Coping with recession and its repercussions

These days everyone is whispering the "R" word dreaded by one and all in the business community. Is the US economy in a recession? Many believe we are living in a recession and if not we will be entering the period soon. Some are saying the US economy is going to drag the rest of the world into a recession and considering that the stock markets all over the world have been tanking they might be right. If past history is an indicator of what the future has in store, the stock markets are saying recession is just around the corner.

Newspapers everywhere are full of headlines stating companies laying off people, retail chains curtailing plans of expansion, some even closing their doors for good, and people having to postpone their retirement plans due to shrinking values of their portfolio. Everyone is talking about the gloom and doom and fear is the predominant emotion. It looks like the days of cheap credit and easy money are over and everyone will have to go through some tough times.


Recession is especially tough for people in the retail industry. It is equally tough for architects, designers, contractors and vendors catering to the building industry



Architects among most affected


Recession is especially tough for people in the retail industry. It is equally tough for architects, designers, contractors and vendors catering to the building industry. Even people who provide blueprinting and reproduction services get severely impacted. Architectural companies are the first to feel the effects of recession
and start layoffs.

Many architects in the USA have given up architecture and changed their profession after having lost their jobs on a regular basis in recessionary periods when the economy had contracted and building activities came to a standstill. Having experienced four recessions in the USA and the prospect of facing another is not something anyone looks forward to. As hard as it may sound to swallow, recessions do present opportunities to those who are brave and can look beyond the cloud of negativity and
spot the silver lining.

Opportunity in adversity

When the times are tough the tough get going! Successful people have a knack of thriving in a rough environment where the others are frozen with fear and are unable to  act. Contrary to popular belief there are opportunities galore in recessionary times especially for small and medium size businesses. In tough times many poorly- managed businesses fail resulting in solid businesses increasing their marketshare. Businesses have opportunities to evaluate their products, processes and people to find ways to improve, resulting in greater profits when the business climate returns to normalcyProfessionals have time to undertake personal development activities in  order to acquire new skills and become more productive and get ready to take on greater challenges and opportunities around the corner.

Towards growth

In tough economic times one can choose to go back toward safety or forward towards growth. Successful retailers are able to overcome the fear and take action with goal  of growth in mind. During the past recessions, the retailers who opted for safety started going defensive by taking across the board actions with the sole purpose of cutting their overheads without thoroughly weighing the consequence of such actions. Some cut down the number of light fixtures and reduced the wattage of the lamps to  save on energy costs. They replaced their experienced sales people with new employees with lower wages. They stopped using services of visual merchandising people and  let their inexperienced sales people do the job. They even went to the extent of reducing the cost of the projects, which were under construction, and removed the most interesting design elements of the projects thus making them incapable of projecting brand identity.


The stores under construction whose design was dramatically compromised could not generate sales due to lack of interest and had to shut doors long before the lease


Pinching the penny

These actions did save retailers some money and reduced their overhead costs but the price they paid in terms of poor sales and loss of profit was too big. The poor lighting and bad merchandising drastically reduced the number of people who visited their stores and those who came in did not buy because the inexperienced sales people they had hired could not close the sales.

The stores under construction whose design was dramatically compromised could not generate sales due to lack of interest and had to shut doors long before the lease had expired resulting in a financial loss many times more than little savings that were realised by changing the design of the store.

Time to rethink

Successful retailers use the periods of economic slowdown as an opportunity to grow their business. They make use of the time available to analyse their operation and see how their venture is performing.

Are the assumptions that they made when they made their original business plans still valid? Are they still catering to the same customer base? Are the current economic conditions and demographic changes impacting sales? Will sales increase if they change the merchandise mix appealing to a customer who has the greatest buying  power? Will this change alienate the existing customer? What other items could one carry that the current customer would like to buy, which he might be buying  somewhere else? How does the staff’s skills and technological knowhow measure up to the professional retailers who they now have to compete with?

New Strategy

Retailers also continue this process at the level of physical environment which has a big impact on the sales of the item. They approach an experienced retail architect or designer to evaluate and ask the following questions. Does the store front and sign truly reflect the business image? Are display windows of the right configuration to display the products that are being sold? Do the floor and wall merchandising systems properly house and display products? Do the placements of fixtures and aisleways expose customers to maximum merchandise? Are there too many or too few fitting rooms? Is the size of the stock room too big? Are the store and displays properly lit to maximise sales? Are the colours and finishes dated and keeping customers away from the store?

One of the greatest advantages of the slow period is that it puts downward pressure on the costs of everything. Due to the fewer number of projects and more people wanting to work on them brings down construction prices by 20 percent to 40 percent compared to peak times. Studies have shown that remodelled stores can increase the sales after a well thought out remodel by 20 percent to 40 percent. The prospect of increasing sales with work done at a great discount is an irresistible proposal to pass up. A successful retailer makes full use of this opportunity and stays on the growth path even in times when everyone is thinking of gloom and doom!

Taking advantage

While visiting a client of mine in Las Vegas, a couple of days ago, I saw modifications were made to furniture and visual mechanising in a store that opened less than a year ago. When I asked why he was tinkering a store recently built, he replied that the upgrades were to fine-tune his message to his customer base, which was slightly different than what he had anticipated. The recession had affected the targeted demographics’ spending habits! The economic slowdown is not changing how he thinks. He is going to take full advantage of the opportunities created by good locations available at favourable terms and lower construction costs. After touring a couple of locations, he has decided to fast-track a project so that the stores could be opened quickly. Some believe offence is the best defence!

(The writer is the Founder & President, DRV Design, San Diego, USA. He earned his B Arch from Sir J J College of Architecture, Mumbai, and moved to the US in 1974. He can be contacted at