By Gordon Hecht, Serta Simmons Bedding
Compared to the history of the world, my history with our retail world is rather short, only about 47 years. I was lucky enough to start my first real job in May 1973, just ahead of a world-changing, albeit manufactured crisis that affected retail in a big way (see Crisis No. 1).
In the two score and seven years that followed, retail has survived multiple disruptions that were similarly classified as world shattering.
Crisis No. 1: In the second half of 1973 the Organization of the Petroleum Exporting Countries, aka OPEC, imposed an oil embargo against the U.S. The member nations effectively turned off the spigot of cheap petroleum that we all had become accustomed to. Oil prices went skyrocketed from about two bucks a barrel to eight dollars overnight, if you could even get it.
At first, fuel prices doubled, from 35 cents a gallon to closer to 70 cents. In some places it was 50 cents per half gallon, as the pumps were never designed for dollar-a-gallon gas. Prices went up on everything, including groceries and transportation. We were told that the earth was running out of oil and retail sales crashed. It was the end of the world!
By the following year prices had stabilized. While we would never again see a 25-cent gallon of gas, retail picked up and times were great again — until …
Crisis No. 2: Inflation! You may complain about the low rates on today’s savings accounts, but you wouldn’t trade it for the rampant inflation of the late 1970s and early 1980s. In 1978 the inflation rate was 12 percent, but due to help at the federal level it rose to 14 percent in 1980. At retail, that meant a $500 item in January 1978 went for $560 by December, and was priced closer to $700 a year later. But there was no concurrent rise in wages; unemployment was close to 10 percent; and the nation was dismayed as 52 Americans were held hostage by Iran for 444 days.
We were led to believe, 40 years ago, that America’s (and the furniture industry’s) best days were behind us.
I clearly remember changing price tags every 90 days at Edward’s Drexel Heritage store, up about 5 percent a clip. Mortgage rates topped out at 17 percent, meaning payments on a $60,000 home were over $1,000 a month. Retail furniture and bedding sales took a 50 percent dive in those days. And for the first time, shoppers could dial an 800 number to possibly get a better price from some distant storefront in North Carolina. Inflation, unemployment and competition from other states! And yet retail recovered — until …
Crisis No. 3: The IRS gets involved. Effective Jan. 1, 1988, changes to the tax code made employees’ tips subject to IRS reporting and FICA taxing. I worked in a tourist city at the time, where workers from maids to bartenders to blackjack dealers to waiters and waitresses (“server” was not yet an occupation) depended on tips to pay their bills. The effective result was a 25 percent cut into what had previously been hard-earned but free-and-clear cash.
The initial shock in tourist towns and any place with “tipped” workers caused discretionary retail dollars to dry up like a puddle in the desert. Sales were dying and retailers were waiting for last rites. And yet happier days returned — until …
Crisis No. 4: You’ll probably never forget that day in early September some 19 years ago. The sun rose on 9/11/2001 to a crisp, crystal clear morning in the eastern U.S., but just before 9:00 a.m. a large passenger jet crashed into the north tower of the World Trade Center. We assumed it was a freakish accident until 18 minutes later when a second jet slammed into the south tower. The Pentagon was to follow, and a fourth plane that fell over Pennsylvania.
The loss of life, hopes and dreams was immeasurable. Wall Street closed for six days, only to open to a near 10 percent drop in value. Retail sales as well as the entire economy halted. No one wanted to travel, and fears of further attacks and an upcoming war froze the nation.
But the U.S. economy is legendary for its strength and resilience, and the national character is persistently optimistic. We went to work and school, visited stores and moved forward. Things had changed, but times were good — until …
Crisis No. 5: The bubble burst and the market crashed. If Ben Franklin was around in 2007, he would have reminded us that “Nothing is certain but death and taxes,” and could have added that the safest investment is owning your own home. But beginning that year, for many reasons including a sea of sub-prime mortgages, the country experienced a housing-price bubble burst of epic proportions. That $200,000, four-bedroom colonial near the lake that you bought in 2004 was now worth $160,000, and you probably still owned $185,000 on it! You weren’t only near the water; you were under it too. Your number one investment was in the gutter
As if that wasn’t enough, on Oct. 9, 2007, the Dow peaked at 14,165. By March 5, 2009, it had dropped by more than half, to 6,594. It may not have been the greatest percentage decline in history, but it was vicious.
2009 also saw the end of Pontiac, Oldsmobile, Plymouth and SAAB. Small businesses took a bigger hit with 170,000 closings. Retail shopping centers looked like ghost towns, and home goods casualties included Circuit City, Eddie Bauer and the Door Store. We were told jobs were going away and were never coming back.
But times got good, and then business got great again — until …
Crisis No. 6: Yep, you guessed it, it’s this crazy COVID thing, which we were led to believe would end by Easter.
First, we were shut down; then, when we could finally reopen stores (and manufacturing facilities), only about half of our workers came back. If you are reading this, you survived March, April and May. Business exploded in June, but by July many stores realized that manufacturers couldn’t make all the stuff they were selling. And manufacturers realized their suppliers couldn’t make all the stuff it takes to make the stuff they supply to their retail customers.
Meanwhile, we all have bills to pay and payrolls to meet. Toss in a few dozen angry retail customers armed with Facebook and Twitter accounts and a dealer is facing a crisis of epic proportion.
Forty-seven years of depressing news! But here’s the uplifting part: We live in the short run, and in the short run things always look scarier than they are. We know now to put more merchandise in the barn and a few more shekels in the sock drawer.
The sun will shine again, and then rainy days will follow. But in the long run retail will survive and flourish, and we will all be wiser and stronger.
Gordon Hecht is Senior Regional Manager/Strategic Retail Group at Serta Simmons Bedding. You can reach him at email@example.com.