Published on: December 15, 2009by Michael Sansolo
With apologies to Leo Tolstoy, I’d argue that the current economic realities can best be stated by paraphrasing the opening of Anna Karenina. That is: all economic good times are alike; each downturn is unhappy in its own way.
In economic good times the industry has essentially traveled the same path, adding services, products, tastes and quality. Glory, sales and profits abound even in the face of pitched competitions. Downturns are much more complex.
After all, this is an industry born of the Great Depression, when Michael Cullen’s prototype self-service supermarket changed the way Americans shopped. Recent history is exactly the same. The relatively short recession of 1990 gave rise to the emergence of alternative formats such as Walmart and Costco among others; invasions that in many ways packed the same competitive punch of the original supermarket. The relatively short downturn in 2000-01 saw a vast increase in extreme value formats such as the dollar stores, Save A Lot and Aldi.
So the questions we all have to wrestle with as 2009 ends concern what’s changing now. Without question, the current economic downturn goes way beyond anything we’ve seen in generations. While unemployment levels were higher in the early 1980s (not to discount the misery of the current times) and while inflation was far worse in the 1970s, most every other measure of today’s economic woe is unmatched since the Great Depression. And despite the economic data marking the official end of the downturn, worrisome signs remain abundant.
For this industry the questions all surround the letter c: Customers, Competition and Costs.
With customers we have to ponder both the depth and longevity of this new frugality. If this trend has staying power, the appeal of adding value, service and taste might be muted once the economy actually does recover. It’s easy to assume that the trend will disappear once good times return, but stay mindful of how long consumer behavior was scarred by the Great Depression. The big question may be how consumers will blend frugality with indulgence once the economy rebounds and how the industry deciphers and serves these new needs.
With competition we have to wonder what change might be the long-lasting mark of this downturn. It’s very easy to recall the early 1990s when Walmart’s first supermarkets (remember Hypermart USA?) were dismissed lightly. Even though Walmart grew at light speed, it wasn’t instantly apparent how strong it would become. There’s no way of telling what format is emerging or evolving today that might play a stunningly large role in the future.
With costs we have to question pretty much everything. Tough times put a premium on doing more with less and finding ways to squeeze even greater efficiency out of an already efficient system. Again, the past holds lessons. In the early 1990s the industry proudly touted its record of efficiency only to discover that virtually everything it was doing could be done better. It’s essential to question everything, to consider everything and to search everywhere for improvements.
But most of all, it comes down to the simple question of what are you doing? Since this downturn began in mid-2008, what changes have you made, what elements of the status quo have you overturned, and what questioned have you asked inside your organization, of your trading partners and beyond?
If somehow you haven’t asked the hard questions or made the hard decisions, use history as your guide. Consider all of those who stood firm with the status quo during the Great Depression or the downturns of 1990 or 2001 and ask if those companies survived? In many cases, the answer is no.
The odds are that we will be talking about the impact of this Great Recession for years to come. Unless you are asking questions today, you might not be part of that conversation tomorrow.
Michael Sansolo can be reached via email at email@example.com . His new book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .
- KC's View: