Catalog Marketing: The View From 35,000 Feet
by Don Libey

What is going on and where is our industry headed? These two questions keep coming up regardless of the assurances or reassurances that are offered CEOs in these difficult times. As always, there is a need for perspective and, more important, the sense of relevance of that perspective.

Where is the Economy ?. . . Really.

Our long term, stable national economy has suffered a number of unforeseen and crushing body blows in recent years. The escalating psychology of terror has had a measurable economic impact on the nation. This comes, unfortunately, at the end of a major business bull cycle, thereby magnifying the effect and the reach of the influences. The cyclical, long term change in weather has also had a measurable impact on the economy. Due to massive, weather-related insurance losses in the immediate years--likely due to changing, long-cycle weather patterns and severities--economic shock waves have ripped through the nation’s insurance and agricultural realms, producing a lengthy litany of negative influences on investment portfolios, pension funds, and other pillars of the active, day-to-day, under economy.

The exposure of the soft belly of corporate financial fraud, greed and moral expediency has had a sobering, if not devastating, influence on the broad economy of the U.S., primarily investor confidence and corporate valuations as reflected and measured by stock prices. What may continue and hasten this deterioration of confidence and value is the growing, global recognition that this is a widespread and engulfing influence. It exists in the board rooms of the corporations, and their accounting firms, law firms, banks, supply chain partners, and down the obscure layers of their strategic partners and alliances; the very fabric of numerous U.S. stock corporations may be moth-eaten, if not dry-rotted and decayed throughout., and a revaluation and economic penance is assuredly on the horizon. It is the necessary cost of reestablishing an acceptable risk : trust ratio. With high trust comes high risk investment; with low trust comes low risk investment . We are currently at the trust to risk level of, essentially, utility company investing.

At the same time, the establishment and activation of the European Union, as well as the emergence of China as a protean production machine capable of out-producing even Taiwan, have jiggered the economy of the U.S. through the stereo effects of the artificially controlled Euro and the rapaciousness of “Deep China” import pricing. Globalization and the Euro are primary economic influences. We first wrote of the coming downstream effects of the European Union and its Euro dollar in 1998 and warned that the real outcome would be felt with currency conversion and repatriation and with trade zone regulation and anti-American discrimination. Et, voila! European trade sanctions and Deep China have figured in our outlooks for the past five years. It has all come together in a Bose-like thumping bass that screams, “EU Favoritism” and “margin-erosion” and “lowest-price-point migration.”

The monumental hanging, fall and shattering of the telecom-technology-Internet glass ornament were not only unseen and unthinkable, but inevitable. At a time when a catalyst was needed, one was provided. Great, steaming hunks of phantom, imagined value were Rolfed from the gluttonous body economic during that lovely little era.

On top of these not insubstantial, global influences on the U.S. economy, our consumers succumbed to the numbing drone of price cutting salaciously tongued in every ear by the merchants of competitive death at Wal-Mart. The Wal-Martization of America has left a wake of price sensitivity and inelasticity that has caught Main Street in its deadly undertow from which there is no escape or return (except, of course, for in-store credit).

Add to this the nation’s Siamese twin, the joined-at-the-buttocks congenital anomaly called Congress, and the economic directions become ever more ill-conceived and illogical. But, if you possess a Magic Decoder Ring, admitting you to the Inner Sanctum, you can decipher the Congressional messages, and you will find they all begin and end with the words, “Big Oil and Big Money.” If you simply remember that it’s all about oil and money, you’ll be fine.

The Fundamental Elements

And so, those seem to be the background influences on this circus we call the U.S. economy (in order of presentation above): geo-political; nature; greed; regionalism/globalism; irrational exuberance; price migration; government and politicians; and, the ringmaster of all, fear. While there are many other elements that exert pressure, and while the hierarchy of influence tends to shift back and forth at any given time, these are the primary influences on whether your customers buy or not. At the end of the day, businesses and people are going to spend money if (a) they have it, and (b) if they believe they will be able to replace the money they spend with new money; i.e., they will continue to sell products or be employed. The economy is, after all is said and done, mostly determined by fear.

Evaluating these primary influences, then, becomes of some interest to the student of tomorrow. Were we to simply assign a state to each of them, we could use “positive,” “neutral,” or “negative” to describe the present conditions. Let’s do that:

There would seem to be a predisposition to the negative side currently and a fairly negative economic outlook based on the fundamentals. But fundamental analysis does not an outlook make. We must consider the technical elements of the economic analysis, those indicators that can be measured and squeezed neatly into an oranges and oranges comparative relevance.

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