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Libey Incorporated
Economic Outlook
Secrets of the Catalog Master
Vol. MMV No. 7 October 2005
(Continued--page 2)
The Fourth Quarter 2005 Regional Economic Outlook
I will repeat with some modifications my September Special Issue recommendations. I repeat that I absolutely see this as a time of necessary investment prospecting, new product development and new market expansion. A number of common sense, rational factors must continue to be carefully considered. First, there is no benefit or gain from a hasty, ‘pull back’ mind-set. All that will do is create a serious drop-off in your business downstream. What is needed is a logical and comprehensive analysis by your broker and Trusted Advisor as to where you can decrease and substitute, and where you must increase circulation, and to what levels.
First, using logic, let’s reiterate the estimated regional economic performance through the end of 2005. I believe it will look something like this:
Signs of Improvement or Status Quo
Region
One (CT, ME, MA, NH, RI, VT)
Region Two (NY, NJ, CT, PR, VI)
Region Three (PA, NJ, DE)
Region Four (OH, KY, PA, WV)
Region Seven (IL, IN, MI, WI, IA)
Region Eight (MO, IL, IN, KY, TN, LA, AR)
Region Nine (MN, WI, ND, SD, MT, MI)
Region Ten (KS, CO, MO, NE, NM, OK, WY)
Region Twelve (CA, UT, AZ, NM, OR, WA)
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Slower
Region Five (KY, MD, TN, VA, NC, SC)
Region Six (GA, AL, FL, LA, MS, TN)
Region Eight (MO, IL, IN, KY, TN, LA, AR)
Region Eleven (TX, LA, NM)
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Regions Five, Six, Eight and Eleven will continue to be the most effected, specifically (and you must adjust for these regional inclusions and exclusions) all of Louisiana, Alabama, Mississippi; parts of Florida, Texas, Arkansas, Tennessee. And due to the effects of oil prices, likely parts of Georgia, South Carolina, Arkansas, and possibly North Carolina. There may even be more storm damage as the hurricane season continues through October.
We believe the general economy will continue to be fairly stable in Regions One, Two, Three, Four Seven, Nine, Twelve and Ten. The primary wild-card effect in these relatively stable regions will be the influence of oil prices and possible, resultant inflationary spikes. However, the overall economy in these regions is healthy and should continue to remain healthy.
In business-to-business, we see a rapid, huge demand surfacing in the months and year ahead as the devastation is cleared and these vast areas of the Gulf region begin to undergo reconstruction and, ideally, improvement. As an equivalency, perhaps up to ten percent of the total U.S. businesses will require refitting from the ground up as they are in the reconstruction area. These are predominately small businesses. We believe access, although initially mostly alternative, will be restored quickly and will include alternative telephone, online and email channels with mail and UPS/FedEx/USPS package services established quickly, especially as the demands of reconstruction grow.
Because the majority of the economy will continue status quo, there are areas of the country that will be able to absorb increased circulation to offset the reduced circulation in the area of reconstruction. We have attempted to describe those decreases and increases below for your end-of-the-year guidance and consideration in adjusting your circulation and prospecting plans.
The Fourth Quarter 2005 Circulation and Prospecting Outlook
and Recommendations
Synopsis
The short-term economic outlook for the catalog industry continues to be positive, but pressured, through the fourth quarter of 2005. There will be signs of slowing emerging in the leading indicators, and there is likely to be moderation in the fourth quarter and early 2006. The intermediate-term outlook, however, remains positive for the balance of 2005 and into 2006, and the long-term outlook through 2007 remains positive. This outlook is dependant upon the effects of oil prices short term and during the winter.
Continue Prospecting
Again, I repeat my Winston Churchill position: Never, Never, Never Give Up. Continue maintaining circulation and prospecting plans but adjust them logically and rationally. Do not allow new business momentum to wane. The path back from knee-jerk prospecting reduction decisions is always littered with failure.
Once again, perspective is essential. If you will think back over the years and recognize how many companies have regretted their short-term decisions to pull back in emergencies, or during periods of uncertainty, you will reflect again on the reality that reducing prospecting and house mailings at any time is always a strategy for slowing the growth and profitability of the business longer-term. The savings of a few thousand dollars in times of uncertainty or cloudy economics can result in the loss of many more thousands of dollars in future profits and business valuations. Our strategy should be about focus, consistency and growth. Those are the qualities that deliver the greatest percentage chance of stability in an unstable time. The point: Prospecting in all channels isn’t an optional strategy in stressed economic conditions; it is a constant strategy that must be adjusted and logically addressed. But, it never stops.
Nation At A Glance
The detailed economic conditions for each state (and specifically the Katrina-devastated states) have been integrated into the following recommendations. Changes to circulation recommendations through the Fourth Quarter 2005 and are highlighted in bold italics. A number of offsetting and moderating changes are recommended through the fourth quarter to assist in your circulation adjustments to offset as much as possible the effects of Katrina. There are obvious decreases, but there are also offsetting increases.
In those states with a suspend recommendation, please carefully monitor the resumption of mail and package services to those areas. Additionally, attempt tests to determine the level of Internet activity and potential for email programs to your customers in those areas. As an example, an acquaintance operates a major recording studio in New Orleans and will soon be replacing all of the electronic equipment necessary to the business. This will, at some point, all be purchased online.
Each state is listed with a recommendation for H = house and P = prospecting circulation.
