Renaud

Step1: Stop talking about it!

‘What comes up must come down’. This sounds like a terrible cliché but it’s true. Romania has witnessed spectacular growth and it seemed unstoppable. When I was reminded that in July the Romania’s GDP growth was 7.9% and 6 % for 2006 and 2007 respectively and ARIS is forecasting a growth of 6.5% for 2008, one must put this in perspective. In fact, the chief economist of Romania’s Raiffeisen Bank, said economy grew 8.5 percent in the second quarter of the year. How many other countries do you know (ok, aside from China) that grows 6+ % per year. Western Europe is lucky if they get a +1 or 2%. In some cases it’s negative growth. Now we are talking about 4-5% growth for 2009. Those are still respectable numbers and reason for optimism.

Unfortunately, the economy can’t remain on a continuous upward trajectory. The problem for my fellow Romanians is that recessions are a novelty. The country really never had a recession so there is a lot of confusion and over reacting in my opinion. So in order to help us understand that recessions are temporary in nature, there is merit to point out that you can actually be productive, sell things and progress during a recession.

I’ve asked my Market Research department to pick up some articles that talk about just that. What can we do during a recession, is there some good news somehow and which companies actually prosper? If I can demonstrate that there is hope then maybe we can stop talking about the recession.

I am dating myself but I remember in the USA a recession in 1973, the early 80’s, then 1990-91, the reference point being in the USA since the data is easier to find. I also remember the dot com bubble bursting in 2001. My recent reading indicates that there is a downward trend in the economy every 8-10 years. Therefore it is unavoidable and it will happen. Denial is not an option. Think about it: Logic alone dictates that there must be corrections in real estate, share and markets prices.

On the positive side my recent discussions with key stakeholders in Romania have given me some encouraging data:

1. Some banks are actually doing well. BCR had its best quarter ever (BCR sustains profit growth with a 71.8% increase in Q3 2008, PRESS RELEASE, Bucharest, 30.10.2008). BCR and Erste are considered local banks in their own right and are not affected by the crisis as much. Add to this that Romanians have a healthy appetite for consumer goods such as home products, appliances and electronics. Couple this appetite to buy things and BCR’s willingness to lend, this indicates a position of strength for the bank. Have you noticed how many ads BCR have on TV lately?
2. Carrefour and Metro have made investment commitments in the last few months to build more stores in Romania. The Food industry always prospers in recessions. Why? Well people have to eat i.e. Maslow’ fundamental need # 2. Seriously, consumers may cut back on luxury food items but people still have to eat and in times of continuous financial pressure, people will spoil themselves by buying some food items that are a little more expensive to’ forget about life for a while” .
3. Travel. One would expect people to cut back but the travel industry has not been hit yet in Romania. Travel agencies I spoke to have not seen a steep decline in travel especially in the Christmas period, indicating that Romania has been insular to the financial crisis.
4. There are other examples based on our research that can and will continue to do well despite what we are witnessing. Products and services such as candies, CD’s, art, video games, entertainment, online sales and online video advertising are only a few. See my next article: Step 2: Remember that some industries that do well during a recession.

Events and their effect. When I am sitting down with market opinion leaders I always talk about ‘an event’ that usually triggers the economy to improve. The media loves to talk about bad news but usually some key events will get the media to back off on the grim news about the economy and over time, things start to improve. When things improve you never hear about it - it’s not newsworthy and all of a sudden companies start hiring again.

Events like Barack Obama’s election has given the USA and the world a renewed source of optimism. Christmas is not what I consider a good catalyst of good news but it does get people off the ‘bad news’ trip and is nevertheless, an event. Consider this: Despite how bad things are in the USA, according to data from the National Retail Federation, a trade group, shoppers are expected to spend an average of $466.13 USD this year on gifts for their family — $3 less than last year. Does this sound like people “want to forget about life for a while”? In some cases consumer goods companies earn 25-35 % of their annual revenue in December alone. Getting people to spend is another example of an event.

Another type of event occurs when companies make public statements of investing in times of recessions. This usually helps. If we can get 3-4 more good news stories similar to Carrefour and Metro in the market, this will neutralize the stigma of bad news.

My suggestion in these difficult times is to really stop talking about it. Accept the inevitable effects of cycles, use the information that I have highlighted above and move on to something more positive.

We are conditioned by bad news and we automatically get trapped (and in some cases enjoy) in talking about bad news. How can we get more business from a client if this is the first thing you bring up? Next time you are talking to a customer it may be more effective to discuss other issues where you can help your customers like getting more business, loyalty programs and beefing up the sales team and activities.

Use this quiet time to time to plan, re-look at inefficiencies in processes, find out more about the competitor, build up your database of prospects and spend more time with clients.

I am a firm believer that things can improve with the right mindset. History has proven that recessions are unavoidable but it also shows that some businesses do well and recessions are short-lived. Focus your conversations on what might trigger the next order and getting ready for renewed demand. In order to help you get on the right foot for your next client discussions, my next article will talk about product and services that do well and what should you do during a recession.