Renaud

Step 2: Remember that some business can do well during a recession!

It’s normal to think that all businesses have difficulty during economic periods like these - not so. In fact some businesses do better. Let’s consider a few examples:

Candy:
It is a known fact that candy business is likely to fare better than other nonessentials in these economically trying times, even as prices for commodities such as sugar, milk, and cocoa have risen. The bottom line is: As vices go, candy is still relatively cheap for most consumers. Analysts at The Nielsen Co., which tracks consumer habits in the US, go as far as calling the candy business “recession-proof,” compared with other discretionary items, such as tobacco and carbonated beverages (though beer also tends to do well when the economy is hurting).

Candy’s reputation for getting people through tough times is longstanding. During the Great Depression, a nickel chocolate bar was sustenance. Some had names such as “Chicken Dinner.

“Candy bars, during the Depression, were really America’s fast food,” says Steve Almond, author of “Candyfreak,” a book that examines the economic history and allure of chocolate. “They were expressly marketed in a way that would suggest to people that this was a cheap meal.”

Such strategies helped some candy makers and sellers weather a weak economy.

CDs:
Other items like CDs sell well during a recession. As the economy suffers, the music industry is hoping an old truism will hold: that as a relatively low-cost commodity with sentimental attachments, music will prove recession-proof.

“In a bad economy people retreat to cheaper forms of entertainment,” said Richard Greenfield, a media analyst at Pali Research in New York. “CDs have held up a lot better than I had expected this year.”

Art:
You might think that an economic recession would be bad news for art collectors. With wages sinking and savings evaporating, you might think art lovers would have difficulty expanding their collections. Consider this as a source of optimism:

A Dutch painter named Norbertus announced that he’s pegging his prices to the Dow Jones industrial average. From the press release:

Using the Dow’s level of 10,000 as a benchmark, Norbertus will discount prices for his work when the market goes below 10,000 and increase prices when it goes above 10,000. At a Dow level of 8,500, purchasers will receive a 15 percent discount on his paintings.

Why would he do this? Norbertus is confident the ride below 10,000 will not last and hopes to send a positive message.

“I wholeheartedly believe in the recovery and future of the financial markets.” He is convinced the current crisis originates simply out of sentiment: “The market will turn around as it always has, hence, my willingness to tie my pricing to the Dow Jones.” (Source: The New York Times).

Sounds like Norbertus has been reading my articles!

Entertainment:
One axiom that grew out of the Depression was that, in bad times, people go to the movies - have you been to Plaza Romania on a Saturday night lately? Box office data from more recent downturns show conflicting signs on ticket sales: total box office grosses fell in the economic contractions of 1990 and 1991 but rose in the recession in the early 1980s. Ticket prices have soared since then, making the impact of a bear market hard to predict.

“Still, relative to other venues like sports or concerts, movie theater tickets are much less expensive,” said Marla S. Backer, an industry analyst at Soleil Research. (Source: The New York Times)

Video Games:
A Goldman Sachs forecast report predicted one unlikely winner among media choices: video games. Previous generations of video game consoles have proved popular in recessions, and the sector is growing rapidly: the market research firm NPD estimates that United States video game sales will surpass $10 billion in 2008, partly because of a strong slate of upcoming games.

“Video game sales are in the home and, frankly, video games are perhaps one of the cheapest forms of entertainment on a dollar per hour basis there is,” wrote Jon C. Ogg, the editor of the blog 24/7 Wall St., two weeks ago. (Source: The New York Times)

There are a couple of reasons,” said Ron Meiners, director of community for the Hollywood Interactive Group. “One is the traditional value of entertainment during tough economic times. Like the great fantastic musicals in the 30s. Movies did great, because they took people’s mind off of the troubles they were facing. Video games have great value as entertainment. The number of hours of solid entertainment that comes from a video game purchase is much greater than a movie, for example, for very comparable cost.” At the same time, Meiners added, video games today offer consumers a much higher degree of interactivity and engagement.

Healthcare Business:
Health service occupations in private clinics including medical assistants, physical therapists and medical records technicians account for close to half of the fastest growing occupations. People face more stress in a recession. We all know that stress can make you ill… right?

Online advertising:
In a moderate or even quite severe downturn, online advertising actually improves, because people switch their advertising budgets out of traditional advertising formats - TV, radio and print - and move more online because it’s got higher performance, it’s cheaper and it’s more measurable.

So what you are saying! Should I stop what I am doing and consider the candy business? Obviously not but there are a few messages here:

1. Your clients may have opportunities that you can explore with them - mention that you read this article.
2. Consider targeting some of these companies if you were not doing so in the past.
3. Be creative by exploring different payment mechanisms instead of the typical supplier-client relationship. If you change the way you sell products. One of my clients who sells new homes is offering the ability to ‘rent to own’ which is a fairly new concept in Romania. For a small deposit and reasonable monthly payments, you can own your new home. At any time you can apply for a mortgage and pay the developer. Some conditions apply.
4. ‘Barter” If you can’t pay for something you can probably barter your services for other services and products.
5. Re-sale of products. Some fashion shops in New York are buying used brand name clothing and re-selling after it was used only a few times. The profit margins are good and customers get a sizeable discount off designer clothes. These are hard to find in Romania but it sounds like a business opportunity to me since some of the savviest shoppers are staking out consignment shops in search of top labels at steep discounts.

“The resale industry has always been recession-proof,” says Adele Meyer, executive director of the National Association of Resale and Thrift Shops. More people, Meyer says, are combing their closets for items to cash in - and filling in their wardrobes with previously owned high-end goods. For the past 30 years, The Closet ( Boston, Mass) has been a beacon for high-end bargain hunters. Dolce & Gabbana and Marc Jacobs share racks with fun if less familiar names.

As soon as my market research department provides me with more recession- proof business ideas I will add them to the list - Keep looking at this section.