Magazine article CRM Magazine

No Credit Where Credit Is Due: The Rebirth of Layaway in an Age of Automation

Magazine article CRM Magazine

No Credit Where Credit Is Due: The Rebirth of Layaway in an Age of Automation

Article excerpt

RECESSION TALK brings numerous prescriptions for recovery, and nowhere is this truer than in sales, where everyone seems to have a solution. While many of these ideas are good, they might miss the point on one of two counts: On one hand, it's a recession--by definition, sales lag; on the other, we might be inaccurately assessing the very nature of this recession.


On the first point, overoptimism is forgivable. Sales is always a hard job, so a can-do spirit is needed in a disappointing economy, even noble. But the second point is serious: Misdiagnosing our current situation could lead to wasted efforts targeting the wrong set of challenges. There have been 18 recessions in U.S. history--and the seven since World War II have often been characteristic studies of production and inventory getting ahead of consumption. To combat an overfull supply chain, producers will idle capacity, lay people off, and have sales to reduce inventory. When inventories come back into alignment, demand stiffens and production starts again.

Recessions have become more infrequent of late, thanks to good, fast, and cheap computing that has enabled us to better manage the production/inventory side of the equation. The most recent recovery ended in December 2007 after six years; the prior recovery lasted an amazing 11 years.

But the current recession is not from the same mold as most of those that preceded it. This is a credit-driven recession started when the credit markets dried up in the mortgage crisis. Without credit, the short-term financing companies would naturally rely on to manage payroll or inventory is not available (or available at such high prices that it is effectively nonexistent).

A recession of this type will not be cured by the Federal Reserve lowering rates--in fact, it had lowered them to near zero at press time. Credit is not being extended further out; the lucky few with jobs or cash are leery of spending. The credit-card industry is expected to reduce the credit available to consumers this year by an astounding $2 trillion. Banks and other institutions are simply not lending, further tightening the economic lockup.

But the frozen credit markets present an opportunity to vendors of all sorts, as well as an unexpected challenge to creditors. …

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