A Hesitant Marketplace?

Last week was a tough one for the stock market as it dropped for another week with one day dropping 280 points on a quartet of bad news ... low new hiring (only 54,000 new non-farm jobs), the ISM manufacturing purchasing managers' index fell to 53.5 in May from 60.4 in April, the U.S. auto industry suffered its first significant setback in more than 18 months (a 3.7% year over year decline), and the continued decline in home prices (not to mention that it doesn't seem as if any new homes are being built and sold!).  Coincidentally I was also speaking with some distribution management personnel, catching up on industry insights.  One topic seemed to sum up much of the industry's sentiment.

Some want blood from a turnip

Essentially the comment was that everyone seems resource constrained.  Few, if any, are doing any hiring unless it is opportunistic or to grow a niche / target area.  Business owners are concerned about the nascent "recovery", taxes, healthcare, government regulations, the banking system (and lack of credit), the deficit and more.  Employees are focused on keeping their jobs and being able to make their mortgage, given the dearth of available opportunities (jobs).

While there are pockets, and market segments, that are strong, there are a comparable number of areas and segments that are weak.  This marketplace dichotomy, especially after the recent recession, makes business owners hesitant.  And hesitancy drives people to be risk adverse.

While no one had an answer, the consensus was that many business owners may wait till 2013 (elections and the "start" of the new healthcare initiative) to decide if they want to return to being a growth company ... preferring to settle and be a lifestyle company at this time.  While sales have stabilized, or grown for some (especially industrial or energy efficiency-oriented companies), profits have grown at a faster rate due to personnel and expense management.

With housing down, re-locations are difficult, forcing companies to limit searches to local candidates.  Housing also tends to drive light commercial; and larger companies need to continue to grow to justify larger commercial facilities.  Is the export market the economic salvation? (It's helped many industrially-oriented distributors and manufacturers.)


Meanwhile, at the same time we're seeing some of the nationals hiring in selected areas and sniffing / making acquisitions - looking to take share.  And sometimes these acquisitions create opportunities for strong independents in those marketplaces ... are you positioned to be opportunistic when someone creates business for you?!

With many waiting, is this creating opportunities for you to profitably take share? Are you hiring to prepare for future retirements (and new opportunities) or trying to just make it for the next couple of years (and if you are, will your company be as valuable to someone else if you don't have a succession plan and need an exit strategy?)

Are you hesitating or investing and taking advantage of opportunities?

Gas Beyond $4.00. Impact on Your Business?

I was returning from a meeting with a client this morning and needed to put gas in the rental before the return.  While gas has been creeping up, today was the first time I paid $4.00 per gallon (and yes, I know that there are 5 states that are averaging over $4.00 for regular unleaded).


As we know from the last couple of times that there were gas spikes, typically distributors start to think of how they can reduce costs, shift costs or increase revenues (margins, fees) to minimize the incremental expense, especially with the concurrent erosion in margin over the years (and other increasing operational costs).


This time, while we've heard some comments, there haven't been many nor are we hearing of many distributor surcharges, service revisions, minimum orders requirements, etc.  Is it that we've become used to the increases, the pain isn't enough, you don't think anything can be done because you don't think your competitor will make a change, or we feel this is just the "cost of doing business"?

In 2008 and late 2005 we conducted distributor surveys to ascertain how distributors are responding to soaring fuel costs (click here for some of our 2005 findings).  Should we do it again?

What are you doing with $4.00 unleaded regular gas (and expected to go higher for the summer) and more for diesel?  Will this eventually change an industry business model? What happens if we see $5.00? $6.00? Are manufacturer minimums increasing? Are your's?