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Rick Smith

Rick Smith

Posted: November 30, 2009 04:54 PM

BLACK 2010??

What's Your Reaction?

Below is a clip of my interview last week on Fox Business News. The topic at a high level was about how retailers were going to approach Black Friday - would they simply look to their competitors and follow their lead? Who is doing well? Who is scrambling?

Fox Business News from Rick Smith on Vimeo.

The general business point here is that when you are confident, you can think in longer time horizons. Price wars are notoriously dangerous for business. A one percent drop in price results in an 8% drop in profit (averge for S&P 500 - mckinsey & co), and it is historically very difficult to raise prices back up.

However, when there is an extremely high level of competition, and a corresponding level of uncertainty, the time horizon on which you evaluate decisions shrinks - it's not about long term profits, it's about short term survival. In this environment (the one we are in right now), companies are much more likely to quickly match price drops, and try and figure out profit later (which is exactly what happened last week, and will likely continue into next year).

And some of you may be wondering how in the world I answered these questions, with absolutely no retail industry experience. Actually, the night before I slept in a Holiday Inn Express (...and called 5 of my buddies who are running global retail companies...)

 

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