On a recent short trip to the US I read in the newspapers that minus 30% was the new up in business these days and it is amazing how many of the companies I have spoken to since have used exactly that 30% figure as the statement of where they stand short of 2008. What this means is that nearly all have stopped recruiting, some have had to make people redundant, some are on short time and those short of cash are in trouble. Those with strong balance sheets will also have taken action to conserve cash but have also got an eye to what the future will be like.
A simple glance at the auto industry and what is happening in the USA makes it clear that the future is not going to be like the past, not just going to be a getting up, dusting down and going on as before. At the moment we are seeing stabilisation in the industry although some ownerships are yet to be settled and some closures yet to be announced. Also we are seeing that the Chinese market is still growing but with smaller cars, and the Chinese have started to get better at making them. The Tata Nano looks like being a great success and marketing papers are already being writing about it from an innovation and marketing standpoint. Fuel costs have been rising again with big implications for some of the bigger luxury saloons. If three quarters of BMWs have leather but 99% of the Series 7 consider the implication of reduced sales of Series and growth in the highly economic Series 1 and 3. And who will win the battle now for the future growth in the Chinese, Asian, Indian, and African markets? All change.
Similarly with luxury goods. The weak will go and the leveraged have been busy refinancing – and quite a few big naems are heavily leveraged. Coach looked at the US and slowed if not stopped its expansion there, but decided to keep on going in China. They were correct. India also looks good for growth in luxury goods. The more I talk to Asian colleagues the more I see that they understand the rules of quality and marketing, so don’t assume that growth in Asia will all be for American and European brands. They will have their place certainly but expect western brand names under new ownership or with new configurations to do just as well. Helped by the fact that India still refuses 100% foreign ownership in some sectors which continues to keep the likes of IKEA away.
But now is a time for cobblers to stick to their lasts. Extending a brand into handbags by wandering off to the Far East and getting a few styles made with your logo on just won’t wash anymore. A walk down Oxford Street will show you that. It’s not 30%, not even 50% off – it is like a bazaar in Istanbul. Indeed that’s where I would send some of the goods for the daily planeloads of tourists from Vladivostok to buy and take home. Right now the only busy handbag stores in Oxford Street are Louis Vuitton. And Mulberry is OK with its good products and low cost structure.
So while times are difficult they are not proving impossible, and for those with vision can be a time to lay down foundations for an exciting future.