Lessons from the Recession (2007-2009): Make Products that Consumers want and Offer a Competitive Price
The Great Recession that started in 2007 is “very likely over at this point” claimed Federal Reserve Chairman Ben Bernanke during his address at The Brookings Institution. (Refer to his address to The Brookings Institution on Tuesday, September 15, 2009).
When I started my previous post on the lessons I have learned from this recession, I dwelled on the fact that the recession was affecting all equally – manufacturers and retailers, and recovery was going to be a long road. The fed chairman seems to concur and as he put it – recovery may be moderate because of the depth of the recession.
There are countless articles out there talking about the need for improvement in Consumer Confidence. That makes sense. As a consumer you are worried about the decline in your net worth, the stagnation in your wage growth and the rising unemployment numbers. These issues affect your spending patterns. (Refer to my previous article on “Bull Whip Effect” and how your spending patterns can affect the Supply Chain of Products).
So in all this doom and gloom, how could any company do well? Can you think of any companies that have?
I can think of 2. One a Manufacturer and the other a Retailer, both recently reported a blowout Fiscal Quarter with Improved Guidance. Below are highlights from their third quarter results:
(A) Manufacturing Company – Apple (NASDAQ: AAPL)
Highlights:
Highlights:
Here are my takeaways:
(A) Develop Products that excite the consumer and keep bringing them back to you. Innovation is necessary to compete and maintain/grow market share.
The market for Portable Media Players is saturated with a multitude of options from various suppliers. To name a few known suppliers; you have Apple, Archos, Creative, SanDisk and Sony.
Pretty much all the media players support the MP3 format. Yet when you walk into your local electronics retailer OR shop online, you are drawn to the iPod. You spend your time comparing it to the hundreds of other options out there. To your surprise some of these “potential” options have far more features than the iPod. You struggle to justify the premium that you will have to pay to get one. But in the end, you do end up buying the iPod. Why? I like how one of my friend’s kids put it – “It’s like a fashion accessory!”
Apple did it again with the iPhone! They created another product that has revolutionized the smartphone market. The demand for the iPhone has been so good that even Apple seems surprised by it. "We were very surprised by the demand," admitted Chief Operating Officer Tim Cook during the third quarter earnings release (Refer to the Conference Call Transcript).
The demand trend in the iPhone does not surprise me at all. If you make products that consumers want, there will always be consumer demand for it. Even in the recession!
(B) Offer the consumers the most competitive price.
The consumers are getting smarter about their spending habits and are actively shopping for bargains. I personally think that this change in consumer behavior is a huge driving factor behind Amazon’s growth.
Why do I like to shop at an Online Retailer? If I price compare the product I am interested in buying at the store vs. what I can get for my money at an online retailer it’s a no-brainer. In most cases, the savings are just too good to pass up.
As the savings rate continues to climb in the US, people will continue to look for better deals before they open their wallets. And unless the local retailer figures out a way to offer a competitive deal to the consumer, online retailers will continue to prosper.
Feel free to post comments below. I look forward to hearing from you.
Until my next post!
Best regards,
-AS
Update: November 29, 2009:
I wanted to document some Taglines and Slogans for some popular retailers during this recession. (Note the emphasis on helping the consumers save money.)
Home Depot: More Saving. More Doing.
Target Stores: Expect More. Pay Less
Sears: Life…Well Spent.
Wal-Mart: Save Money. Live Better.
When I started my previous post on the lessons I have learned from this recession, I dwelled on the fact that the recession was affecting all equally – manufacturers and retailers, and recovery was going to be a long road. The fed chairman seems to concur and as he put it – recovery may be moderate because of the depth of the recession.
There are countless articles out there talking about the need for improvement in Consumer Confidence. That makes sense. As a consumer you are worried about the decline in your net worth, the stagnation in your wage growth and the rising unemployment numbers. These issues affect your spending patterns. (Refer to my previous article on “Bull Whip Effect” and how your spending patterns can affect the Supply Chain of Products).
So in all this doom and gloom, how could any company do well? Can you think of any companies that have?
I can think of 2. One a Manufacturer and the other a Retailer, both recently reported a blowout Fiscal Quarter with Improved Guidance. Below are highlights from their third quarter results:
(A) Manufacturing Company – Apple (NASDAQ: AAPL)
Highlights:
- Sales of Mac Computers jumped 17 percent
- Sales of iPhones increased by 7 percent
- Profit rose to $1.67 billion compared to $1.14 billion from the same period in the previous year
- In most instances “demand exceeded supply” for the newest model of the iPhone
- Link to Conference Call Transcript - here (Source: Seeking Alpha)
Highlights:
- Revenue rose 28% YOY
- Operating income rose 62% YOY
- Net income was $199 million compared to $118 million for the same period the previous year
- There was demand growth across all categories.
- Link to Conference Call Transcript - here (Source: Seeking Alpha)
Here are my takeaways:
(A) Develop Products that excite the consumer and keep bringing them back to you. Innovation is necessary to compete and maintain/grow market share.
The market for Portable Media Players is saturated with a multitude of options from various suppliers. To name a few known suppliers; you have Apple, Archos, Creative, SanDisk and Sony.
Pretty much all the media players support the MP3 format. Yet when you walk into your local electronics retailer OR shop online, you are drawn to the iPod. You spend your time comparing it to the hundreds of other options out there. To your surprise some of these “potential” options have far more features than the iPod. You struggle to justify the premium that you will have to pay to get one. But in the end, you do end up buying the iPod. Why? I like how one of my friend’s kids put it – “It’s like a fashion accessory!”
The demand trend in the iPhone does not surprise me at all. If you make products that consumers want, there will always be consumer demand for it. Even in the recession!
(B) Offer the consumers the most competitive price.
The consumers are getting smarter about their spending habits and are actively shopping for bargains. I personally think that this change in consumer behavior is a huge driving factor behind Amazon’s growth.
Why do I like to shop at an Online Retailer? If I price compare the product I am interested in buying at the store vs. what I can get for my money at an online retailer it’s a no-brainer. In most cases, the savings are just too good to pass up.
As the savings rate continues to climb in the US, people will continue to look for better deals before they open their wallets. And unless the local retailer figures out a way to offer a competitive deal to the consumer, online retailers will continue to prosper.
Feel free to post comments below. I look forward to hearing from you.
Until my next post!
Best regards,
-AS
Update: November 29, 2009:
I wanted to document some Taglines and Slogans for some popular retailers during this recession. (Note the emphasis on helping the consumers save money.)
Home Depot: More Saving. More Doing.
Target Stores: Expect More. Pay Less
Sears: Life…Well Spent.
Wal-Mart: Save Money. Live Better.
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