Possible good news? 7 tidbits and counting
Jerry Epperson -- Furniture Today, June 22, 2009
As I search for some good news that can result from the ongoing trauma this recession has brought, I keep finding tidbits here and there that almost sound positive.
First, over the past eight months, consumers have reduced spending, paid off debt and increased savings. This implies that there is both deferred demand and a more creditworthy consumer. As this continues into our autumn selling season, we may see some pleasant results.
Second, we have lost a lot of retailers over the past three years, and more will fail. This will give the survivors an opportunity to gain market share, approach some new, unserved markets, and leverage their existing locations and store brand. Even if overall local furniture sales are down, they can show gains.
Third, this is a great time to try new products at a broader range of price points. Show the locals something unfamiliar, even shocking. It will get attention and draw new customers.
Fourth, some of the stronger stores today are those that kept their old, proven way of doing business. They finance their own customer receivables and carry consumer electronics, appliances, floor coverings and other home-related, credit-driven merchandise. Not being reliant on outside consumer credit sources not only gives the store more control to set its own credit standards, but the income stream from the credit helps ease the pain of the weak sales months. By carrying the electronics and other related merchandise, they can offer packages like a flat-panel television with a matching cabinet, enhancing their sales and margins.
Fifth, this is a great time to offer new compensation packages and incentives to your most important employees. Most people today appreciate having a job, and welcome new ways to make money. Reward the best.
Sixth, recognize that this will be an inconsistent recovery as it begins. It will likely surge and slow with the many national and local economic factors. Housing, for example, is always local, so the national numbers are meaningless. Those areas that have seen the most severe declines in both home sales and home values may show a more vigorous recovery because of the opportunity and value they offer. Some areas like southern California and southern Florida are already seeing more home sales.
Finally, take a look at the public furniture and mattress manufacturers and retailers and you will see that nearly all have taken write-offs of facilities, goodwill and bad debts, and have refinanced their balance sheets. Granted, some of this was involuntary, but with the magnitude of the cost cutting and restructuring done in recent months, I suspect our industry will be able to show some very strong profits (yes, remember that word?) on some relatively small revenue gains.
Just watch and see.
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