MARKET WATCH: Managing In A Recession
Jeff Harbaugh
- January 22 2009
- 1,016 views
- 56 comments
I can’t stand it anymore, so be warned.
The next person who says to me, “We’re watching our inventory carefully” or “We’re working hard to keep our existing customers” or “We’re being really selective about our advertising and promotional expenses,” or “We’re cutting brands that haven’t sold well,” is going to get dumped on. They won’t really deserve it- they’ll just be in the wrong place at the wrong time.
My frustration level with people who tell me this stuff as though it represents new ideas in management is just off the chart. Those four things (and a whole bunch of others, but you get the point) are what you should have been doing anyway. It was just standard, run of the mill, boring, good management even before the recession started.
And guess what? The companies who come through the recession in good shape, and maybe even with some opportunities, are going to be the ones who were already doing those things. It’s not like you shouldn’t start now, but the impact of good management and correct strategic positioning is cumulative.
The second thing that’s driving me crazy are the people who are looking forward to the recession ending so we can all, “Get back to normal.” Actually, getting back to normal is exactly what we’re doing right now. We’re wringing leverage out of the economy. Reasonable credit standards are going to be reintroduced. Consumer savings are going to increase. This will be “normal.” Normal is not what we had three years ago. Normal is not a negative savings rate, a mortgage market where literally anybody can get a mortgage and a gross domestic product growing at four to five percent.
As you plan, please think carefully about what you mean by “normal.” All the good Keynesians in Washington are going to throw a whole bunch of money at us. But last year when they did that ($171 billion, as I recall) only about 17 percent was spent. The rest went to savings or debt reduction. Unless this new stimulus package is very carefully targeted (probably a political impossibility) we can expect a similar result.
John Maynard Keynes was once accused, in an argument, of changing his opinion. His response was, “When the facts change, sir, I change my opinion. What do you do?”
My suggestion is that you consider the facts you’re working with and see if they might change and if you opinion should change with them.
I’m about to leave for the airport to fly to San Diego for ASR. You DO NOT want to be the first person I talk to.
Jeff Harbaugh is a consultant for the action sports industry and works with companies to identify and focus on critical business issues and opportunities fundamental to the bottom line. For more information, visit www.jeffharbaugh.com.
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January 22nd, 2009 at 6:04 am
Great little essay there. Ahh yes the old Keynesian model. Well-I think there should be more of a darwinian model to approaching the recovery of a recession (read: depression)The weak will die and the strong will survive.
A trillion dollar stimulus is not the right thing to do here, particularly if much of that stimulus comes out in Gov’t works. Building bridges and roads will take years with little benefit other than new bridges and roads.
Obama is what this country needs and I am a tremendous supporter of his, but he is stuck in dealing with this economy. He must move ahead on a stimulus plan whether it will work or not….and it won’t.
Jobs will continue to be lost. Look at all the derivative job losses just starting now in commercial real estate.
It is always the derivative markets where folks get crushed..
Look at it like a gold rush economy-When the gold rush was over- All those folks that sold picks and axes were left with inventory and no one to buy the gear. Lots of poverty ensued.
Sorry-are we only to talk about Dane Reynold’s passion pop airs, or the genius of Richard Woolcott and Tucker Hilbert.
January 22nd, 2009 at 6:47 am
Right on…slap some sense into these fools. I was wondering when you where gona stop talkin softly and drop your stick.
January 22nd, 2009 at 7:19 am
great notes , when I started my surf shop I new nothing of recession or how the stock market is doing and I just focused on customers and had a hunch it would work , stay focused on doing the right thing for customers everytime and you will gain there trust and there dollar bills
-1 customer at a time , I made so many mistakes I could write a book
http://www.dacanesurfshop.com
January 22nd, 2009 at 8:22 am
Wow! Great comments on this thread so far. There is still common sense afterall and I agree with all! Yes, I agree that the “new” stimulus deal will go down like a lead balloon. It will solve nothing. I support our new president 1000%, but the U.S. economy is bleeding away DAILY, faster than I can type. Let’s not mention California’s severe budget crisis! I hear that Cali is on the verge of total financial collapse!!! OUCH! I guess we will join Michigan in the soup line soon enough. No jobs = no money = tightening your wallets = no luxury items…well, you get it. It’s a horrible and vicious circle economically and every sector is affected.
January 22nd, 2009 at 9:31 am
Outstanding read and very on point Jeff , or at the very least a plan that calls for action . Circling the wagons is not fighting and not fighting is not gaining ground.
This year you will hear the term ” the new normal ” a lot. This is a psychologist term for accepting life after a great loss , it is part of the healing process and in my elementary mind does apply to the state of the nation and more specifically to the state of our economy .
Thank you Jeff for taking the gloves off , we do not have the luxury of blowing it off and going surfing this time around , we stand to lose all. We must fight to the finish and then pass the baton to the next generation or we will be nothing more than a cultural footnote .
What this has to do with who Bobby will sign with ? I have no idea !
In peace and Hope ; Rw
Oh P.S. The Bob McKnight Bashing , Quiksilver hating is completely off base , they are a cornerstone ,respect them and help don’t hinder and just be glad they don’t eat thier young !
January 22nd, 2009 at 10:08 am
Damn ! da ding dong damn !
January 22nd, 2009 at 10:53 am
Props
January 22nd, 2009 at 12:21 pm
Good call rob willis! I agree. Quik is the cornerstone. They cannot collapse!!! If they go, all will follow. Remember, with the expecption of “Hang Ten” of the 60’s genre, Quik IS the standard of modern surfwear. Bob and Jeff did not make it what it is by sitting on their butts all day back in the early days. Nope, I do not work for them, but I do admire Bob for hanging in there during such awful times right now. The debt problem they have is bad no doubt. But, hey…cut Quik some slack for now and sit back and see what develops in the months to come. Who cares if Bob makes a dollar an hour or a billion a minute? As for the haters: Try starting your OWN surfwear line?! SUPPORT QUIK!
January 22nd, 2009 at 12:41 pm
Thanx DivineHammer ( i love that handle ) I have been reading these post a lot more lately and for the most part really enjoy them , you , Hmmm , bHawk and a few others are like minded , i am not the definitive word on anything but it seems the comments towards Quik are pretty vicious considering all they have done for those of us who love and live the ASI world.
But then , like my granny says ; “nobody kicks a dead dog” Quik will take care of Quik and we will be better off for it.
January 22nd, 2009 at 2:48 pm
RESPECT LAnce great attitude.Plus charging sub zero barrels !!
January 22nd, 2009 at 8:21 pm
Thanks Rob! You are a respected guy in the industry and a stand up guy as well!
January 22nd, 2009 at 9:21 pm
sorry, I don’t have respect for quik, They sell to some very lame stores. You got to have a little pride don’t you.
Good comments jeff, like always
January 23rd, 2009 at 7:24 am
Quik is like pot it’s the gateway brand.
January 23rd, 2009 at 8:21 am
Honest,
I largely agree with you about the stimulus package, depending, of course, on its specifics. I’d like to see the focus on infrastructure even though, as you correctly point out, it probably won’t make a short term difference. It will, however, make a longer term difference and there’s a whole of money that needs to be spent on our infrastructure.
I’m wandering around ASR through tomorrow, so may not have time to respond to all these comments as quickly as usual. I will get to it though.
Thanks for the comment!
J.
January 23rd, 2009 at 8:23 am
bhawk,
Just trying to get everybody to think about the issues and how things may change. If my ranting and raving a little helps with that, I’m a happy camper. Fools? Nope. Just people trying to deal with unprecedented times.
Thanks for the comment.
J.
January 23rd, 2009 at 8:25 am
Lance,
Apparently you did some things right as well since you’re still around. Just run your businesses well everybody!
J.
January 23rd, 2009 at 8:28 am
Divine,
The recession will end, the country will start growing again, and new jobs will be created from places we can’t even imagine right now. There’s some pain and dislocation in getting there, but that’s the way it always is.
Thanks,
J.
January 23rd, 2009 at 8:46 am
Stop worrying about Quik - if headphones are the most exciting thing at ASR this Spring - we are all F’ed
January 23rd, 2009 at 8:53 am
hahahaha so true!
January 23rd, 2009 at 10:16 am
I was just trying to sound like Mr. T. I guess I failed.
January 23rd, 2009 at 11:28 am
true dat!
for a good example let me share a true story.( at the risk of sounding maudlin)
i hired a kid once who had never been to the coast, never swam in the ocean.
one day i noticed a tattoo on his ankle. the quiksilver logo. seems he and his best friend had got tatts because they promised each other they would one day surf. i took him out, gave him his first board, and of course he finally moved to santa cruz to surf and fix Westies. so yeah, gateway brand? why not. one of many. Never underestimate the power in the images these brands portray.
Oh, and his friends’ tattoo? Maui and Sons.
January 23rd, 2009 at 11:31 am
whats with everybody biting Skull Candy? Nixon headphones? Quik headphones? WESC headphones? come on guys, think up something for yourself. The AS industry has always been about biting others ideas. This will lead to the demise. If you want to suceed now days you have to make something killer that every kid has to have. No room for middle ground copy cat companies.
January 23rd, 2009 at 11:58 am
Tuss Have you Seen “Just add water”.That is what sold me I will always wear Quik baggies.
January 23rd, 2009 at 12:04 pm
“Let us pray”
January 24th, 2009 at 12:18 pm
Well, I’m expanding and hoping for the best. (And being careful with my inventory
That is what we were commenting on, wasn’t it?
January 24th, 2009 at 3:29 pm
R.W. I just heard YOU got laid-off ???!!!
If guys like you are getting put out, guys like me have no chance finding work !
Good luck to you brother ,call me , as you say , “you’re a good man , worth knowing ”
K.B.
January 24th, 2009 at 4:25 pm
Thanx Ameeho , Yeah , sometimes it’s just a matter of “last in , first out ”
We were making some strides but it just could not be sustained.
Left them with an amazing Rep force though and that is the front lines so who knows , maybe it’ll turn around.
We could start a super company with ALL the great people out of work right now , you included ! Rw
January 24th, 2009 at 5:23 pm
The new normal- exactly. I love it. By the way, the new normal may look something like the old normal. It’s just that what we’ve had the pleasure of going through before the recession was not normal, and those who think it was are in for a surprise.
Ever hear the story of the turkey? He’s born, and from the moment he’s out of the egg, he has people taking care of him. They keep him warm, feed him, give him medicine, clean up after him, etc. Life is good. Every day people come and take care of him. This goes on for hundred of days and if you ask the turkey what’s going to happen tomorrow he says, “Hey! It’s going to be another great day!!” And he’s really, really sure he’s right. Then it gets close to Thanksgiving…………… You can’t always base what you think will happen tomorrow based on what it was like yesterday.
J.
January 24th, 2009 at 5:26 pm
Divine,
I have tremendous respect for Quik and what they have accomplished and I hate to see one mistake and a lousy economy cratter it. I imagine there will be some kind of financial event in the not too distant future but whatever happens you can assume those brands will be around.
J.
January 24th, 2009 at 6:27 pm
Yeah Right,
Look, the thing is that when a company grows, it’s going to have to sell to what you call lame stores. I know what you mean and everything, but they just don’t have any choice if they are going to grow. I’m just back from ASR where somebody reminded me that brands grow and expand their distribution and some retailers have to decide when it’s time to not carry that brand any more and to find some new brands that fit the core retailer’s position in the market. It was really refreshing to be reminded of that. It’s the way it’s always been. It’s not good or bad. It just is.
thanks for the comment.
J.
January 24th, 2009 at 7:31 pm
Sorry Jeff, I have to disagree. They had a choice and blew it. Quik could have still grown while only being in the core shops(shops that sell surfboards and wetsuits). If only the core shops were carrying the brands(Quik,Hurley etc.), the consumers that wished to purchase would have searched out, gone to the core shops and bought–if, said brand was that in demand. Quik and many others have watered down their distibution and image to the point it is no longer carried in most core shops, only in the “lifestyle stores”. When surfing becomes boring to the masses & is no longer in the mainstream adverts, the big box/mall/kook stores will move on the next big thing(MMA, badminton, extreme cooking, your guess is as good as mine). Quik & other sellout comp.s will be left with oversized warehouses, bloated staffs, bloated expenses…… They had a good run, could and should have been managed much better, I will not be sorry to see them go. They will be replaced. Most core shops will survive this recession/depression by tightening their belts and catering to their SURFER/SKATER customers. Great thread TWS. Mahalo for letting me vent.
January 24th, 2009 at 7:34 pm
It wasn’t always that way. Surf/skate design used to be cutting edge and everyone else followed our lead. That all changed with grunge in the early 90’s.
January 24th, 2009 at 8:17 pm
Got one word for you , Billabong ! They don’t sell Dept. stores and they do all right eh bra ?
January 24th, 2009 at 8:27 pm
Ha ! Great little cautionary tale Jeff !
You are a regular Zig Ziglar but be careful or Josh will be calling you ” colloquial” like me
I am loving this Post Thread , seems a good bunch who how to debate rather than hate .
All the best , looking forward to see your thoughts of ASR ? Rw
January 24th, 2009 at 8:54 pm
That Turkey needs an exit strategy !
January 24th, 2009 at 10:07 pm
Okay brainiacs..let’s start our OWN core brand! I’ll bring the doughnuts! Good point Jeff, right on! I’m sorry guys, I am on such a bad trip nowadays, I don’t now what to do anymore! California just posted a 9.3% UP in unemployment figures, just nipping at the heels of Michigan! Michigan is at at 10%!!! To make matters worse, California may go BANKRUPT altogether in February 2009!!! I’m scared stiff and worried!!! I wanna cry in my brew-ha-ha…
January 24th, 2009 at 11:43 pm
Would have to call you out on that one . Do not know about Hawaii but Billabong is in plenty of Dept/mall stores around here for sure snizzle my dizzle . adyfi
January 25th, 2009 at 12:46 am
Hey crew. Hear me out. Want to start a new company? Here is one of my ideas:
Trade show… ASR sucks. It just does. Same lame booths blocking out anything (unless your on the inside) about what they are doing while the head designers for each brand are going clubbing together after the show. ASR today and ASR 5 or even 8 years ago were exactly the same (minus the MEGA ramp). Nothing new under the Nielsen sun… (even Volcom was limp and Agenda was like nap time).
SO! Open it up to consumers! Like any good car show, hold the private meetings upstairs in meeting rooms and have the downstairs completely open (with no walls) to the public. Let the end buyer really get a feel for their favorite brand and what the brand is offering for the next season. That way, the show can charge consumers to get in too and make a killing and your floor will be PACKED! Talk about energy!
ASR is like bingo at the old folks home. One persons pleasure is 10 others pain but we all keep playing ’cause what the hell else is there to do? At least Quik is smart enough to see the writing on the wall… Next year, VF Corp will buy ASR and own ALL of what we once held as sacred.
OH WAIT! The WAVEHOUSE Demo went OFF!!! Oh and don’t forget, ASR is adding the CLASS Show! Can’t WAIT for that one! Remember the MMA show, last season? Torture!
Can I get an Amen? Or at least a consumer based trade event? Obviously, the shows of Crossroads, Sacred Craft and Thread or doing something right.
January 25th, 2009 at 7:54 am
<>
This is exactly what is wrong with the industry: hubris and hyperbole
Quik could disappear tomorrow and guess what - kids would still surf, kids would still skate, kids would still ride…
Let’s not overstate our role in the big picture.
January 25th, 2009 at 9:16 am
Billabong is in Tjmax and Marshalls by us along with most other larger surf brands. I can go to Marshalls and buy the same shorts I just received/put on my racks, at my shop for less than wholesale. They had Eddie gear last spring.
Haven’t seen any Billabong displays at the department stores yet.
January 25th, 2009 at 9:30 am
The turkey had an exit strategy- he just didn’t know it and the result wasn’t what he planned, whichis the point of the story.
J.
January 25th, 2009 at 9:46 am
HB,
Keep disagreeing. That’s the way we both learn the most and I never claim to be right all the time.
Certainly Quik could have chosen the strategy you propose, and they could have sold more in those core shops. But now we get to the part where probably neither of us has the numbers we need to prove their point of view- at least not right at our fingertips. My belief is that at some size it simply becomes impossible for quik, or any other company, to grow beyond a certain point without expanding their distribution. A core shop simply runs out of room to sell more quik. Unless they are going to become a quik store and we all know what quik has done with their own and partner stores. Consider some of the problems Burton has had trying to expand sales in core shops. There just wasn’t any more room in the stores for more
Burton stuff. (I know- they blew up their distribution too).
If a core store is perceived as a burton or a quik store, they are screwed. I’d argue they simply aren’t a core store any more. The store has to define the brands it carries. The brands should not define the store.
So I think that some level of expanded distribution is inevitable- unless you just decide to stop growing and I’m not sure that’s a viable strategy.
anonymus bra,
Let’s wait and see how Billabong manages their distribution in the future. They aren’t nearly the size of Quik in revenues yet, are they?
Thanks for the comments.
J.
January 25th, 2009 at 9:51 am
anon,
Headphones are another high margin, easy to copy accessory. Like watches or sun glasses. Or backpacks once upon a time. Somebody pioneers it, the margins are huge, everybody copies it, price is the only differentiation not created by marketing and eventually the margins fall and the product becomes more mainstream.
The consumer gets a better product at a better price.
thanks,
J.
January 25th, 2009 at 9:52 am
No, let us run our businesses well.
J.
January 25th, 2009 at 9:54 am
Aquaholic,
None of this hoping stuff please- plan. And by the way, if you can make it in this environment, you’ll kill it when things turn around a bit.
J.
January 25th, 2009 at 9:55 am
Divine,
Be concerned for sure, but don’t be so scared you’re paralyzed. The biggest risk right now is probably doing nothing.
J.
January 25th, 2009 at 10:04 am
Yo Divine ; Just checking on your head Ameeho ? Can’t say as i blame you but planning fixes what panic can’t.
I can be prone to a blue-funk every now and then too so i will just leave you with a quote that makes me smile at the very least :
” do not tell me worry does not work on my problems , everything that i ever worried enough about never came to be ” Mark Twain
Let me know if i can help boomer , Rw
January 25th, 2009 at 12:59 pm
I realize growth is an important biz decision, but smart growth is what gives you longevity. I think billabong is being smarter because they are acquiring good brands. Quik has been slower with that.
I personally think volcom should have stayed private. Now they have all the pressure. How much money does wolcott need. I would rather make less money and control my hard built biz, than to have to sell out to lame distribution channels.
I am sure I could make more money if I sold swimsuits and lacrosse gear, but then I would have lost what I built.
January 25th, 2009 at 1:42 pm
Yeah,
Quik got 21% of its revenues last year from DC, an acquisition. I agree Billabong has made great acquisitions. They paid high prices, but got great value and brands that can keep growing and don’t have to be fixed.
Smart growth for sure is what gives you longevity or at least its one of the things.
Certainly going private gave Wolcott a “liquidity event” as they put it. But they didn’t go public just for that reason. They went public to give the company the capital it needed to grow. You can make the argument that they just should have grown more slowly, but then there are those other pesky investors who aren’t in it just for the love of action sports and want to make a bundle.
Sounds like you’ve made a decision with regards to growth that was right for your business and what you wanted to accomplish. Good. Everybody else gets to make the same decision and can choose to handle it differently.
Thanks. Good discussion
J.
January 25th, 2009 at 3:30 pm
your right, I guess thats why I don’t have investors or bank loans. I have realized that you sometimes have to let go of brands after a while. Its a bummer to help build a brand, only to watch it sell to lame stores, but it is the way of the world. Its hard not to take it personal.
I also get caught in the growth thing. Lately though I have challenged myself to not get in that mentality. My store is profitable and I have a simple life. I think that is a good thing right now.
keep up the good words. I always read your articles
thanks
January 26th, 2009 at 10:00 am
Good thread, y’all. And as always, good words Jeff. For me I found it hard not to get caught by the economic downturn. For almost all of my 20+ years in surf retail I have dealt with the dtress of growth. I have pressure little experience in a downturn and no experience with one like this. I’ve always tried to watch my bottom line, but when everyone goes off price on snow stuff in November, I get my ass kicked. When customers stop shopping all of sudden, it takes me a month or two to start to gauge how bad it will be and how long it will last. And when it means laying off employees, all good friends, it is more than just business and watching dollars.
Still, our industry has been a dog with too many fleas for years. We all knew a shake out was coming. My best to all to adapt and survive it, and I feel for those of you who have lost your jobs.
Mikke
ZJ Boarding House
January 26th, 2009 at 2:22 pm
Mikke,
Nobody has any experience in an economic environment like this except my 88 year old mother. But she wasn’t running an action sports business.
See you in Vegas.
J.
January 31st, 2009 at 1:47 am
Hi Jeff
Opinions are like assholes we all have one so for what its worth here is mine.
Its back to the future for us (ASI) a focus on what made specialty stores special in the first place
1. A genuine relationship with our community
2. A genuine love of service for for the guests (customers) as if they were in our own home
3. A focus on products that are Relavent ( a deletion of the trinkets and trash programs to justify departments and jobs)
in these times we gotta sell what people need,as wants maybe a
step too far in the coming times
4. A system for owners to be able to sell their stores to new blood to freshen up with new and driven talent, hey even all star teams need new players.
5. The BRA to step up in this tough time and based on the United we Stand and Divided we fall analogy,l locate and deliver the synergies that focussed scale can deliver, (This is not a jab in the ribs at the BRA but an observation that they are the best placed organisation to catalyse this)
6. Clear Thinking and Good Leadership; (Any More Obamas out there)
7 Think Global but act local as thats what makes yo u different from their company store in say Estonia
As Mikke said above, Good luck to those who have lost jobs, and to to those in jobs make youselves valuable to your employer and to paraphase JFK ask what you can do for your company, its really tough for your boss right now, make him some money.
Sean Kennedy
January 31st, 2009 at 9:40 am
BRA is useless. So far all they have accomplished are “summits”in tourist areas. It is nice when the girl from Ron Jon is in the party photos though !
January 31st, 2009 at 10:06 am
Anon,
Help me out here in the spirit of keeping this conversation on point and useful. If you’re going to say something like this, at least defend your point of view a bit. I don’t happen to agree with you about BRA. It costs, I think, $125 a year to join and the direct benefits a typical member gets from insurance, fed ex, and other discounts is almost certainly going to repay their membership fee very quickly. Honestly, I don’t see any good reason a retailer shouldn’t join, even if it’s only for selfish reasons.
Thanks,
J.
January 31st, 2009 at 10:09 am
Sean,
There you are my friend! Haven’t heard from you in a while.
As I pretty much agree with what you said, (ie., retailers need to run their shops using good business practices) I guess this will be a short reply.
Thanks,
J.