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4 retail businesses that are doing well during recession

January 28th, 2009 · 8 Comments

  • Costco: I was at Costco over the weekend – what recession? It was crowed! Someone I knew who worked at Costco told me that their store was doing more business. I’m not surprised at all. Given its low price and high quality, I think Costco will do better than most retailers. Instead of going to Safeway or Wholefood, people will buy bulk at Costco at lower price. Furthermore, I’m a big believer in Jim Sinegal, CEO of Costco. Unassuming and low-key, not whole lot of people heard about Jim. But, without any exggeration, he is the Sam Walton of our time. He is that good. A true retail legend. As long as he is at the helm in Costco, I think they’ll do well during the recession.
  • McDonald’s: instead of going to fancy restaurants, families are going to McDonald. 🙂 A great business. And they’ve been taking market share away from Starbucks since McDonald started to offer premium coffee drinks. By the way, I also found out some of its "$1 dollar menu items" are no longer $1. It costs $1.29 now. I’m sure the price increase won’t hurt their top line and bottom line. 🙂
  • Panera Bread: When I was living in the Midwest, I loved going to Panera Bread. It’s a sandwitch shop with an ambience. There is one Penera Bread restaurant near my work. It’s always packed at lunch time because it’s such as a nice meeting place for professionals. At night and over the weekend, I go to another Panera Bread near where I live. It’s always full of young families. Their price point is higher than fast food, but cheaper than dine-in restaurant. More importantly, they’ve become a meeting place for professionals and families. They’ll continue to do well in this economy.
  • Netflix: they just beat their earning estimates. Pretty impressive. A lot of people have written Netflix off and considered them as "one trick pony". But, I think they’re uniquely positioned to benefit from the recession. For $10/month, you can get two movies a month. That’s 24 new movies for a year. If you’re going out to watch a movie, for a young couple, it’ll cost about $20 to watch a movie, and cost $40 for a family of four. To save money, some people will stay home to watch movies. Plus, I think many people underestimated how Netflix has streamlined its logistics and mastered customer acquisition. These are key competitive advantage that are not easy to duplicate.

Honorable mention: Amazon.com

I was going to put amazon.com onto this list, which is dominant in online shopping. However, I’m a little bit concerned about amazon.com’s growth potential during recession because its two largest categories in term of sales volume are Consumer Electronics and Books. Consumer Electronics is discretionary income spending that people will cut during recession. Books is discretionary income spending as well — you could always get the books from the local libraries. Amazon.com is better positioned than most retailers, but I still have some doubts about how it’ll be able to maintain its growth.

Do you know any retail business that will do well in this economic environment? Leave a comment.

Tags: Beat Recession · Company Analysis

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