Don’t let double-dip fears drag you down
Consultant Steve Pruitt discusses the possibility of a “double dip” recession and how it might affect retailers.
Based on what you’re seeing, how likely is a double dip at this point? When would you expect retailers to feel the effects? A double dip is possible, but not likely. A lot depends on what is going on in other parts of the world. We’re coming to the end of a normal retail cycle. They tend to run 24 months, and this fall should be the end of the rebound cycle. We will probably see a slight retail slowdown this spring because we will be at the end of this normal retail cycle. We saw gains in June, exceeding expectations, and we should see the same trend in July. Everything is indicating that fall will be strong as well.
What segment of the consumer market would a double dip affect? It will affect the lower part of the market the fastest, and they are already struggling. Our types of clients (better and luxury stores) will be the least affected. They are in a better position to manage this because they have been outpacing big-box retail in terms of growth over the past several months. Again, it’s all about fresh product that lands at the right time.
How is the current economic shakeup different than the last recession? It’s very different. This time the markets are reacting to a purely psychological situation when it comes to the US economy. Last time banks were failing, this time traders are reacting to fear, not real numbers. Of course, much of it has to do with what’s happening abroad, primarily out of Europe. Whether the US consumers hold back because of the psychological implications remains to be seen, but I don’t think it’s time to panic yet.
Do you have any advice about public fear vs. real numbers? How do you keep retailers from getting rattled by the media coverage? The real numbers are positive. Business continues to grow for our clients, who are mostly in the better and luxury sectors. I tell our clients to turn off the TV, especially the ones in their stores. Don’t get sucked into the cycle of negativity. Continue to rely on positive instincts, and real-world numbers.
What should retailers do now to prepare for a possible economic slowdown? I understand that retailers are concerned. They just got out of a recession and the last thing they want is to face another, deeper one. That’s why I’m advising all of my clients to put two contingency strategies down on paper. The first strategy is to cut 10% from your spring purchase plans and negotiate approval before delivery for all of your on-orders, including the balance of your fall on-orders.
The second strategy, if things really start to get worse and consumers pull back, is to cut 20 percent from your spring purchase plans and again negotiate approval before delivery of all your on-orders.
Have those plans in place, but you may not need them. My other piece of advice – and this applies to any season or circumstance–is that retailers make sure that they pick great looking product, and the proper quantities of it. Put a positive face on the situation. One thing we do know is that some retailers can post growth even in recessions since we saw it the last time around. It’s all about timing of deliveries, and fresh product. You need to do everything you do, better.
You kept most all of your retailers afloat in the last recession. What strategies you learn then that we can apply today? A lot of it has to do with discipline. Make sure you are on top of your planning and updating your plans on a weekly basis. Another key strategy to remember is that you should keep outside counsel. Outside counsel should help you keep your emotions in check, and enable you to focus on real strategies and opportunities, rather than distractions and noise.
