With shoppers shunning extravagance and merchants eager to sell inventory, prices on many goods and services have plunged. Fancy flat-panel TVs are marked to move, and flights between the coasts have dipped below $120. Forget cell-phone billing; prepaid is in.

For businesses trying to coax consumers to spend, the recession has brutalized profit margins. Still, despite the current profit pressures, an even bigger worry looms: What if the low prices become the norm? A shift in attitudes about consumption and frugality for many Americans could mean businesses' loss of pricing power endures long after the recession ends. "It's a whole lot easier for prices to come down than for them to go up," says Eric Almquist, head of consumer global insights at consulting firm Bain & Co.

No longer, experts say, should retailers expect the same sort of robust profit margins as in the past, and they'll have to work harder to keep brands relevant. With margins cut thin by increased competition -- both on the Internet and globally -- retailers should expect to woo customers through service and time savings. Even when the economy rebounds, services will almost certainly become increasingly important in a range of industries as big-ticket goods -- that once offered healthy margins -- become commoditized. "The world of shopping is going to change more in the next two years than it has in the past 100," says Paco Underhill, founder and CEO of Envirosell, a New York-based research and consulting firm.

Baby Boomers Hit Hard

Consumer spending is also affected by the so-called "wealth effect." Rising home values, healthy 401[k] balances, and profitable investment portfolios all increase the sense of net worth. With those financial markers greatly diminished, consumers aren't in the spending mood. Especially dour are the baby boomers, who make up more than a quarter of the...