We’re all in the soup now, Luv

October 30, 2009

Alphabet soupEver tried predicting the future with Alphabet Soup? It’s easy. You just pick up an amorphous piece of pasta, dunk it in the hot liquid and – Hey Presto!  – the emerging letter tells you what’s going to happen in the next few months. Anyone can play and lots of people do, including  leading economists and captains of industry. Some reckon it will be the top-ranking game this Christmas. It certainly beats econometric analysis for fun.

Still not convinced you want to play? Well here’s a simple example to encourage you. Take the letter ‘V’. Spot that in your soup and it means the recession will be deep, but short-lasting, with a steep and symmetrical recovery. If it’s ‘L’ you happen upon, I’d put it back if I were you and leave it to someone else. It’s like the electrocardiogram stopping: meaning, there won’t be any recovery for several years and your business will probably die.

Luckily, ‘L’ is a rare letter. More likely, you’ll hear of people coming up with a ‘W’. Don’t listen to them. They’re reheating last month’s soup in the hope of sounding awfully wise. No one in the swim thinks ‘W’ is going to be the winning letter any more. Some claim to have seen a ‘VW’: either they’re indecisive, or they’ve been spending too much time in a camper van recently. Then there are the clever clogs. They believe the future can be predicted with mathematical precision, and they’ve got the formula to prove it. It’s √. We’ll sort of. The trouble is the look of the square root symbol, which is what they’re on about, depends on the font you use. The plateau bar could be anywhere along an indefinite length of upstroke. So it’s no help to anyone. As I say, clever clogs.

However, the most inscrutable, and probably unbeatable, combination to date is the so-called LUV pattern. Apparently it means: West Europe L-shaped, US U-shaped and BRIC V-shaped. But we only have Sir Martin Sorrell’s word for that, because he’s the only one who’s seen that shape so far (although he has confessed he got the idea from Reuters). Sorrell is a past-master at the Alphabet Soup game. During the last recession, he was the principal backer of the U-shape. When recovery stalled, he hedged his bets a bit and came up with the bath theory, later the corrugated bath theory. Which is simply not playing the game.

Still, we’ all know after Christmas who’s right, won’t we?

It’s not over yet, says Hermann Simon

September 9, 2009

Hermann SimonIt’s all over then? Economists certainly think so. Data published by the National Institute for Economic and Social Research, a think tank, suggest the recession ended in May. There’s plenty of circumstantial evidence as well. House prices are apparently stabilising and the City seems to have been gripped with merger fever as the FTSE 100 brushes 5000 for the first time since Lehman’s collapse last year.

Not everyone agrees, however. One eminent dissenter, whom I met this week, is Hermann Simon, co-founder of international strategy and marketing consultancy Simon-Kucher & Partners. He’s not impressed by the uptick in economic activity and warns of a ‘W-shaped’ – or double-dip  – recession. In his opinion, a lot of credit failures have yet to materialise. He’s also suspicious of the economic statistics coming out of China. Exports are 40% of China’s GDP – and in June they dipped 26%. The state says it will make up the deficit from internal growth, but Simon is not convinced.

“There’s no easy way out of this recession,” he says. “We won’t get back to where we were merely by cost-side solutions. What we need are revenue-side solutions.”

Handily enough, he has some; 33 in fact, which form the core of his new book Beat the Crisis – 33 Quick Solutions for Your Company. That’s too many to enumerate here. But the gist is, whatever you do, don’t get involved in slashing prices because of a reduction in demand. By all means offer added value, as Hyundai did in the USA with its 3-month guarantee against job loss, or give a discount on bundled products, but don’t cut the price of individual items. One arresting example of  price support is the champagne industry. In 2008, it sold 340 million bottles of French bubbly. This year, it reckons on selling only 260 million, so it has taken the extraordinary step of destroying excess volume. Simon says this has worked. Prices have remained stable, despite champagne being a luxury, discretionary item associated with the good times.

Tales of the recession. Part 1: Cath Kidston

August 22, 2009

KidstonOK, I admit it. I must have been asleep all this time. The first I heard was the media hullabaloo trumpeting her success as a businesswoman. Cassandra Jardine in the Telegraph hailed her as a post-feminist icon, and pretty much everyone else has piled in as well.

Because? The year-end figures for Cath Kidston’s private company had just percolated to the surface (God knows why now, the year-end is March) – and they were astonishingly good. Sales have leapt more than a third to £31.3m and profits soared a majestic 59% to £4.6m (£2.9m). This is no flash in the pan. The 50-year-old designer has been sticking to her knitting for 15 years. What we have here is a recipe for success that has clearly been baked to perfection in the worst recession in living memory.

Now it’s not cheap, the stuff she sells in her 27 shops; nor is it to everyone’s taste. Some would characterise it as upper-class kitsch, whose last great exponent was Laura Ashley. So wholesome, so mumsy, so floral, so…English. Yet there are few places the Kidston motif has not managed to insinuate itself over the years. We even have the stuff ourselves – some rather nice mugs my wife once unwittingly bought at Waitrose. “These can’t be Kidston,” she declared authoritatively. “They’re not floral enough”. The monikored assay mark on the base of the mugs cleared that one up.

Whatever it is – let’s settle on zeitgeist – Kidston knows how to bottle and sell it. In her way, she’s a domestic goddess. A more matronly, kindly one than the grasping, go-getting Martha Stewart in her pomp, and a safer, less threatening one than the glamorous Nigella. But like them, she’s peddling a kind of escapism: in her case, the illusory, nostalgic domestic idyll of the Fifties. And women of a certain sort – the kind that can afford her – are lapping it up.

I agree with JKR’s blogger that calling her oeuvre “Pinnie Porn” unfairly demeans her. You wouldn’t employ that sort of perjorative language describing the achievement of Sir Terence Conran in an earlier era, would you? Indeed not.

You may convict Kidston’s design aesthetic of being bland, smothering, a conceit that denies everyday reality. But porn? No. it’s much cleverer than that. Good luck to her.

And, by the way, we still use the mugs and they’re still in perfect condition.

Small cheer for businessmen over politicians’ discomfort

June 5, 2009

At last, the silver lining in the cloud hanging over Parliament that we’ve all been looking for. Apparently, it’s great for business, especially small businesses, according to an article in the FT. The bizarre reasoning runs as follows. Politicians are attracting all the flak. That means the media is no longer saturated with gloom-filled stories about rising unemployment and companies going bust. Which in turn is persuading consumers that the worst is over and that they can now start spending freely again.

I’m not entirely convinced. And more importantly, nor is Stephen Alambritis, spokesman for the Federation of Small Businesses. If there really is good news about the economy, the preoccupation with politicians and their misdeeds is probably preventing it from trickling through. “We may be pleasantly surprised when the expenses debacle subsides that the recession is not getting any worse,” he concludes. That good, eh?

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