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What This Week’s Numbers Revealed: Pessimism Rises as Prices and Spending Drop

Friday, December 12th, 2008

A collective analysis of studies released this week paint a revealing, evocative portrait of the nation’s economic environment. As prices drop, spending drops even further, as an opaque cloud of consumer pessimism remains hovering over the nation. But below, amongst all of the downward activity, researchers are searching for that cloud’s silver lining.

On the Ground Below

The Bureau of Labor Statistics, National Retail Federation, and Census Bureau released reports indicating that wholesalers and retailers are still adjusting to the economic climate, as price indexes continued to fall:

• Retail container traffic fell in November for the 16th month in a row. With this finding in mind, the National Retail Federation maintains its hypothesis that 2008 will be the slowest year for traffic since 2004, with a year-to-year decline of 7.1 percent.

• U.S. wholesalers lowered their inventories by 1.1. percent in October, though sales also dropped by 4.1 percent from the previous month, according to a Census Bureau report released Wednesday.

• As reported today, wholesale prices of finished goods dropped by 2.2 percent in November, following monthly declines of 2.8 and 0.4 percents.

The Cloud of Consumer Pessimism

As these prices fell, a few research groups found record retail sale declines last month. The International Council of Shopping Centers even deemed Black Friday and the following weekend’s shopping days a “poor start to the holiday season sales,” as it observed a year-to-year decline of 2.7 percent.

The cause of these sales declines: a hibernating consumer, hiding from any temptations to spend money this holiday season:

• The ABC News Consumer Comfort Index measured record-low levels of confidence for the fifth week in a row, as reported on Tuesday. According to the poll, 92 percent of consumers surveyed said the nation’s economy is in bad shape, while 79 percent of them rated today’s buying climate negatively.

• Perhaps as a result, shopping ranked second only to dining out as one of the top activities consumers planned to decrease, according to a poll by the National Association of Television Program Executives and E-Poll Market Research. About 35 percent of consumers also said they planned to stay local more in their socializing, if not at home. They may also hesitate to buy any gifts full price this holiday season – though they were also willing to splurge on themselves, as Women’s Wear Daily reported.

Attempts to Find a Silver Lining

Meanwhile, researchers are taking such economic and behavioral conditions in mind, in trying to find positive news within it all.

• Some, like MasterCard’s SpendingPulse, traced the origins of rising consumer pessimism back to the ongoing depreciation of petroleum, as wholesale prices for it and petroleum products dropped by 11.2 percent last month.
  The research group reported yesterday a 3.8 percent decrease in total retail sales, excluding auto purchases – the biggest month-to-month decline it has ever measured. The caveat: without the rapid decline of gasoline purchases factored in, retail sales growth would have otherwise remained relatively flat.

• In its latest study, the Kauffman Foundation posed to question whether recessions were a good time to start a new business.
  The study, examining entrepreneurship up till 1975, did not reveal anything too conclusive, as the research group found a number of other factors that had to be considered. The research group also acknowledged that potential entrepreneurs would be unwilling to leave their jobs to found companies during recessionary periods.
  However, when the study excluded the Great Depression and World War II – the most unusual periods of time – the Kaufmann Foundation found that slightly more companies debuted during recession periods than expansion periods.

Overall, this week’s numbers showed that consumer pessimism remains persistent as retailers and wholesalers continued adjusting to the economic environment. Whether such feelings or downturn behavior will fade first, time has yet to tell. But either way, as the next few weeks pass by, and as the new year approaches, new perspectives could perhaps lead to new solutions – or, at the very least, a break in the cloud.

Tags: ABC News Consumer Comfort Index, Bureau of Labor Statistics, Census Bureau, christina lee, entrepreneurship, Kauffman Foundation, MasterCard's Spending Pulse, national retail federation, producer price index, wholesale pricing
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U.S. Entrepreneurship, Past and Future

Friday, November 21st, 2008

A recent study has led researchers to suggest that economic decline negatively affected U.S. entrepreneurship, after it revealed significant declines over the past three years.

Furthermore, they say that the emergence of start-up businesses could jump-start an economic upturn as they create jobs nationwide – that is, if such businesses strive for innovation, rather than mere economic survival.

The Global Entrepreneurship Monitor, an international research firm, found that more than 61 percent of businesses in 2007 were start-ups – an 8.6 percent decline from 2006, and a nearly 10 percent decline from 2005. It attributes such a drop to the great rise and fall of the housing market, which began in 2001 and ended in 2006.

During that same time period – with the unemployment rate peaking at 5.3 percent, and up to 71 percent of industries losing jobs – entrepreneurship generally declined as unemployment rose, according to the Global Entrepreneurship Monitor report. In addition, all of the net job growth from 1980 to 2000 came from firms less than five years old. Older firms, on the other hand, lost jobs.

Future economic growth relies upon such creation and destruction of jobs – as seen in 2007, when service-providing startups made up more than 75 percent of total job creation and losses, according to the Kauffman Foundation. And while new firms may not initially bring in a high amount of new jobs, over a few years they create new jobs, in addition to innovative goods, services and processes.

The research foundation’s latest report ranked Massachusetts, Washington state, Maryland, Delaware, and New Jersey as the nation’s most prepared for the future, or “the new economy” in summation. With this, companies of any industry should fare well if they embrace new technologies and business models, especially in an economic environment bound only to get more competitive.

The foundation also recommends that new businesses not be entirely inclusive and removed from other sectors of industries. Rather, future success “requires that a whole array of institutions – universities, school boards, firms local governments, economic development agencies – work in new and often uncomfortable ways,” especially with a growing global economy.

Tags: christina lee, entrepreneurship, Global Entrepreneurship Monitor, Kauffman Foundation, start-up businesses
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The Crippling Fears of Entrepreneurship: Reasons Why People Don’t Start a Business

Thursday, January 24th, 2008

Most Americans, at one time or another, have dreamed about quitting their job and starting their own business. But why don’t more people turn their entrepreneurial dreams to reality? For many, it’s their own fears that are holding them back. Here’s a list of some of the most common reasons why people are afraid to start a business - as well as some tips for conquering those fears.

Fear of failure - This is, by far, the number one fear that keeps people from starting their own business. No one likes feeling like a failure and even just the thought of a collapsing business (and what their friends and family might think) keeps many from even giving entrepreneurship a shot. It’s important to realize that many successful business owners failed at their beginning business attempts. And, it’s also important to remember that those failures didn’t stop them from starting another business. They learned something from the process and then tried again. But, there’s plenty that a new entrepreneur can do to avoid failure all together:

1) Research your ideas, target market, competition, pricing, etc.
2) Force yourself to put together a detailed, in-depth business plan .
3) Try to get as many honest opinions about your business idea as possible. You can prepare a Non-Disclosure Agreement if your idea is proprietary.

Not enough money - True, there are some businesses that take a hefty down payment to get off the ground, but there are plenty of others that don’t. First, don’t assume that your business idea is financially out of your reach. Do the research (ideally, you should prepare a business plan) to find out the exact dollar amount you will need start your business. You may find that you’ll need less money than you assumed, or that some of your costs aren’t needed for the actual start-up. Once you have the amount of start-up cash you’ll need, you can then figure out how much you are able to contribute on your own and how much you’ll need a loan for. There are plenty of options for obtaining a small business loan: bank, Small Business Association (SBA), private investors, family and friends.

Don’t want to be overstressed/overworked - Some people think that all entrepreneurs are working eighty-hour weeks and are always stressing about money and sales. While that may be the case for some, it’s certainly not the case for most. There are plenty of other entrepreneurs who work just a few hours in the morning and then are off doing their own thing. The way you decide to run your business is up to you - that’s what "being your own boss" is all about!

Fear of loneliness - While working for yourself may not mean an office full of people to chat with at the water cooler, it certainly doesn’t mean you’re doomed to live the life of a hermit. You can become active with your local Chamber of Commerce and network with other local business people, attend seminars and participate in business luncheons. There are also plenty of online communities that cater to small business owners and home-based businesses. These are great resources to turn to for business-related questions about your new start-up.

Don’t have the skills - Sometimes entrepreneurs are seen as being a special breed of business person who’s part creative, part risk-taker, part all-knowing genius. Well, in reality, anyone can be an entrepreneur. All it takes is an idea and the drive to turn it into a business. You don’t need to be anything but motivated. You can always hire someone to be the engineer, computer technician or marketing guru.

Fear of procrastination - With your own business you’ll have complete freedom of your workday, but that doesn’t mean you’ll automatically end up on the couch watching soaps with a boxful of bon bons. If you believe in your business idea and are excited about your business idea, then your drive for success is what will keep you working.

So, if you’ve been thinking about starting your own business venture, why wait? Conquer your fears by first understanding them and then realizing that, yes, you can overcome them. Remember, all you need to be an entrepreneur is an idea and some motivation. If you are driven enough, you can make the rest happen all on your own!

Tags: advice, Carrie Hinkel, entrepreneurs, entrepreneurship, Starting a Business, startups, tips
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