High End Or Low End… Which Is It?

According to a recent Bloomberg article, Starbucks, the cliché indicator of the “splurge” economy, is enjoying a “61 percent increase in operating income”. Apple’s net income was “up 94 percent last quarter.” And “Mercedes-Benz is having a record sales year…” How can this be? The chief economist of the International Council of Shopping Centers (ICSC) stated that the retail recovery at the end of 2009 “…was all dollar stores and luxury.” And it appears the spread is continuing.

The rich, while adjusting to stock market peaks and valleys as well as real estate declines in values, are still maintaining their lifestyles and apparently, are still willing to splurge on lavish lifestyle expenditures in the high-end market. On the other end of the spectrum are the unemployed/part-time employed/low-wage employed that are supporting a flourishing market on the low-end, i.e. discount and dollar stores. They are simply either conserving capital, trying to survive, or are afraid of the future and thus saving rather than spending. One view suggests that a number of people are cutting overhead budgets by shopping at discount stores for basic necessities so they can justify splurges like a BMW or expensive daily lattes from Starbucks.

This is important information as it can be the basis of new strategies for retailers, wholesalers and even service providers. What do you do with this information? Absorb it, reflect on your current strategies and come out with a high-end or low-end strategy that somehow accommodates the changing mood swings of the market place and delivers what the consumers want. Selling less, but more profitably, is a winning strategy if your costs and overhead can be controlled.

This is a perfect situation in which debt workouts are critical, as debt chokes so many businesses with reduced revenues; this prevents you from using your capital to emerge successfully with your reinvented business model. This is also a perfect example of what reinventing your business model means. Figure out what your customers want, do your debt workout, accommodate these changing marketplace conditions and market your business efficiently. That’s the path to success in today’s marketplace.

Call for help if you need it: 413-584-2581. Norm will arrange a no-obligation teleconference to discuss your needs.

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