Understanding Value

Posted on October 20, 2009 | in Uncategorized | by CRC

Predictions of when the full economic recovery will occur change frequently. For example about two months ago, I was reading The Wall Street Journal (August 14, 2009) and a couple of their articles about the economy were striking.For the first time in recorded history the US is not the first country to lead the global economy back into the black. Countries like China and Europe seem to be showing signs of recovery before the US. Europe in particular is reporting a rebound in retail sales, unlike the US. Now that time has passed it seems like the recovery overseas will be slower than initially anticipated.However there is still the issue of what is driving the shifted recovery?

The US may have changed its spending perspective, while other countries are resuming spending. Another article on the popular youth clothing store Abercrombie and Fitch offers a perspective that suggests the US may spend differently for the foreseeable long-term. Abercrombie and Fitch is one of the only retail stores that has not drastically cut their prices in the current market. Why? Apparently, this store is marketed overseas in Europe as a luxury American brand. The retailer doesn’t want to cut costs here and risk losing its image (and profits) overseas. However, it was suggested that the retailer may lose its image on US soil because “cool” is now associated with value. I repeat, “cool” is now associated with value.I thought the latter was worth repeating because it suggests that the recovery in the US at least isn’t going to be similar to more recent economic downturns, but may more resemble the recovery following the Great Depression, which shifted the perspective of that generation forever (think about your parents or grandparents who save everything).

How have you adapted your business to fit with this current, potentially long-term, perspective that value is trendy?I’ll go even further to add, that savings and “back to basics” (think the new Allstate commercial) are also part of that value. Abercrombie and Fitch is hoping they won’t have to change and can simply ride out the recession (they have a solid cash reserve and still report growing sales in Europe), but is such a steadfast approach appropriate for small businesses in the US, or even large ones for that matter? I think it goes back to knowing your customer and having a plan in place that will alert you to possible red flags that you may need to make more significant changes to keep your business viable. Ignoring or avoiding the situation and signs won’t make them disappear. Often we ignore and avoid them anyway because we aren’t sure what to do about them. Having expert assistance to give you back a sense of control, as opposed to the current “wait and see” approach, may make all the difference in how your business comes out of this recession.