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Good News/Bad News

December 9, 2008

Geez, this has been a day of mixed messages, good news followed by bad, followed by good, followed by bad. . . well, you get the idea. I started off the morning with good news as I filled up my car before coming in to work. It took about 21 gallons and cost under $40. It was just a few months ago the same tank of gas was over $80. At this rate, I could save over $2,000 a year. That’s much bigger than any tax stimulus plan we have seen over the last few years. In fact, since I made too much to get anything back from the last two packages, this is a benefit I probably wouldn’t have gotten if it were in the form of a tax rebate.

Bad news. After filling up, I started to drive in to work while listening to NPR’s morning show. A commentator came on to explain “deflation.” To put it in a way we could all understand, she talked about a gold purse she saw a few weeks ago. When she first saw it, it was $249. A few days after that it went on sale for $199. Then, just a day or two ago, it was reduced again to something like $149. A great deal but she still didn’t buy it. She figured that the price would probably go down again. When it did, she would buy it.

That’s a great example to explain “deflation” and why it is a scary problem. Even thought things get cheaper; consumers wait to buy because they think things will get cheaper. By not buying that purse today, the commentator realized she was hurting the economy. Multiply her delayed buying decision by the millions of Americans who are waiting to shop for the same reason, and you can see that “deflation” is, to quote Martha, "Not a good thing!"

Good news. When I got to the store, I decided to make my plane reservations to Atlanta for the January gift market. When I checked into ticket prices a week ago, Delta’s fare was $269 round trip. This morning, the same tickets on the same flights had dropped down to $149, a 45% savings. Part of that comes because it costs less to fill up a jet as it does to fill up my car. Also,  I would assume the other reason for the lower fare was a drop in demand. But that can’t be right because I keep hearing that airlines have been cutting back flights and using smaller equipment in an attempt to fly at least 90% of capacity. It is hard to believe that in just a week demand dropped so much that they had to drop prices by 45%. But you know what, I am not complaining and will take a savings that big whenever and wherever I can!

Bad news. A few minutes ago, I had to run to the shopping mall to pick up a computer cable we needed for the store. Now, it is two weeks and a day before Christmas. Any other year, the parking lot would have been full, and I would have been driving around and cursing because I couldn’t find a place to park. Not this year. Parking was difficult but not impossible. As I was parking, I had to pass the now empty “Linens N Things” building. Even though it was one of the first to have the “going out of business” sale the rest are having now, I was surprised to see it empty so soon. Then, once I got in the shopping mall I walked in front of the empty Sharper Image store. Gosh, I remember going to my first Sharper Image in La Jolla more than twenty years ago. The store was filled with things I had never seen before. I could have spent a fortune in there if I had the money. As I was, I spent more than I should have. Those times sure changed for them.

Good news. At the same time the mall was losing major tenants; it gained an Apple store and a Macy’s. Granted, both were planned before any problems in the economy, but both stores are doing gangbusters. You never see anyone leaving those stores without shopping bags. That means they are shopping and spending money.

Finally, more good news. After I got back from the mall, I sat down to read one of my trade publications.  I came across a very positive article. The upbeat title of the article was, “Hold on, Help Is on the Way.” 

Let me paraphrase. The writer thinks the worst of this economic upheaval is just about over. The reasoning? The drop in gas prices will amount to over $4,000/year for the average family. Then, Obama has promised a federal stimulus program to go into effect when he is inaugurated. Finally, lower home prices could eventually spur a rebound in home purchases with a new generation of buyers entering a market they have been shut out of because of the absudly high prices. Although he didn’t mention it, there are rumors that Fannie Mae and Freddie Mac may have a sale on mortgage rates, lowering then to 4.5% for a 30-year mortgage. As I understand it, mortgage rates have never been this low in our history. This could be a substantial shot in the arm for the real estate industry and by extension, the outdoor furniture industry. 

The article does mention this is only good news if your business can survive the slump. That means cutting costs and enticing sales in the meantime. But, if you do survive, the writer says, “You will be one of the few still standing and the marketplace will be yours.”

Yes it has been a day of mixed messages.

Yours in confused retailing, Bruce