Misery is almost always the result
You borrow a million dollars to buy a house and its
value drops to $750,000 and then you lose your job.
You have a problem. On top of that your pension
policy, likely what is called in the US a 401K, and
other savings are largely in equities and they have
dropped by a third or more. Then to try and boost the
economy interest rates have dropped to near zero so
the little cash you have left is earning nothing.
These are the customers at the end of
the line on whom the leather industry depends. Not all
are in quite such a bad way but surprisingly many are.
Families in the US and much of Europe have seen their
family assets fall by some 30% over the last eighteen
months and they have slowed their spending while they
survey the landscape check that their own jobs are
Extreme hopes are born from extreme
No one can pretend that business can be created when
the final consumer is not buying and even less when
the retailers and brands are closing down or reducing
inventory to protect their cash. Yet there are some
bright spots highlighted by three trends that we can
observe, some of which were first mentioned as we were
in a milder recession in the early 1990s. The first is
the trend towards small indulgences.
The argument is that we are not buying
houses and postponing buying cars yet we are in work
and saving to recoup lost savings. Yet we cannot live
with zero pleasure and so we need the regular small
indulgence. Back in the 90s this might have been a
Haagen Daz ice-cream, or something bigger like a new
putter for the golfer or perhaps a Mont Blanc pen.
Right now we can foresee the leather pocket book,
handbag or a nice pair of shoes as fitting the bill.
As long as the leather looks and feels like leather,
to fit the definition of something that can be handled
with love and give continued pleasure over a long
The second trend can be called
cocooning and recognises that when saving we will stay
at home more to eat and watch television. Spending on
the home is likely to increase especially if all the
housing problems means moving to a new house is
difficult. This is the certainly the hope and
expectation of the furniture trade, and while a
welcome relief volumes may not quite match those when
consumers were buying new homes and moving frequently.
To survive the recession we need to
smarten up and buckle down
The third trend is well defined by Lucy Kellaway
in the Financial Times who tells us loudly that “one
of the most blessed side-effects of recession is that
we all smarten up”. Men at work “in casual clothes
look simply awful”. Sales of ties have already risen
and we can look forward to far more people returning
to a separate wardrobe for work and home, with proper
business wear and footwear coming back into style for
those going to the office each day. No one will dare
to attend an interview improperly dressed.
These are not crumbs for the industry,
but rather trends that are likely to last beyond the
recession for quite while. Those that understand and
follow them could still do well amidst the gloom.
- Mike Redwood
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