streamlined, and simplified. We could hack our lives seamlessly, and doing so would make everything cheaper to begin with.
For a while, the promises seemed to come true. At least in certain sectors. Travel (flights, accommodation, transportation) was democratized and more people could afford to go more places and post the photos to prove it on Instagram. food of local restaurants and groceries can be delivered for free right to your doorstep. Designer clothes can be rented for a fraction of the cost of buying retail and returned with ease, after, again, the requisite social media opportunity.
But in the 2020s, the shine of the accessible luxury tech era has faded. Companies that once subsidized a certain urban lifestyle have failed to turn a profit, so the little luxuries (Uber rides home from the bar, unlimited workouts at boutique gyms) that were once affordable are no longer.
And thanks to a combination of rampant inflation, stagnant wages and recession fears, customers already feel their budgets are tight. So long, cheap luxury; Hello, face reality.
The free ride is over
Spurred by a slew of venture capital funding and favorable market conditions, many tech startups were able to offer customers (often depicted as young urbanites but actually spanning all generations) premium goods and services at prices with great discounts for a decade. It was easy for a certain type of consumer to indulge in a luxury lifestyle at a discount, including routine restaurant delivery, on-demand car rentals, and even discounted portioned meals for aspiring enthusiasts who didn’t know how to cook.
Their salaries may not increase and their student loan debt may be overwhelming, but they could still rent a cottage for the weekend and convince themselves that everything was working as it should.
“They really pampered us,” says Charles Lindsey, an associate professor of marketing at the University at Buffalo School of Management. “Shareholders were really subsidizing those low prices for these companies to build their markets.”
The markets have been built, but the promotional ride is over, and the experts are not surprised. The disappearance of this type of services and financing models was heralded; prices have been slowly rising for years.
Now, however, the full bill is harder for many consumers to bear, thanks to a confluence of factors: The free money that allowed companies to subsidize these lifestyles for no profit has dried up as tax rates rise. interest. Inflation has taken its toll on everything from housing to gasoline to food to travel. The COVID-19 pandemic limited supply but created demand that is now skyrocketing, particularly in travel. The economic winds have changed.
Although the rise of these little luxuries has been dubbed the “millennial lifestyle subsidy,” used to paint Gen Y once again as licentious spenders, the truth is that all generations used and enjoyed these premium services, Lindsey says. And no one is happy that now everything is more expensive.
But the end of these subsidies still resonates more for the generations that entered the workforce in the 2010s and beyond than for their parents or grandparents. Not because millennials are necessarily more dependent on them, but because cheap travel accommodations and on-demand cashmere created an illusion of wealth for college-educated, supposedly upwardly mobile young adults who often had to take multiple jobs to pay their bills. monthly. . As indebted professionals flocked to cities that promised higher wages, these cheap luxuries allowed millennials to enjoy some of the fruits of their labor, even if they couldn’t actually pay rent.
Rent has become even more unaffordable for 20-somethings and 30-somethings who didn’t (or couldn’t) leave cities with a higher cost of living to the suburbs at the same price as their parents. In the past, cheap luxuries offered some solace, but now millennials’ lack of real wealth feels even more pronounced.
These younger generations did not enjoy the housing and education subsidies that their parents and grandparents received after World War II; they have already overcome two once-in-a-generation economic crises, and a pandemic. Now, they can’t even get a cheap ride to the airport.
Premium services at discount prices were never sustainable
The poster boy for this subsidized excess is Uber: when it was good, it was great. But he’s not cool anymore. Rides cost significantly more than a year or two ago: The median price of a shared ride in the US cost 34% more in November 2022 compared to November 2019, according to market research firm YipitData.
Just a few weeks ago, an Uber ride from the New Orleans airport to my accommodation was priced at $73. A taxi, on the other hand, charged a flat rate, which was half the price, only $36. My travel companion and I didn’t even have to wait for the taxi to arrive, and then try to chase it down within the given 2 minute time frame to find our driver; there was a line of them ready to go.
Airbnb is another good example. When it started, it offered more affordable and unique accommodations for travelers hungry for a unique experience. Now, with hosts adding fee after fee and leaving a list of cleaning tasks for guests to tackle before they leave, many people wonder if it’s worth the trouble. If you’re paying for a cleaning service and are barred from having friends over for drinks, you might as well stay at a hotel that guarantees clean sheets and plush towels, and you’re not required to pick up trash. go out when you are in a hurry to the airport.
Companies are cutting rewards and loyalty programs to focus on profitability, Lindsey says. Loyal Dunkin’ Donuts drinkers were outraged when the coffee chain changed its rewards program so customers would have to spend more than double what they previously spent (now $90, instead of $40) to earn a free latte . A more elite example, according to Lindsey: Delta Airlines changed its rewards program in 2023. To achieve the highest rewards status, passengers must spend $20,000 this year (in addition to mileage requirements), compared to $15,000 last year. last year, an increase of approximately 33%. .
Outside of the travel sector, apps like Poshmark and Depop once brought affordable second-hand and vintage clothing and accessories to the masses. Now, resellers have taken over, pricing used goods, from fast-fashion “vintage” T-shirts to worn-in booties, at or above retail. Thrift stores have also been raising their prices, seeing an opportunity to get more out of IRL reseller scrubbing shelves for goods to sell online. The result? People who can’t really afford to buy clothes anywhere else are being discounted.
Doordash and Seamless promised to deliver food from any restaurant or convenience store, often without a delivery fee attached. Now, the fees add up quickly, as restaurants charge for service and delivery, as well as tips for the drivers themselves. Restaurants inflate the prices of their menus to recoup the cut that the delivery app takes.
For some customers, those who are disabled or have limited mobility for other reasons, these are still great services. But in big cities, for those millennials who didn’t think twice about ordering from their phone, it now makes more sense to simply walk a block or two to the nearest take-out place, or pick up the phone and do a request to the old man fashion way.
Disruption leads to fewer options
It turns out that the old way worked well enough for many of the experiences that technology promised to disrupt.
And now that all these services cost more, customers are realizing that the quality is not up to par. Ordering sub-par delivery from a local place is fine when you get free delivery and a discount; it becomes less attractive when freebies disappear, quantities are reduced, and restaurants pass on increased food costs to their customers.
Similarly, an overnight flight on a budget airline is tolerable when it costs less than the taxi ride to the airport. But when each flight costs hundreds of dollars for an exhausting and dehumanizing experience, often including canceled or delayed flights, and the airline losing your suitcase, traveling for the sake of traveling becomes less appealing.
Unfortunately, the old way doesn’t exist in many industries anymore – it’s been wiped out by big tech. Many restaurants that couldn’t keep up with rising food costs and delivery platform fees are no longer in business; those that are are splitting their profits with a broker that doesn’t do much more than make discovery a bit easier for some clients. To keep up with the accelerating trend cycles perpetuated in part by thrift buying and reselling apps, and exacerbated by social media, the quality of clothing in general has been decimated. Even when you are paying for a “quality” garment, you may find that it is made of 100% synthetic materials. Uber and Lyft, fueled by investor subsidies for 10 years, killed cabs in some markets across the country, Lindsey says.
It’s hard for consumers to “extract a penalty” against these market-dominating companies, Lindsey says. “We’re going to have to get used to rising prices, at least in the short term.”
Of course, not all luxury lifestyle accessories are going away. Consumers continue to spend on clothing, food, travel and experiences, but now often pay full price. And who can afford that?
Source: news.google.com