Looking for the upside of a downturn: Print 21 magazine article

It may not be a case of happy days are here again but even with the most pessimistic forecasts of economic gloom, there are always reasons to be cheerful. Harry Brelsford has a spring in his step, hope in his heart and his eyes cast resolutely skywards for signs of a silver lining.

There is little doubt that an economic tightening of our belts is underway and if we are to believe what we see on TV or read in the financial columns the glass is half empty and things are about to get worse. But there is always an upside to a downturn and my parents who lived through the Great Depression would tell me when I was in a tough spot that I should think of the worst possible thing that could happen and in reality the problem was seldom as bad as imagined.

The question is how bad could the current economic downturn become and is there any upside?

Just days after the Black Tuesday stock market crash of 29 October 1929, the day that triggered the Great Depression, the song 'Happy days are here again' was released onto a public who had yet to comprehend the magnitude of what was to come. It is a cheerful song, one of the most enduring with nearly every major recording artist having laid down their own rendition. It is a song that helped people keep their chin up during some of the toughest of economic times.

The history books also tell us that just two days before that crash in 1929, James Scullin was sworn in as Prime Minister of Australia. His treasurer at the time was one Edward Theodore and together they had just inherited a major problem. Australia was one of the hardest hit countries as a result of falling commodity exports upon which it was highly dependent. The Great Depression resulted in a 29 percent unemployment rate with workers leaving the cities in search of menial farming jobs in order to survive. Could the same happen again?

History repeating itself?
Right now there are similarities with recently-elected Prime Minister, Kevin Rudd, and Treasurer, Wayne Swan, knowing that they have a major task ahead as many of our trading partners take a turn for the worse. They have to balance election promises of tax cuts, reduced government spending, repealed IR laws and a commitment to Kyoto carbon taxes on energy against keeping the economy stable.

More pressing to the average Australian right now is the issue of rising interest rates coupled with the highest cost of housing in the world. Then there is the stock market which is down around 20 percent since late last year while inflation is up due mainly to increased transportation costs. There is no end in sight to fuel price rises while the carbon tax will probably add another 20 cents per litre to the cost of motoring when it is applied.

You don't need a degree in economics to see where this is heading and don't forget that the coming carbon tax on electricity will add to the cost of anything manufactured or processed within Australia. This cost is ultimately passed on to the end user who will have to cut back and rework their budget.

If you think things could not get any worse then consider predictions by experts such as Harry S. Dent, the futurist who got it right in his book some years ago when predicting the 'Great Boom Ahead'. He now suggests in a report published in January this year called '12 Steps to the Next Great Depression' (www.hsdent.com) that right now we are seeing a forerunner to the next Great Depression expected to extend from around 2010 to 2020. This new Great Depression will primarily be caused by the baby boomers losing their spending power while cashing in superannuation, resulting in vast sums of money being withdrawn from the stock market.

That's not all. The United Nations is warning us of food shortages whilst, for some time, there has been a looming shortage of hops for making beer. If this next Great Depression is going to eventuate then we may as well pack up now to get in early at Centrelink before the government's coffers dry up. Maybe we could turn the front lawn into a vegetable patch and brew our own beer.

Look on the bright side
The future looks bleak, if we want to believe this 'worst thing that can happen' scenario I have just painted, but I do not think for one minute that we are headed for a depression or even a serious recession. Even if we were, we would survive as did our parents or grandparents.

Here's the scoop.

The boomers have no intention of ceasing their spending or going to work as predicted. They are an ageless generation caught up in the health revolution, spending billions on vitamin supplements, exercise machines, plastic surgery and more. They are living longer, extending their working lifecycle and they want to keep on being productive. I have a colleague who retired and now imports classic cars that he hunts down on the internet. This necessitates overseas trips and he is enjoying life like never before. Two of the most productive printing sales reps I know are in their late sixties and show no signs of slowing down.

According to a survey in the US, around 60 to 75 percent of boomers say that they want to keep on working for social and economic reasons. This means that their earning and spending power will not come to a sudden halt at some predetermined date. They will keep on spending and spoil their grandchildren rotten, continue to do home renovations, buy big screen TVs, go on overseas cruises and have massages for a lot longer than predicted.

In support of this argument is the issue that Dent's predictions may no longer be as accurate as they once were. Some years ago, he forecast that the American Dow Jones stock market index should have exceeded 30,000 points by now. Last November, the Dow peaked at 15,000 and promptly fell back to just over 12,000 points where it has hovered for some time. This is one of his predictions that has certainly fallen way short of the mark.

Boomers in business
On the upside, there are other futurists who see the glass as half full with a fresh bottle of Chandon Vintage in the ice bucket. They believe that we are about to experience the greatest entrepreneurial boom in the history of the world as older people start to see being their own boss as the ultimate ticket to freedom. The workforce has changed from manual labour to knowledge workers and, with a computer and mobile phone, boomers can become coaches, consultants, sell stuff on eBay and more. The next Great Depression seems a long way off and, as printers, we should not ignore this emerging boomers-in-business market.

More indicators. It is hard to imagine a full-blown recession while we have low unemployment levels coupled with skills shortages. Right now there are arguments for migrant workers to help overcome employee shortages which would indicate that high unemployment rates are still a way off. Beyond our borders, the most crucial global employment indicator is the US monthly non-farm payroll data. This past May, the report was better than expected which bodes well for continued employment worldwide.

Whilst our high-cost housing is a concern, the property market is cyclical in nature with some price reduction inevitable. Ironically we simultaneously have a housing shortage and as long as Australians strive to own their own homes, they will ultimately find a way. Whilst rising interest rates cause hardship, we survived the 17 percent home mortgage rates of "the recession we had to have" of the late 80s. I know, we had a high mortgage and two kids asking for Reebok shoes at the time. One upside, according to a real estate client is that their listings have doubled which means a need for increased advertising.

Fuel taxes unlikely
There is not a person I know who does not want a cleaner planet which can only be achieved through a reduction in pollution levels. Of the greenhouse gases, CO2, released through burning fossil fuels and blamed for global warming, is a clear gas and not a pollutant. The Australian ran an article on 23 April by Phil Chapman, the first Australian NASA astronaut, who claims a worrying 0.7 degree centigrade drop in global temperature over the past year based on records from four leading temperature monitoring stations around the planet. This rapid fall in temperature is said to be due to decreased activity on the sun so it is unlikely that we will see a carbon tax on petrol anytime soon. It would be too unpopular.

We have already felt the kick of rising inflation as our annual rent review at Varsity Graphics on the Gold Coast became due in April. The rental on our premises increased by the cost of a good lunch at a local restaurant. The upside to growing inflation is that our customers are more prepared to accept our price rises through increasing electricity, paper, rental, transport costs and more. All businesses are in the same boat and inflationary increases have to be passed on or we become a statistic.

But what about falling commodity prices that caused so much hardship during the Great Depression? During that time, our major trading partners were the United Kingdom, its colonies and the USA. Right now, much of our commodity exports are to the burgeoning Chinese and Indian economies. For as long as these economies continue to grow I believe it is safe to assume that Australian commodities will be in demand.

So things do not seem as bad as we may have thought, although we are going through a cyclical downturn. Tough times are nothing new to the printing industry though. The past 15 years have seen a dramatic fall-out due to rapidly changing technology, while the printing industry in Australia has technically been in recession since last year.

I doubt that many printers even noticed the difference and simply ploughed on doing what had to be done, winning orders and producing print jobs.

Print makes a comeback
Right now, some of our customers are starting to get a taste of the tough times that we consider normal, meaning that we are perfectly positioned to help them meet the challenges ahead, especially with their marketing. We need to tell them about the advantages of printed marketing materials, why it can cost less than other media and that it is also environmentally friendly.

According to Janice Mascini, a communications manager with Australia Post, consumers have a strong preference for traditional mail over email. She stated that paper-based communication is highly valued because it is trusted, tangible and reliable.

The Commonwealth Economic Advisory Service of Australia (CEASA) revealed an 8.8 percent growth in direct mail in 2007. A study last year by International Communications Research in the US indicated that 70 percent of people prefer traditional mail for receiving new product information compared to only 18 percent who preferred email.

Printing is making a comeback against internet marketing, newspaper, radio and TV advertising in that it is more enduring, more easily accessible and often quicker and easier to produce. In Europe, the printing community has joined forces to show customers just how powerful print marketing can be. A consortium of paper suppliers, printers and postal authorities in 13 different countries launched the PrintSells initiative in 2007 with the slogan: "Print. Your brand in their hands."

The PrintSells initiative, aimed at brand promotion, marketing, communication and advertising, provides information on the impact of various print media segments such as direct mailing, magazines, corporate communication and in-store advertising. Brochures on each of these four topics have been produced and distributed to 440,000 recipients throughout Europe. Check it out.

Last man standing
Another upside to a downturn is that some of your competitors currently hanging on by their fingernails will give up the fight. When they shut the doors somebody has to gain their customers and, if you have done your homework, it could be you.

You may negotiate taking over their customer list for an agreed fee based on a percentage of sales over the next year or so, although if they are a cut-price printer, remember a customer gained on price will also be lost on price.

You may even merge with a competitor or if your business is currently marginal it may be time to exit. Approach your competitors early before you have to close. This way you will be able to negotiate more favourably for your client list and any equipment they may want to take over.

Finally, you may have to sharpen your pencil to keep a major client during tight economic times but it is also a time to be tough to avoid becoming a discount printer. Remember your costs are going up. Also, as other printers fall by the wayside, customers have fewer printers to go to, so don't give your hard work away.

So while it may not be happy days are here again just yet, there are certainly opportunities for those who see the glass as half full. Those skies above may soon be clear again.