My oldest son, overhearing some economists on the radio mention the word “recession”, asked me why they sounded so unhappy. I explained that for most people, a recession wasn’t a good thing, and nobody really liked going through it. Austin seemed perplexed by this, and asked “Why? Doesn’t everyone get to go outside and play?” That’s economics to a five-year-old: a recession is when everyone goes out to play, inflation is what happens to balloons, and a depression is what Dad experiences when he thinks about the previous two. Of course, when your primary source of income comes from birthday money and Tooth Fairy revenue, and your overhead consists of penny candy and Star Wars comic books, and the First Paternal Bank is ready to bail you out at a moment’s notice, it’s easy to be positive about the state of the economy.
Unfortunately most (I would dare say all) retailers are not five-year-olds, and there are real struggles to be faced and serious choices to be made over the next year. We can choose to smile bravely and ignore the words of the experts, or we can take cautious steps to secure our businesses and the welfare of our employees. I’m not saying we need to take drastic measures and prepare for the worst case scenario, but we shouldn’t ignore the fact that some customers either currently or eventually might have a hard time deciding to make a mortgage payment, fill their car with gas just to get to work, or pay a credit card bill. If retailers pretend there is no wolf at the customer’s door, they’ll soon find a whole pack waiting outside their own. It might seem clever to be optimistic and carry on business as usual, but most problems of this magnitude don’t go away by ignoring them.
The key to surviving this impact is to understand and accept two ideas: 1) this economic downturn will eventually turn around, and 2) the speed of that turnaround can be impacted by how businesses (especially retailers) react. Some major retailers have announced price drops to help stimulate business. Others are cutting overhead. Some independents are giving up altogether. And some are acting as if nothing is amiss and everything is bright and sunny. They’re the ones who think a recession means it’s time to go out and play.
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