There will be tears

There’s going to be tears and cheers before this recession is over. There will be winners and losers. Unlike the buoyant growth markets of yesterday where in principle everyone did okay, the recessionary market is typified by what we call “iniquitous failure”; instead of every business sharing in the downturn there is a clear demarcation of winners and losers.
Those that did well yesterday will continue to do well but those on the wrong side of the fence will be in serious trouble. This will occur for a number of reasons.
Firstly some businesses will not have been making great margins when ‘the sun shone’ so this downturn will leave them exposed. But more of an issue is what we consumers tend to do with our dollars; we become more careful with our spending, getting a good deal and obtaining ‘good value’ now matters.
For this reason consumers gravitate towards and support ‘high performance’ brands. If yours is not a brand of significance then your future is likely to be bleak.
For those of us old enough, remember when supermarkets experimented with plain packs? ‘Generic house’ ranges were created that were cheaper because the purchaser did not have to pay for elaborate full colour packaging. Well that was the idea.
The expectation was that the lower socio-economic shoppers would snap up these cheaper unbranded products.
However research conducted after the scheme had been running for some time indicated that it was the rich people that were buying the plain packs, not the poor people.
Not surprisingly when shoppers were asked their opinions about the plain packs, they said they were unsure about who made the products or whether the product quality would match existing brands.
Rich people were trialing them because they could afford to make a mistake. Poor people couldn’t afford to take the same risks, they didn’t experiment with their hard earned cash, they continued to purchase the known and trusted brands.
Watch a variation of this experiment happen all over again. There are truckloads of generic ‘me-too’ woefully ordinary products and services in the market right now and I’m picking that there will be a gravitation toward known and trusted brands.

The question is; is your product or service one of them?

Where to from here for retailing?

What a wonderful job retailers have done training the public to hang off buying for Christmas. The New Year’s sales are now where it is all at. Many businesses who hang out for that last month of the year to do over half of their annual turnover have managed a ‘not so clever shift’. Instead of having the big month with full margins in December they have pushed purchasing back a month and slashed their profits. So they have maintained sales but they have done so at the expense of profits and don’t we consumers appreciate it.
They thought they would have their cake and eat it; a big Christmas and a big start to the New Year.
Well it doesn’t quite work like that. The public has said you can have one or the other, but since you insist we will take the cheap option
Retailers have blown their bolt.
This ploy has been their response to an over subscribed market place and an obsession with ‘sales’ as the ‘no brainer’s’ marketing plan.
So that just leaves another eleven months and the question “what will retailers do now?”
Good question. I’d say they have a monumental problem. Eleven months of sales sounds like Chinese water torture.
Watch for the closing down sales this year folks because there will be many retailers who just won’t make it through to January of next year.
So who will the survivors be?
Those retailers who add value rather than dropping their prices; the retailer who becomes a brand builder.