OK, guys, has anybody learned anything?
As the economy slowly creeps back, big business in general—and retailers specifically—will be put to a new test: Have the lessons so painfully learned over the past 24 months been absorbed and understood? Or is everyone just going to go back to doing things the way they used to because ... well, because that’s the way we’ve always done it?
Of course, we can’t for a minute pretend that we are all the way out of the Great Recession. Frankly until California and Florida truly come back—and we’re talking employment, housing activity and all the rest that comes with those things—the U.S. economy as a whole will remain out of sorts. Those two states are just too big a part of things and it seems they will trail the overall national recovery in most respects.
But elsewhere things are looking up despite the continued high unemployment numbers. But as with any numbers, you have to look a little deeper to understand them. Even in the best of times the country usually has an unemployment rate of four or five percent, so the true increase is much less than the nine or ten percent rate it’s been running.
More importantly, it’s the 90 percent who have jobs that are driving the recovery, particularly in retail spending. These were the folks who were hoarding away their cash, terrified they would be losing their jobs. They always had the money, they just chose not to spend it.
Now that they are reasonably sure they are going to hang onto their jobs, they are returning to the malls, the car dealerships and—eventually—the housing market. Trust me, the economy can do quite nicely, thank you, with 90 percent of the population out there spending.
Which brings us back to the retailers. They have certainly been slammed as well as anybody and they have been slow to recover, struggling to put together two good months in a row.
But now that things are looking up, we will find out if they have truly changed their business models. The customer is not going to revert back to her wild spending days, at least not in the foreseeable future. So will stores continue to understand that fabled value proposition? (And while we’re at it, can we please stop using the word value and replace it with what the shopper is really going after these days: a deal.)
Will they keep those opening price points goods in stock? Will they curb their previously out-of-control exuberance on new store openings, reserving expansion only where it’s strategically logical? Will they resist the temptation to keep moving up the top end of their assortments, offering products that even the average Dubai shopper no longer is interested in?
And will they continue to keep costs down, not layering on new vice presidents in charge of vice presidents and other redundant redundancies?
Retailers, like most of us, have relatively short memories (not to mention attention spans) so it will take some real effort to remember how bad it really was and how quickly things collapsed without much advance warning of any sort.
It’s going to be awfully tempting to go back to all those evil ways. The recession may fade away, but the memories should not.