Toward the end of 2007, economic indicators started to take a sharp, downward turn. It had been six years since 9/11 impacted America’s economy and psyche. While recessions have come and gone, with varying depths of impact, few prognosticators could have predicted the fiscal swoon of 2008-2009 would snowball into the Great Recession and paralyze business growth for years beyond its official end.
Well, this year marks the 10th anniversary of the Great Recession’s onset (we’ll hold off on the party favors). Last summer, I pointed out an inconvenient truth: Since 1900, the United States has not experienced a 10-year period without a recession. Under President Obama, annual GDP growth remained under 3 percent—the most sluggish period since World War II—and some economists target the 2.1 to 2.3 range for 2018, 2019 and 2020, according to Bloomberg.
To say that we’re overdue for a recession, in and of itself, is hardly a reason for fear. Recessions generally come on the heels of strong GDP growth periods, which the U.S. doesn’t appear to be embarking upon anytime soon. And we’re not throwing shade at either side of the political aisle. However, since we appear to be in new territory when it comes to GDP growth versus past performances, perhaps all bets are off as to the conditions that could spur the next recession.
The Technology Variable
Bill Melo, the chief marketing executive for Toshiba, believes that while the recession may have stymied demand, the proliferation of smartphones and the general movement toward digital alternatives have played a larger role in decreasing print demand. But belt-tightening economics has a way of causing individuals and businesses to re-evaluate investments.
“Another thing driving device consumption down is MPS,” Melo noted. “When the recession hit, we told our customers that they had too many printers and MFPs. Toshiba was a pioneer in managed print and has therefore been the benefitted from customers adoption of managed print as we’ve picked up lots of print volume from competitors. We replaced a lot of HP printers with Toshiba MFPs, but it’s not a zero-sum game and the population of devices probably has gone down as the result of both better fleet management and reduction in pages printed —you can see it in the revenue reports for HP and other OEMs. It’s been a struggle for larger OEMs to keep up revenues, especially in the aftermarket side, because people are printing less. Companies like ours are gaining market share at their expense.
“It may have been the recession that caused people to start wondering, ‘Do we really need all this stuff?’ But here we are, eight years later, still having that same thought.”
Where a recession or severe downturn would have the greatest impact, arguably, is in the realm of mergers and acquisitions. Nothing keys a buyer’s market quite like the sudden influx of distressed assets, and depending upon a company’s M&A strategy, it’s either a clearance sale bonanza or a climate to avoid. On the latter count, companies like Visual Edge Technology would steer well clear of such an environment, as it exclusively seeks the best-available businesses for acquisition. But even a marginal recession could prompt an organization with a strong balance sheet to reconsider its technological investment strategy in favor of joining a more fortified dealer collective.
Distressed assets, more often than not, have a way of finding a new home at buyer-friendly terms. Merger opportunities abound as well, with dealers finding strength in numbers to secure a better regional market approach. And when distressed companies knuckle under, it repopulates the availability of skilled employees. With unemployment figures currently at 30-year lows, this is no small consideration.
The Economic Variable
A popular refrain from the Great Recession was that companies who were willing to invest in capabilities and infrastructure often made substantial headway in separating themselves from the “let’s wait and see” competition that was reluctant to turn dollars loose in an environment that generally calls for belt-tightening. The worst of times, it follows, can bring out the best in companies positioned to take advantage of an opportunity…even when the opportunity is shrouded in economic chaos.
Not to sound a false alarm like Hawaiians experienced recently, but it’s interesting to note that our industry has witnessed many new organizations sprouting up post-Great Recession—companies that have no track record in the face of a downturn. As we continue to dive deeper into security threat-related issues, it’s prudent to also ensure that your dealership is not only recession-proof but is also equipped to avail itself of opportunities that arise from unfortunate circumstances.
Like a football team that can perform well in a foot of snow, if you can move the ball while others remain frozen, it will enable your firm to pull away on the scoreboard. And while we’re on the snow analogy, asking you to consider the consequences of the next recession is akin to shopping for a snow blower in July. All I’m saying is to expect the unexpected…and be prepared for it. Thankfully, for now, the nation’s economy seems to be garnering steam, despite continued low GDP growth rate.
