Financial predictions are often self-fulfilling

She was the first person I heard to publicly use the word. The moment occurred during a winter workshop I was conducting. When I asked what concerns people had for the coming year, the woman in the first row couldn’t wait to jump up and scream …

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“The recession!”

It was an obvious response given that the headline in that day’s Chicago Tribune said basically the same thing with two big, bold words: “Recession Fear”

In response I shared a few examples from various newspapers and online reports from just a day earlier.

* “Retail analysts predict closing of underperforming stores.” Now there’s an amazing prediction. Stores that haven’t been doing well might have to close. Imagine that.

* “Retail analysts caught by surprise by IBM’s strong 4th quarter.” Oh, so sometimes retail experts are wrong?

* “When consumers constantly hear how bad things are, after a while they start believing it.” Now there’s a person with a message that makes sense.

People buy what people want

In the same Chicago newspaper the day the R-word appeared was a several-page article on the news that Spain’s Iberico ham had finally been approved for sale in the United States. The few companies granted the first round of selling privileges said demand was far outpacing supply. The selling price of this specialty ham, a product of acorn-fed pigs, garners a retail price of almost $100 a pound.

And apparently the CNN pounding of how bad the economy is didn’t make into the homes of the throngs of people waiting in line to pay $80 per person when we spent a recent weekend at Disney World.

Don’t cut prices

An on-target article recently appeared in Business Week Small Biz written by Rees Holden, called “Hold Steady.”

“As tempting as it may be to cut prices during a downturn to boost business, it can spell trouble in the long run. Dropping prices is almost always the wrong thing to do because it undermines your value proposition. When the market turns around, you’ll be stuck with more price-sensitive customers and less profit.”

Sounds like a really bad combination.

Bad decisions, not economy, lead to bankruptcy

In another down-economy article, this time in the business section of the Portland Oregonian, the author had this to say about the impact on weak retailers:

“Bankrupt retailers The Sharper Image and Lillian Vernon, weak links in the herd, have long been plagued with falling sales.”

So as usual, a problem of today had its beginning many years ago. From my position, The Sharper Image always seemed to sell really weird stuff very few people would want to buy and Lillian Vernon sold really tacky stuff that no one should want to buy. But one woman in the article nailed it when she said, “Even if we never hit a classic recession, as long as people feel fear, they’re not going to want to spend the way they did before.”

Marketing key to staying strong

So if the consumer’s reaction to the economy-bashing being done by media outlets with obvious agendas is based on how they feel, then our response is to make them feel differently.

Steve Bailey, The Group’s financial analyst, suggests that garden centers become “comfort stations,” which speaks directly to the strengths really nice garden centers and the products they sell can become. No one has ever really needed our stuff, but the relationship people have with cool companies, a nice staff and self-rewarding products never goes out of style, no matter what the rest of the business world may be experiencing.

In his book “Free Agent Nation,” Daniel Pink said that especially during stressful times, people get serious about “meaning.” Until a company convinces a potential customer that the products they have for sale will add meaning to their life, it doesn’t matter what it costs.

So what’s a garden center to do? Here are a few suggestions:

* Until people decide that they really want what you have for sale, price is irrelevant. That’s why marketing needs to grab people’s right-brain emotional desires before stating left-brain logical facts and figures.

* Retailing products that aren’t necessary purchases will always require impulse merchandising skills. Some studies say that close to 80 percent of all retail sales are the result of impulse customer reaction. This means that your center will need even better displays and signage than before.

* More than 90 percent of people with mortgages make their payments in full and on time. The housing “crisis” politicians and the press just can’t seem to resist is nature’s way of righting the ship of bad loans by bad lenders to people with bad financial planning. Chances are that’s not the majority of your customers.

* Maintain a strong marketing presence. Gardening has a lot to offer, but don’t assume everyone knows it. Companies that maintain their marketing programs will have a couple of advantages. First, since so many others drop marketing during lean times, those companies that hold onto their marketing campaigns will find media outlets to be less crowded. Also, marketing builds relationships, and by being the only competitor trying to build relationships during the downswing, you will have more customers to build on during the next economic upswing.

* Ask yourself: “What really matters to the people who want to be our customers?”

People pulling into your lot have already made the decision that they can afford to shop there. But what caused them to choose your location over all the other options? The answer goes back to the very first Retail Rules of the Road: “It’s not the stuff you sell but how you sell your stuff that separates you from all the rest.”

Whether you or your customers leave money on the table depends entirely on what the shopper experiences.

- Robert Hendrickson

Robert Hendrickson is managing director of the Garden Center Group, an alliance of more than 100 garden centers, vendors and service providers. He can be reached at (410) 313-8067, robert@thegardencentergroup.com; www.thegardencentergroup.com.

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July 2008