Industries That Thrive On Recession
Recessions are hard on everyone – aren’t they?
Actually, just as wars have their war babies (companies that perform well during war and suffer during peace), recessions have their tough offspring as well. Some industries flourish in the adversity of a recession and do so well when everyone else is struggling to make ends meet.
It makes sense that, as budgets feel the strain of an economic downturn, people turn to the shops that offer the most for the least. Discount retailers like Primark do well at any time, but this is not always true. They often suffer in good times as people flush with money buy higher-quality goods at competing outlets. To remain competitive, they are forced to upgrade their product lines and change the focus of their business from thrift to quality. Their profits suffer from either lost sales or less margin on the goods they sell.
In hard times, however, these retailers excel by going back to core products and using vast economies of scale to give cheap goods to consumers. Designers and producers of lower-end products also see an upswing as more people jump from brand names to make their salary go further. People may not like discount retailers, but in a recession most people end up shopping there.
In bad times, the bad do well. Although it seems a little counterintuitive, people patronise the sin industry more during a recession. In good times, these same people might have bought new shoes, a new stereo or other, bigger-ticket items. In bad times, however, the desire for comforts doesn’t leave, it simply scales down. People will pass on the stereo, but a nightly glass of wine, a pack of cigarettes or a chocolate bar are small expenditures that help hold back the general malaise that comes with being tight on cash.
Be warned, though – not all sin businesses prosper in a recession. Gambling, with the exception of the truly troubled gamblers, becomes an extravagance and generally declines during recessions. In fact, casinos do their best trade when the economy is roaring and everyone feels lucky. The most prosperous businesses in this industry are the purveyors of small pleasures that can be bought at the petrol station for a couple of pounds or so for the chance to win a tenner!
Expect a downturn in the service industry as a whole, as companies and families are willing to do more themselves to save money. A certain class of service providers will see an upswing during hard times though. Companies that specialise in upgrading and maintaining existing equipment and products see their business increase as more clients focus on working with what they have now rather than buying a newer model. Eco-friendly practices can be good for your wallet as well as the planet and recycling welding equipment is a good way to help both the environment and your wallet.
In the construction industry, they say renovators hire as builders fire, and this holds true for many other industries as well.
In a recession, simply carrying on with business as usual can be an achievement. Pharmaceuticals, healthcare companies, tax service companies, gravediggers, waste disposal companies and many others are in a category that, while not jumping ahead during a recession, can plod along while other companies suffer. This is simply because people get sick, get taxed and die (not always in that order) no matter what the economy is like. Sometimes the most boring businesses offer the most consistent and, in context, exciting returns.
The Benefits Of Recession
The biggest benefit of hard times is that companies get hurt for inefficiencies that they laughed off in better times. A recession means general fat trimming for companies, from which they should emerge stronger, and that’s good news for investors.
One of the best signs is a company in a hard-hit industry that is expanding anyway. For example, McDonald’s continued to grow in the 1970s downturn even though restaurants generally suffered as people cooked rather than going out to eat.
A recession can be a blessing for investors, as it is much easier to spot a strong company without the white noise of a strong economy
Spending more than you are earning is the downfall of many families and it is imperative that either you budget carefully or find a way to supplement your income. This can be done by selling unwanted items from your home or garage.
Free classified sites or auction sites are an easy way for you to do this. If you find something industrial or specialised why not discover via the Internet a local company who will buy your unwanted equipment or machinery?