Economic Recovery Hinges on Business Finagling

Top-down empirical evidence from corporate America as of Q4 2010 is showing a robust increase in business sales and earnings, nearing in some cases pre-financial debacle highs. Bottom-up and admittedly anecdotal evidence of how companies are meeting those sales targets is less encouraging.

Unable to offer the dizzying and ultimately disastrous array of credit formerly available just a few short years ago, some companies have resorted to low tech and even pedestrian gimmicks in order to boost sales. Some methods benefit consumers and sellers alike, such as the buy-one-get-one-free policy (BOGO), enabling sellers to dump costly inventories while enabling consumers to stock up on items for future consumption. The BOGO policy is supplanting cheap and abundant credit as a popular method for encouraging consumers to consume today by borrowing from future purchases. What will drive future sales?

Less compelling are the “now you see it now you don’t” discounts that appear certain hours throughout a day, or on the internet but not on the phone, or in print but leave out important caveats that detract from discount offers. Some discounts don’t offer brand confirmation on receipts making consumers wonder if they’re getting what they pay for. Competition is fierce as businesses will do anything get consumers attention.

Unsavory and deceptive approaches to gin up sales further indicate an anxiety and desperation among sellers not seen in recent history. For example, have you noticed lately some of your monthly bills contain superfluous jargon that confuses you? It would seem that some companies hope you pay their bills without reading them, and it’s a fact that others will reward you for joining their automatic payment plans, so you never have to read their bills again. If you’re diligent and actually read your bills you may notice unaccounted charges, and learn that the agreement’s fine print automatically initiates the purchase of an additional service, unless and until you explicitly call them and tell them you don’t want it. Sometimes that service will automatically renew unless it is explicitly terminated. Even when those unexpected charges turn out to be an error, customer service representatives will attempt to sell you something new, even before THEIR error is corrected. Heads they win, tails you lose! Aggressive sell tactics have existed forever, but were once only used by small or fly-by-night purveyors. Now even image conscious corporate giants and household stalwarts heretofore synonymous with good customer service use those tactics. They have become so common that comparing experiences has become a mainstream pastime among many consumers.

It is clear that an economy 70% based on private consumption must expand that sector before meaningful economic recovery can occur. With unemployment chronically high, public and private pension plans under duress for decades to come, new household formation temporarily stalled and the housing sector in the doldrums in the near term, consumer incomes and spending are unlikely to expand much for quite awhile. Corporate America would be well advised to concentrate on offering consumers products and services they desire and need, instead of relying on deception and gimmicks to meet their sales goals.