As recession reshapes consumer and corporate behaviour, smart companies will seize chance to change
|National Post 22 May 2020 at 17:47|
“Tailored clothing is probably going to be near the bottom of people’s priorities,” said Stephen Granovsky, chief executive of Toronto-based Luxury Men’s Apparel Group Ltd. (LMAG), owner of Samuelsohn Ltd., which makes $1,000 sports jackets and $1,500 suits in the north end of Montreal.
It’s not that LMAG’s core customers don’t have money to spend. Despite the COVID-19 crisis, the number of men and women working in finance and real estate was little changed from April 2019, while the number of workers in Statistics Canada’s “professional, scientific, and technical services” category was only 2.7 per cent lower. Meanwhile, the year-over-year overall decline was more than 17 per cent.
The company’s consumers are the type that will power the recovery’s early stages. Granovsky, however, doubts he’ll benefit much from any pent-up demand. His customers kept their jobs, but they won’t be in the market for office clothes if the office is now the kitchen table.
“Retailers who are opening now that sell casual clothing and sportswear, and even on their online businesses, are seeing lots of initial demand,” said Granovsky, whose company also owns Rochester, N.Y.-based Hickey Freeman Tailored Clothing and Toronto-based Lipson Shirtmakers.
“If you’re in the sweatpants business, we’re all buying more sweatpants,” he continued. “We’re all buying stretch jeans and things of that nature. But the stuff you wear to work, the stuff you wear to weddings, the stuff you wear to go to parties, the stuff that we make … we’re going to be somewhere in the bottom half of people’s consumer spending priorities for some period of time and we have to be prepared for that.”
Economic downturns destroy companies with weak business plans. The Great Recession punished companies that had grown complacent with exporting to the United States. Canada ended 2009 with about 550 fewer firms than existed at the start of that year, , a quick snapshot of what a recession can do to an export-dependent country overly reliant on a single market.
The coronavirus crisis is different in that it will also test executives such as Granovsky, whose strategy was entirely reasonable up until a few months ago. The recession is reshaping consumer and corporate behaviour, which will cause reliable streams of demand to run dry. “We’re already well over two months,” Stephen Poloz, the Bank of Canada governor, told reporters on May 21. “It’s going to be long enough for certain habits to change.”
Poloz made the comments during an hour-long videoconference , taking advantage of technology that existed prior to the crisis, but was little used because professional work was wedded to face-to-face meetings.