What is Sticker Shock?

The term “sticker shock” is widely used in the United States to refer to an exclamation of surprise at the high price tag on an item. Some people also use the term when they express dismay at unexpected charges on bills, although this could more correctly be termed “bill shock.” Rising prices of consumer goods throughout the late twentieth century led to an increasing amount of sticker shock. The associated reluctance to purchase expensive goods is also sometimes blamed for economic slumps.

It is believed that the term originated in the 1970s, when automobiles became substantially more expensive due to increased government regulation. In the United States, many car dealers price their cars with very large stickers which can readily be seen by passerby, with the intent of drawing people into the lot. As prices rose, these stickers might have indeed seemed shocking, especially since inflation was rising at the same time as well.

Sticker shock can be very damaging to a store or manufacturer, especially when a consumer has a set idea concerning the cost of the item. If consumers feel that a product is too expensive, they will seek it out in a less expensive form, forcing manufacturers to come up with cheaper ways to produce goods. Many manufacturers are forced overseas, where labor is much less expensive, because they cannot compete otherwise. This can create a depression in the labor market in the home country, as overseas workers can produce goods more cheaply, and sometimes more dangerously as well, with less governmental oversight.

While sticker shock alone is unlikely to contribute to the collapse of an economy, it can certainly be a symptom of economic problems. When sticker shock is expressed, it suggests that consumers are either startled by the price of a product, or they cannot afford it. Lack of ability to afford things can translate into an economic downturn, as money will circulate more sluggishly through the system. It also contributes to outsourcing and other tactics which are designed to drive the cost of goods and services down.

The term is also used to refer to unfavorable exchange rates. Since the phrase is American in origin, it is usually used in the context of a falling dollar. When Americans travel overseas while the dollar is weak, they can experience extreme sticker shock as everyday items suddenly become much more expensive. For the host nation, this can be difficult, as tourists will tend to spend less money in an attempt to cope with the comparatively higher prices.