Making Cents in a Nonsensical World

As financial giants and elder statesman of the American economy have come crashing down this week, it’s difficult to pull this all together and project forward with what is coming up in the near future. I may not always be perfect in looking at my crystal ball (see Yahoo and Microsoft Impact), but I am definitely not afraid to try.

Near Term Retailing Impact

The near term impact of all the upheaval this week from the stock market drop, to failing mortgages, to the fall of Lehman Brothers,  AIG, and others, will be decreased sales as consumer confidence takes a hit.

Wow…suprise, I know.

So 2008 has shaped up as a really tough year (at least I was right on this one, see Wake Up, 01/2008).  However, I would expect this trend to continue into Q4. There will be a holiday season as usual, but it will not be as robust as predicted a year ago, and most likely there will be many more low ticket items sold. The silver lining is I would expect the December 26th sales to be a big draw as people look for items that surprise…no one could afford to give to them.

As a retailer, I would focus on froogle friendly products and put together promotions based on consumers not being as free wheeling as perhaps they were a few years ago. In other words, luxury items will be a tough sell. Dito for home improvement goods since fully 5-10% of mortgage payers are struggling keeping up.  I would recommend the following:

Free Shipping: Tried and true, and I would lower the qualifying price point as low as possible
Buy ‘X’ and get ‘Y’ free: Push multiple item purchases, bundle when possible. I have a feeling many will be looking to buy an assortment of goods at a discount to hit their gift giving list at once.
Time Sensitive Promos: Pick out some special days, slash prices, and see what you can clear out. This is best if you have a high traffic item or section you can put a promotion on, however a good email list and campaign can work just as effectively. If you can keep a rolling line of promotions so consumers check back throughout the holiday shopping season, even better.

Long Term Impact

Undoubtedly, the economic landscape will be changing quite a bit. If I were really on the ball, I would be looking into starting a financial or investment service, because the pickings really slimmed down for investment banking this week.

For retailers, I would take a scaled approach for 2009. I still believe strongly that the valley will be reached sometime in 2008, and the economy will turn beginning in 2009. I would anticipate much smaller gains next year than in years past for ecommerce. However…and this is the big however…. ecommerce will gain more quickly on traditional forms of retailing like physical stores and print advertising.

The continued increase in communal marketing and usage online will be accelerated by people becoming more local, essentially limited in terms of driving and transportation. More bargain hunters have emerged, and will continue to emerge.

As a retailer, and I am biased here, I would continue to invest in optimized strategies through CSE and SEM usage. However, also look into social networks. As many will tell you, this will be the next big wave as business learns how to take advantage of MySpace, Facebook, LinkedIn, etc. I expect company centric groups and communities to spring up around products which are more custom tailored to smaller audiences (insert ‘grass roots’  paradigm here).

Ultimately, there will be change, innovation, and a bunch of new stuff. Youtube type videos will continue to grow, and retailers should expect to be more informative and transparent than ever to gain new clients. It will be fun…

On a side note, I think I will be going back to writing posts during the day. These 1AM musings seem to be a little too philosophical and not as granular/detailed in nature…as I remember that was the point of this blog in the first place….

September 16th, 2008