Smart People Don't Panic
October 20, 2008,
There's a lot that's scary about the Linens 'n Things liquidation. The fact that a chain that just a couple of years ago generated $2 billion in revenue basically collapsed. That 589 stores are dropping off the map. That an estimated 8,000 people are suddenly without a job in a terrible economic environment.
If that wave comes ashore, I think it is more likely to be populated by independent retailers — bad news for suppliers who've avoided the boom-and-bust pitfalls of servicing the larger volume retailers.
But what's most worrisome is how the mistrust is spreading everywhere. Last week at a Wachovia investor conference, Bon-Ton's ceo made a point of dispelling rumors that his company has financial problems and said he had no idea how the rumor got started.
I have no idea either, but I remember the first time I heard it. It was back in April when a lot of vendors had just decided to stop shipping LNT. Both vendors who mentioned Bon-Ton "trouble" acknowledged that neither one of them actually did any business with the department store. For the record, none of the Bon-Ton vendors I spoke with during market week last month reported any problems with the company.
Unfortunately, in a toxic environment everyone starts looking around the corner for the next calamity. I visited with a company a couple of weeks ago whose execs said the biggest decision they're making every day is figuring out who to ship, who not to ship, and how much to ship. I don't blame them. "Who's next" is becoming a familiar refrain.
The misinformation loop isn't restricted to the trade. The other morning on Bloomberg Radio I heard a retail analyst advising consumers not to holiday shop early because she predicted there were going to be a lot of sales late in the season. Is she nuts? Does she not realize retailers are holding their inventories very low? Or does she not know that most last-minute "sale" prices are already cooked into the order?
But that's where we stand these days. So now might be the time to remind everybody that there are a lot of smart people in this business — never mind the many jokes the industry likes to make at its own expense. Most of the retailers and suppliers now in business made it through the 9/11 economic fall-out and subsequent recession. There are many still standing that saw their way through the economic fiasco of the 1970s. And there are even a few that survived the Great Depression.
Panic is a natural human reaction, but it solves nothing. I'm betting on the smart people to hold their own while the times are tough — and to absolutely tear it up once the economy starts improving. Go get 'em.
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