The great thing about retail is that it’s a day-to-day business – sometimes an hour-to-hour business – as shoppers’ emotions swing from doubt and fear to elation and exuberance, either translating into confidence and spending, or lack of confidence and no spending.
It’s probably the most immediate indicator of peoples’ collective confidence in the future.
In early December 2008, just before the world was going to fall apart, I prophesised that Australia and most of the OECD countries would have a surprisingly strong Christmas. The weak retailers and manufacturers – those with large debt levels born of poor capital management – would go out of business. But the strong retailers like Wesfarmers, Woolworths Group, Harvey Norman and JB Hi-Fi would report stable results.
I based it on the premise that 70% to 80% of Australians would be employed without risk of job loss. And against a backdrop of more pocket money than we had 12 months earlier – think low petrol prices and reduced mortgage repayments.
Six weeks later the world hadn’t fallen apart, according to retail sales for December. Now, a short 20 weeks later again, 92% of those who wish to work are still working, our cost of living has fallen dramatically, house prices at the “feeder end” of the market are rising, the sharemarket is up, full time jobs this week are reported surprisingly buoyant and first quarter sales figures are good news.
Robert McNamara, when he was Kennedy’s secretary of defence during the Vietman era, coined the phrase “the fog of war.” And I think that’s where we’ve been.
He said that when in the midst of battle, things, numbers and people just don’t line up. There is little evidence of cause and effect, and events aren’t easily linked. Only in retrospect, with 20/20 hindsight and chronological reporting, do things appear linear.
In the “fog of war” late last year, we could only observe what soldiers called the FEBA – the forward edge of the battle area – to draw our own conclusions on how good or bad the economic situation was.
The FEBA was the shops and dealerships around the world. Observing shopper behaviour and talking to shop assistants and sales staff was where the prophecies were drawn from. We saw people shopping – albeit more cautiously – but not dramatically less.
Now, news from the FEBA shows we’re still at the bottom of the curve; but this is as bad as it will get.
We will still see smaller retailers, dealerships and manufacturers run out of money. Cashflow is slow everywhere. It’s still just as hard to move a Yamaha R1 superbike for less than $20,000 as it is to move a Porsche Cayman for $170,000. Shopper confidence remains low. It must grow before we spoil ourselves again.
But the fog of war is definitely lifting with every sales report, and now with the latest job figures. We are now able to document and report; to link the dots mapping our way through the downturn. The fog is clearing – and it looks promising.
With thanks to Robert McNamara and the RMA Sandhurst.
In his role as CEO of CROSSMARK, Kevin Moore looks at the world of retailing from grocery to pharmacy, bottle shops to car dealers, corner store to department stores. In this insightful blog, Kevin covers retail news, ideas, companies and emerging opportunities in Australia, NZ, the US and Europe. His international career in sales and marketing has seen him responsible for business in over 40 countries, which has earned him grey hair and a wealth of expertise in international retailers and brands. CROSSMARK Asia Pacific is Australasia’s largest provider of retail marketing services, consulting to and servicing some of Australasia’s biggest retailers and manufacturers.
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