Yep, another meandering post on the state of the economy. As reluctant as I’ve been to write them, they’ve been fairly popular. Well, except for the ones I wrote in 2006 and early 2007 discussing what I felt was a pending recession. I think the central focus now should be recalibration of expectations, mostly in how we choose to do business. Along the way I take a stab at slow fashion vs fast fashion and what you can learn from the men’s wear market. So make a cup of tea and pull up a chair. I’ve written something to offend everyone today.
Recalibrating income expectations:
We are reluctant to give up that which we have. No one wants to lower prices particularly if our relative costs have increased but the specter of value raises its head. Computing is often cited in this context, computer prices continue to fall partially due to improved technologies, competition and economies of scale but this isn’t the whole story. There are myriad reasons why what we are doing today may be less valuable than it was a few years ago.
Recalibrating value expectations:
In a tightening economy, people are more concerned with filling basic needs. Even those whose finances are stable are reluctant to spend because of uncertainty (and they don’t want to appear profligate when so many are doing poorly). They don’t know where they’ll be this time next year. Because they’re willing to settle for less, less is what they want to pay. Only, like you, they still have hopes of getting more than they paid for. One of these days I’m going to write about the value of free stuff. It’s really killing us. We’re losing a lot of institutional knowledge, making the film Idiocracy more credible every day.
The increase in home prices had the effect of inflating prices across the board. If you increased pricing during the bubble, you may have to reset them just as home prices have fallen. Those whose products tend to be financed by credit cards (designer hand bags etc), more so. If your prices remained flat or static in real dollars adjusted for inflation, you’ll probably have to give up a little in either pricing or features to meet value expectations (people aren’t buying as many huge homes anymore either). If your pricing did not increase with the bubble and in effect have decreased (I haven’t raised my prices in 12 years), you’ll have to examine the value of the products you have for sale. Even though you’re earning less for them, they might be worth even less. Ah, pain. I think I’m writing this more for my benefit than yours.
Recalibrating expectations in how we do business:
This is the biggie that requires a lot of introspection and really, it’s the only thing we can do. Here’s a simplistic example:
I submitted a quote request through their website and never received any response other than a form letter telling me they received my request and asking for more information (line sheet, etc…). I replied with all requested info and got the same form letter back. I never received a response after that. A bit disappointing.
As it turned out, a simple web site glitch was responsible for our friend’s disappointment. Before this was determined, various people suggested she call (and call, and call) but the designer wasn’t used to having to do this. As a solo operator, her expectations needed to be recalibrated because she’d spent the last 12 years working as a designer at Big Name Design Firm where vendors responded in a timely way -or else.
There’s a few things that most troubled enterprises have in common such as: everything is always a crisis (inefficiency) -usually because you’re doing the same thing over and over but expecting a different result (insanity). Doing the same thing over and over -even if it worked for you in the past- still means getting less (inflation). That’s why I call this “insanity inefficiency inflation” or I3. I should see if someone has already written a book about it so I can compare notes.
Here’s a few other problems, such as, we suck less than you do, we aren’t the least worse. Or how about, blaming it on something nebulous, a non-person. Such as, sales are down, the market is in the toilet etc. Quick, let’s find someone to blame! I kid of course because you can run into problems with blaming people if setting things to rights aren’t a part of the process. Which reminds me, you can’t pass off the responsibility to someone else and in hard times, it’s more tempting to do so than ever. Please, could someone just get me a big easy button? I have enough on my plate as it is. You know exactly what I mean. Some days I’m sure that the only people who want to start a business are those who’ve never run one. Ignorance is bliss.
Seriously, it’s time to think of doing things differently. Some people huddle in a time of crisis and look for the good ole days. A recent trend in response is the move to “slow fashion”. Spare me. If it only takes 28 minutes to sew up a pair of jeans, why is there more virtue in getting it to you in 12 to 16 months instead of two weeks? If slow fashion were optimal, we’d all be industry titans by now. Slow fashion we’ve got. Slow economy we’ve got. Slow spending we’ve got. Consider my favorite analogy, agriculture and slow food:
Not all time is created equal. It takes much longer to grow a serving of corn than it does to cook it and serve it; it’s in that last leg (getting the corn in your shopping cart and on the table) that eats up the time that matters because at that point, food is perishable. How is it a virtue if it takes longer? If it’s fresh, it’ll be tasteless if it takes longer. Fresh should be fast.
Why fast fashion is good:
First, my argument presumes you’re the trendy leader you imagine yourself to be, meaning impervious to the demands of store buyer merchandising constraints. For everybody else, trends are cooked up at least two years in advance. As explained in the cerulean blue sweater scene in The Devil Wears Prada, it seems contrived and calculating that some omnipotent committee somewhere has arbitrarily determined the latest color you have to have -on their schedule. They are determining what will be important to you and you don’t even know it. How is this better? This circumvents the vicarious whims of the consumer who may just have a hankering for something off the trend charts. Something you can give them, fast and fresh.
A lot of people think they’re lean (fast fashion is lean) because they’re running their operations on a shoe string. Lean manufacturing isn’t a financial constraint, it’s an operating strategy. And lean doesn’t mean getting something for nothing. It means optimizing what you have to create value for consumers and being hungry enough to go and get them. Did you know that Toyota (the lean gurus) used to sell cars door to door? They did, and in an organized fashion. They kept records of who bought what and when they’d be likely to need another. And they made the cars to order. They still do. All of their cars are made to order. Dealership order of course, but still to order. Toyota makes more cars in the US than the big 3 “domestic” automakers. There’s a lesson there too. I concede that profit repatriation is an issue but most people only look at jobs.
Have you ever thought of your product in terms of its lifespan? From dirt to shirt? The longest segment of its life should be hanging in someone’s closet or on their body, not getting it to market.
Have you thought much about other product segments and the lessons they offer? I like to talk to about men’s wear. Men’s wear holds its value while the price of women’s clothing continually drops. And don’t think it’s due to a sexist industry cabal either. Men’s wear is more profitable (manufacturers are less frantic and weigh decisions more rationally) because it can cost less to produce because styling is less trendy. We can use the same blocks (hint) for longer. With reduced product development costs, one can finesse the fit a little better since the pattern will be used longer and yeah, we can use nicer fabrics because men won’t weep and gnash their teeth over minimal cost differences once value is computed. Men don’t like to shop, the men’s department always has its own outside entrance at the mall. Men are less fickle than women and they’re more loyal. Men tend to do a cost benefit analysis on the fly. Such as, considering the value of my time, is it worth it to go to another store to get a lower price? Often times it is not. What lessons can you take from this?