Sunday, 25 January 2009

The other side of recession

Businesses fail and prices fall

We knew that the recession had arrived when house values fell, banks failed, businesses closed, unemployment rose, etc. And as nations become very rapidly poorer, many prices are falling too, also very rapidly.

In the United Kingdom, to walk along the iconic ‘high street’ is to see failed businesses, vacant shops, building lots where work has been suspended, and store windows plastered over with SALE, SALE, SALE signs.

Go in the shops and supermarkets. Things are 20% OFF, HALF-PRICE, UP TO 70 PERCENT OFF. You see CREDIT CRUNCH SALE, AMAZING REDUCTIONS, TWO FOR THE PRICE OF ONE etc. etc.…. The cheap shops, frequented once mainly by the poor, have new clientele, the basic own-brand 'economy' lines of middle-range stores are proudly displayed and expanding. 99p and £1.00 outlets are booming.

And amazingly, amongst this bonfire of economic pricing, some goods seem to be holding their value. One thing isn’t, though, the poor old pound sterling. Prices are increasingly marked simply as £1, £2 etc., and even in the markets pricing in pennies has virtually vanished apart from a fat, round 50p. The pond coin has become small change.

Some business plan!

One can see what cashflow-hungry traders are doing, getting customers and money into their stores at all costs, just to keep the show on the road. It’s a business plan of sorts, though one with an uncertain long-term outcome.

Customers, some already strapped for cash enter an extraordinary world. How can the shops afford to sell things so cheaply? And if they can, how did they dare charge what they used to? Most of all perhaps, there is increasing bemusement at what nowadays is the real value of goods and services, and what is the real value of money.

The apparently thriving £1.00 stores are working on a business model. They may be going somewhere. Conventional business existing day by day on slashed prices are probably going somewhere too, somewhere rather different…

And what about the effects of falling prices for us all?. Falling prices are fine, aren't they, especially alonside falling wages? Er, no, not unreservedly.

The threat of deflation that comes with them, threatens possibilities altogether too awful to contemplate.

New business models for Conductive Education?

The ‘CE high street’, in January 2009, displays no outward signs of the recession to its customers. Plans for expansion are still being announced. There are no SALE signs, no AMAZING REDUCTIONS. No outlets have announced, closure, no major brands have vanished, there are no vacant lots, and as a result, no joblessness and unemployment.

Maybe, as has been suggested already on Conductive World, Conductive Education will turn out to be one of those commodities occupying a strange and peculiar economic niche, that will sail through the recession virtually unscathed.

If it does not, then as has also been suggested on Conductive World, it will require new business models to see it successfully through the recession and into the as yet unknowable future. Maybe Netto, Aldi, TK-Max, Iceland Frozen Foods, and the 99p and £1 shops might offer one business model, a deflationary one, for those who can work out how to implement this.
Most certainly there will be others.

And there’s still the tantalising notion of ‘free’.

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