The Art of the Possible: If Optimism Doesn’t Knock, Build A Door
Optimism is the fuel for serious marketing, the muscle behind smart investments and the driver that pushes CFOs to fulfill opportunity. From a macroeconomic level, we measure our country’s optimism through the health of our GDP (Gross Domestic Product). Our nation’s total annual revenue for all goods and services is the harbinger for months and years ahead. Careful marketers historically retract assets and human capital investments during a downtrodden economy.
Investments are easier to initiate when the nation’s revenue rises. In essence, based on our current GDP progression, America is growing in the right direction. You business will too if you retune your engines going into the New Year.
To be clear, the higher our GDP growth, the more likely shoppers will open their wallets at retail. Growth-minded companies will invest in strengthening their brick, cloud, supply chain and human capital assets. When our economy delivers positive growth our, GDP averages 2.5 percent. 2013 will weigh in around 1.6% for the entire year, well below the expected and needed 2.1% we hoped for. But there is very positive news afoot. According to Moody’s, our 2014 GDP is expected to grow at 3.1%, a dramatic increase over 2013.
This anticipated growth is based the end of our social security tax holiday, the increased spending by upper income households along with a significant reduction in overall government spending. 2014 by all measures glows positive growth and opportunity for prepared retailers and manufacturers.
Overall retail sales growth this year should average about 3.8 percent, hitting 4.5 percent in 2014. But we should remain cautiously optimistic, invest wisely and remain SG&A balanced through this anticipated growth, since retail growth in 2012 was 4.9 percent and 5.4 percent in 2011. We continue to experience high unemployment at more than 7 percent, as multitudes continue to drop out of the work force. But spending among Americas continues to improve, especially as consumers repair their credit debt, pay down loans and restrain wild purchasing of years past. Based on these forecasts, 2014 should also be a robust year for CE product and market growth.
For all CE companies, 2014 will offer unquenched demand for mobile products; short, hyper-changing product life cycles; and categories dominated by mammoth global manufacturers. And more brands and products are coming. Gary Shapiro, CEO of CEA, predicted that 20,000 new products will launch at CES 2014, which will boast more than 3,200 exhibitors.
He also estimated a draw of 150,000 attendees from more than 150 countries. In the face of such challenges, aggressive competitors and product growth opportunities for 2014, Gen One Ventures offers five manufacturer-centric suggestions designed to energize optimism, and to ensure growth:
1. Core Down And Heavy Up: CE manufacturers continue to drive short product life cycles to fuel profitability. Manufacturers must pursue EBITDA improvements by discarding unprofitable categories, limiting SKUs, firing unproductive sub-brands and better managing overall product rationalization. These improvements will widen distribution, create more profit and lower consumer price points.
2. Factory Disciplines Come First: Factories need to find smarter ways to lower cost and expenses in product development and manufacturing. They also have to start outsourcing to lower costs, accelerate development and create higher capacity.
3. Overhead Becomes Under-head: To many second- and third-tier manufacturers seem to naturally spend their entire gross profit on their overhead (SG&A) costs. Above-line product sell-through must better fuel and offset SG&A cost contributions for any brand in order to ensure stability in market and channel investments to exercise competitive advantage. Growing brand affinity through below-line market contributions is just as important to allow a product to earn a few extra pennies in profit versus shelf competitors.
4. Listen With Squinting Ears: Manufacturers need to listen to their captains who are leading sales, marketing and administrative operations. Connect local market organizations to centralized factory leadership to ensure market advantage through shared knowledge, hyper-fast communications and smart decisions. The market fluidity of shifting and straining product line logic and pricing pressures creates unique sales opportunities for market range advantage.
5. Organizational Leadership: If you have five quarterbacks on the bench, there is no quarterback. Authorize and anoint leadership by title and command to own their market opportunity, P&L responsibility, and channel strategies. Allow them to invest in human, brand and channel capital.