The current economy reminds me of the story about a guy who moves to upstate Alaska…in July. Everybody warns him about the climate, but he figures he can handle it. When September arrives, temperatures drop to 10 degrees below zero. The guy is standing at a bus stop, all bundled up, shivering uncontrollably, teeth chattering..
Finally, the guy turns to the native Alaskan woman next to him and groans, “Man, it’s cold!” To which she cheerfully replies, “Yes. Winter is coming.” (The story does not say if the guy stuck around long enough to see what full-blown winter was actually like.)
That anecdote seemed appropriate recently when Best Buy, one of America’s strongest consumer brands, said it can hold fourth quarter losses to 10% declines – if consumer spending doesn’t drop more.
Good luck. Winter is coming. As market analyst Felix Salmon writes: “This news is flat-out scary. If Best Buy can’t do better than 10% declines in comparable sales, I weep for the prospects of everyone else.”
Consumers say they are cutting back on discretionary spending – even home heating – according to the Quinnipiac University Polling Institute. “On leisure activities, 62% say they’ll cut back on going to movies, shows or sports events, to 33% who say they won’t. By similar margins, people say they’ll cut back on meals out and vacations.”
Fortunately, there are some hopeful counter indications. For example, America’s home videogame industry saw sales improve significantly in July, August, September and even in October, while the bottom fell out of the rest of the U.S. economy.
All of us would like to believe that consumers will treat coin-op music and amusements more like home videogames and less like travel, eating out, movies, shows, sports and the rest. But we’ll simply have to wait and see. Meanwhile, let’s face facts: The current economic crisis is unlike any of the six recessions this nation has endured since the Great Depression. Old templates may not apply. Heck, if the movie industry sees sales decline, as Quinnipiac forecasts, it will be a first. Box office receipts have increased in every previous economic downturn since 1933.
Evidence is plentiful that today’s situation is unprecedented, or at least that the old rules don’t necessarily apply. From Bloomberg News on November 19: “The cost of living in the U.S. fell by the most on record, as fuel costs plummeted and retailers used discounts for cars and clothing to entice consumers hobbled by job losses and sinking home values. Consumer prices plunged 1% last month, more than forecast and the most since records began in 1947, after being unchanged the prior month, the Labor Department said in Washington.”
What can industry members do to prepare for the toughest economy this generation has ever seen? One idea might be to pull some of those “golden oldie” games out of the warehouse and set them up…one machine per location…and offer old-style gameplay at ridiculously old-style prices. A dime? A nickel?
Obviously, these giveaway price points will not pay for the overhead of sending a route collector to locations. Not all by themselves, anyway. But if they help draw bargain-hungry consumers to locations, maybe some of the higher-priced games will get played, too.
As the song said back in 1933, happy days are here again. Maybe 1933 prices should come back, too, or at least 1972 prices – here and there. But why not experiment? If it doesn’t work or doesn’t appeal, try something different. If you have been nurturing some radical ideas in the back of your mind for a while, this might be the time to try them.