What’s really going on?


Facebook Twitter LinkedIn Google+ Grapevine News | The Latest Updates on Franchising


maize

Over the past year or so, our economy has been sending out mixed signals. On the one hand, there is talk about an ever-deepening recession with all its attendant doom and gloom. On the other hand, we are told that the economy has bottomed out and, come 2010, we’ll be up and away! To add to the confusion, there are also those who tell us that in a business sense, 2009 has been the best year they ever had. Given that all these people operate in the same country, South Africa, and that the economic downturn is a global occurrence anyway, one had to ask: Is the situation really as bad as some people make it out to be or are they using the current downturn as an excuse for having been caught napping?

We decided to find out and soon realised that around the turn of the millennium, it was comparatively easy to enter the world of business and succeed. People who lacked the entrepreneurial gene jumped on the bandwagon and because the going was easy, they notched up some modest successes at first. When the tide turned, they quickly fell by the wayside. This was unfortunate but was it really an indicator of an economic downturn?

We donÔÇÖt think so. The simple fact is that those early casualties simply did not have what it takes to make it in the cut-throat world of business. Unfortunately, this was overlooked at the time and their demise triggered a chain reaction. Banks stopped lending, suppliers reduced credit terms and businesses were folding at an alarming rate.

Problems continue to exist

As we prepare this article, evidence of a weak economy is all around us. Businesses continue to be liquidated resulting in prime spots in fancy shopping centres remaining unoccupied for lengthy periods. In the retail sector, the ubiquitous end of season sales turned into pre-season sales at first and now, discounting has become a way of life for many who would previously have frowned upon such practices.

Unemployment statistics appear to be the only numbers that remain on an upward curve. So, on the face of it, the situation looked depressing. At one point, we had to ask ourselves whether the people who continue to claim full order books and bank accounts to match aren’t deluding themselves. But as we continued to scratch below the surface, we soon found that the situation is not as clear-cut as we initially thought.

Opportunities are there for the taking

Although economic activity has slowed dramatically, people haven’t stopped buying. What has happened is that the cake that represents the total market has become a little smaller. Companies have to claim a larger slice of it just to stay in business. To get it, they have to fight harder. It’s a replay of Darwin’s survival of the fittest all over again and not necessarily a bad thing.

With FIFA 2010 almost upon us, improvements in service levels are of greater importance than ever before and a little shake-up is exactly what was needed to achieve that. We all know, for example, that in the not too recent past, people were easily swayed to part with their money. Even if they didn’t really need an item and perhaps couldn’t afford it, they would purchase it anyway. With credit readily available, the buying public headed for a disaster.

We predict that this type of buyer behaviour is a thing of the past and the experts agree. They predict that consumers spending habits have changed significantly and expect this change to be irreversible. Having learnt their lesson the hard way, most consumers will carefully weigh the pros and cons of making a purchase in future. Before they are ready to sign on the dotted line, they will consider carefully whether they really need this particular item and how they are going to pay for it. Recent shock treatment aside, the implementation of the National Credit Act has provided additional impetus for this type of consumer behaviour.

This is where we see untold opportunities presenting themselves. Astute entrepreneurs will grasp them with both hands by finding out what customers really want and giving it to them, packaged in the most attractive way possible. Product knowledge and after sales service will be decisive factors in the buying decision; this is excellent news for franchised networks. When it comes to service excellence, no branch network can upstage franchised outlets. Because their own money is at stake, franchisees can be relied upon to outperform branch managers every time.

Comments