In this age of all the hype about a down economy many people are looking to save money. One thing that millions have done is turn to dollar menus at fast food restaurants. I have noticed that chains with good menus are busy and still quite popular, and presumably profitable. I have also noticed that some chains just don’t seem to be catching up, such as Arby’s, A&W and Long John Silvers. I often drive by many of these and the parking lot is usually empty, and when I go inside the whole place is empty. It seems that some companies are watching the trends, they share this data with all the franchise owners and make changes to their system to make it more profitable, others simply sit there and do nothing, watching their empty store.
McDonalds has always provided good value, they are good at making customers think they are getting a great deal and that is because they usually are, as long as you stick to the value menu. The only burger left on the value menu was the Double Cheeseburger, a fairly good burger and a great value. In December of 2008 they replaced it with the McDouble. It is the exact same thing but with one less piece of cheese. They say it will save them 6 cents each, and I have eaten a few of these already, they still taste just as good and now have less fat. Of course this was done mostly to save McDonalds money, but the lesson that should be learned is that businesses have pressures that make it hard to stay profitable in this economy, while at the same time they need to offer better deals to keep the customers coming. Some get it, and have started to change, and others are simply empty and on the road to failure.
It is hard for most small business owners to understand that by charging lower prices they can make more money per day, simply by doing more transactions. I went to the mall this weekend and there were a few stores going out of business, they even had 50% off sales on most everything. But even at this price they were STILL more expensive than the local Walmart, it is obvious why they went out of business. Too many store owners in the US have really gotten away from providing value for their customers. During my travels in Asia I have noticed that most companies have a very small markup. I even have talked to many owners that felt that a 10-20% is fair and ethical, and more is not.
In the US for the last few decades it has been all about getting as much as you can, charging all that the market will bear. But this mentality is not going to work any longer, too many people now are suddenly taking the time to watch their dollars. The companies that have ran their business on this model and have grown with borrowed money to take all they can have seen their sales dry up, and their bills come due, with out being able to borrow they are going out of business. Yesterday during my trip to the mall I visited Dillards. Dillards had a huge sale, all watches were 50% off, Jewelry was the same, and most every section of the store was the same. The store was packed, it took 15 minutes just to talk to someone to look at a watch, and people were buying all over the store. Some of the employees were worried because it felt like the store was going out of business, the check out lady said she was there for many years and has never seen this before. But for me I know that stores like this are still making money at these prices, and it is much better to sell the stuff and make something than to keep it in inventory. An hour later I walked into Macy’s. They have a larger store, and almost nothing was on sale, and because of that there were almost no customers in the entire store. The employees were just sitting there. Macy’s is a big and old company, maybe they just have deeper pockets, but more likely they just don’t get it yet. They both are public companies and both are down over 60% in the last year, lets look a year from now to see who does better. Dillards will be able to report higher sales. They took a large hit in their stock price with they announced their October and November sales numbers going down 10% from 2007.
On a side note the company report from dillards says this…
During the four weeks ended November 29, 2008, sales were significantly above the average company trend in the men’s apparel and accessories and shoe categories and significantly below trend in the juniors’ and children’s apparel and home and furniture categories.
I have been told before that when the job market gets tough people tend to dress much nicer, they need nicer clothes to go to that interview or to simply look better on their current job so that they won’t be fired. People are willing to skimp in other areas. I just find it great when you find hard data like this to confirm everything you have been taught.
Thanks for reading, I would really like to hear from you about what you think, please leave a comment.