How to prosper through a downturn

http://smallbusiness.smh.com.au
Michael Baker

In the famous Monty Python skit, a pet shop owner is confronted by an angry customer returning a dead parrot that had been nailed to its perch to make it look alive.

Unyielding even in the face of the obvious, the shop owner nonetheless makes a spirited attempt to dispute the fact that the parrot is really dead.

As consumers become more penny-pinching, their antennae are up for retailers selling their own versions of the dead parrot. The parrot may be a shoddy product, slow or indifferent service, greater reluctance to accept returns, or some other manifestation of expense cutting.

All of these things are dangerous to the image of a business.

Some retailers may also be tempted to abandon well-thought-out growth strategies that could prove to be even more effective if they are implemented in a soft retail climate than in boom times.

This is the beginning of a siege mentality, where smaller retailers see the larger chains cutting back and shelving growth plans, and think they too should be doing the same.

Of course, controlling expenses, managing inventories and making only prudent capital expenditures are no-brainers. But if you have a strong belief in your concept and you are already some way down the road on the implementation of a growth strategy, then staying the course rather than crawling into a bunker to wait for the storm to blow over will often be your best course of action. It will position you for a bonanza when the economy finally gets up and dusts itself off.

Angela and Con Vithoulkas - Vivo, Sydney

Angela and Con Vithoulkas, sibling co-owners of the Vivo Cafe in downtown Sydney, understand this well. Vivo has three locations, including a 300 square metre flagship at George and King streets.

Ms Vithoulkas says that more than 400,000 pedestrians walk by that intersection every week, so it's not too bad a place to have a café.

Still, they have seen food consumption patterns shift adversely over the past six months as the economic downturn has taken hold. It doesn't faze them.

Instead, they are targeting greater market share, partly through a newly-installed electronic coffee card loyalty program that works with their POS system and already boasts 2000 members.

Another important part of their strategy revolves around an imminent $900,000 makeover of the three cafes that will transform their visual dynamics. The refurbishment is intended not just to make the cafes more visually appealing, but also to simplify the decision-making process that customers have to go through when choosing what they eat, how they eat and where they eat.

Angele brothers - Brunetti, Melbourne

In Melbourne, it's also full steam ahead for the Angele brothers, Fabio, Yuri and Robert, co-owners of Brunetti, an iconic Melbourne establishment (caffè, ristorante, pasticceria and gelateria) whose desserts are the stuff of local legend.

Brunetti, like Vivo, currently consists of three restaurants. Apart from its Carlton flagship, a 1,000 square metre beehive of a place with three front entrances, there is also a smaller unit in the Melbourne CBD and a recently-opened one in the eastern suburb of Camberwell.

More are planned, and hardly a week goes by without the brothers being approached to take their brand and expertise to new locations, both in Australia and overseas. Brunetti's manufacturing capability is being beefed up to meet the expected increased demand.

They are finicky about where they open though and with good reason - Brunetti is a clearly differentiated brand that has staked out an upscale market position. The owners are not about to degrade the brand by bringing it to market in sub-prime locations.


Although Vivo and Brunetti have different growth strategies, neither is using the downturn as an excuse to change course. Nothing that has happened during the past six months has altered their focus on planning for long-term growth.

Simon and Joanne Chadwick - Stride with Confidence, WA

Sticking to the game plan doesn't mean retailers can't also be opportunists though. In WA, Simon Chadwick and his wife Jo-Anne run a premium footwear chain called Stride With Confidence, and although the business has been adversely affected by a decline in consumer discretionary spending since about the middle of last year, they have found ways of turning the situation to their advantage.

One is to use more favourable media advertising rates to help build the brand.

A second is to hunt for real estate bargains and that effort is bearing fruit, with Mr. Chadwick expecting to be able to open a fifth store shortly.

He believes that rental levels have further to subside over the next 12 months and that retailers who have invested in the long-term will be poised to take advantage of some attractive deals.

While frustrated by the events of last winter and the continued fallout on consumer sentiment, Chadwick is nonetheless philosophical: ''We do not expect to return to the boom times of the last few years for a good while. However the lessons of the last nine months, and the next six to twelve, have and will continue to make us better retailers.''

Retailers need to consider their strategies for the next 12-24 months carefully. The Vithoulkas, Angele and Chadwick families are among those who are not taking any prisoners. Plans that have been in the works for a long time will be carried out, with an eye to the longer term future of the businesses.

Other retailers may not be so aggressive. Some will modify or even abandon their growth plans despite more favourable market conditions for labour and real estate.

There may be perfectly good grounds for doing so in some instances. But please, no dead parrots.

Michael Baker is a global retail and property analyst and consultant. Mbakerconsult@gmail.com