Prepare Your Company for a Fundamental Economic Shift

There isn't a single segment in the specialty CE industry that hasn't been hard hit by the recent economic slowdown.

The analysts are saying the industry is down 27 percent as of the first of the year, but my take on this is somewhat different.

The fact that the stock market is down as much as 35 to 40 percent since last year is a benchmark number that can't be ignored. As I've spoken with many specialty manufacturers, rep companies and magazines recently, they all seem to report sales reductions in that range -- 35 to 40 percent.

That would mean that a large percentage of home theater dealers and integrators must also be down by the same 35 percent, at least in terms of product sales, if not labor.

I think 35 percent down is the operative number across a much wider swath of the economy, not 27 percent.

I think we are looking at a 35 percent national haircut that will affect every single industry, not just consumer electronics. Over the next year I predict everyone will be adjusting down by roughly this amount.

The average consumer will spend 35 percent less on restaurant meals, gifts, movies, entertainment, clothing, golf, vacations, toys and, yes, consumer electronics.

Baby boomers (our best customers) are especially vulnerable now, with savings portfolios down and multiple college tuitions on the horizon.

Consumers are learning to live on much less and, once they start changing their consuming habits, I don't think they will be changing back anytime soon.

In the process, I think many people will re-discover some deeper family and life values that are not dependent on conspicuous consumption. All of a sudden, having all this stuff just won't matter anymore.

This will be the new reality, and this will have a major impact on all businesses -- not only in America, but also across the world. And in the process, as the pundits predict, there could be upwards of 149,000 store closings in 2009.

Yikes!

So what does it all mean for custom and home theater dealers? I would suggest creating an immediate plan to downsize your company's overhead to a level that can sustain profitability should sales dip 35 percent or more.

This may entail hard decisions about cutting personnel, eliminating all superfluous expenses, downsizing or closing locations, narrowing lines, reducing inventory on display and seriously assessing long-term capitalization requirements in order to keep the company healthy until the economy rebounds.

That being said, we all know you can't save yourself out of financial difficulty; you must sell yourself out of it.

So, make the difficult cuts, and then put all of your energy and resources into sales training, outreach, contacting previous clients, networking and, in markets where Tweeter and Circuit City are gone, trying to grab market share to boost your bottom line.

Fight the good fight. There's still business to be had. You just have to work a little harder to make it yours.