The home furnishings industry during the 1990s has to deal with a multitude of uncertainties that will grow during the decade. Retailers must remain open to change and learn not to depend on what was done in the past. Areas of uncertainty include the new Republican Congress and its affect on political changes, competitive uncertainty and credit uncertainty. There’s is also much uncertainty about consumer buying.
In 1954, when asked his opinion about all the change taking place in the world, Dwight Eisenhower responded:
Things are more like they are today than they have ever been before
The pundits of his day ridiculed Ike for obfuscating even the simplest questions. But Eisenhower was right. He is even more right today.
What Ike was trying to say in his own roundabout way was that we live in unprecedented times. There are no historical comparisons, no previous trailblazers to point the way. In an age without precedents, past experience is no longer a virtue. In fact it may be a detriment.
The lesson home goods retailers need to embrace is that we are all trailblazers now. From politics to economics, from new competition to changes in consumer trends, home goods retailers face a complex and at times confusing array of change agents that make managing a business today more difficult than it has ever been before.
Take politics. It has been nearly 50 years since the United States last had a Republican Congress and a Democratic President. In 1946, the Republicans swept the mid-term elections on a platform of change, a grass roots dislike of President Truman and a general weariness with the New Deal Democrats.
The new alignment of power may result in political bickering as it did back in 1946. Two years of gridlock would not be all bad economically. Just imagine: no change in taxation, no new regulations, no health care reform, no reform of welfare. It’s not the best possible outcome, but it’s not all that bad, and the economy would continue to grow.
It is also possible that the two sides could get into a tax cut bidding war as they did in 1981. Given all the tax goodies the Republicans have promised in their “Contract With America,” the Democrats could counter with a set of tax cuts aimed at their favorite constituencies.
Were that to happen, the result would be a sharp acceleration in economic growth and a corresponding increase in interest rates and inflation. The next recession would be delayed well beyond 1996. When recession did come, it would be longer lasting and much more severe.
A third possibility would be for both sides to find common ground on issues of welfare reform, free trade and tax reform. The appearance of leadership in Washington would have a positive effect on consumer confidence, lifting consumer spending and the economy.