Saturday, December 12, 2015

Guest Post: Odd Business Cycles. By Ronald G. Pittenger

Odd Business Cycles. By Ronald G. Pittenger

Have you noticed the many cycles that seem to occur in business? When I was a boy in the early 60s, a lot of the slightly older boys who weren’t doing well in school quit and opened gas stations. It was like a skin rash that flared suddenly, stabilized, and then vanished with little trace left behind. By the time I was discharged from the Marines in 1968, only one or two of those guys were still in business. Some returned to school, most went on to other kinds of work.

Through the late 60s and well into the 70s, antiques were the rage. Everybody bought a book or two about them and opened a store. There were even a few people going door to door asking about "old stuff" they could buy (a few of those people were even honest). By the mid-80s, those were mostly gone, too.

Starting in the mid-70s, the thing was book stores and convenience stores. In the late 70s and early 80s, every coin collector tried going dealer (sadly, they are mostly gone, too). About 1982, everybody who wasn’t already a coin or precious metals dealer was opening a pizza, yogurt or sandwich shop. Many of the C-stores and small restaurants lasted well into the new century, but have withered away since, with most of the survivors evolving into a conglomeration of gas station, restaurant, candy and tobacco stores (with or without alcohol).

About 1995, it was all about cell phones. Kiosks and stores were everywhere like mushrooms after a heavy rain. Now, not so much; that business has largely gone to the big box stores.

In the early 2000s, consignment shops arose selling almost anything that can be imagined (Why not? They didn’t have to pay for it unless it sold; with no cost for inventory, you can carry anything that fits in your space). At the same time, there was a resurgence of "thrift stores," Salvation Army, Good Will, et cetera. A refinement of this was the used book store. So many people and organizations have more books than they can store, they were begging for someplace they could DONATE the excess to; the used book stores were almost forced into existence. For a while.

About 2005, it was dollar stores selling very inexpensive imported items and knock-offs of higher quality things. They’ve since evolved into "$5 and under" stores, and I expect their demise within a decade or so.

Starting about 2010, "donation boxes" were found in parking lots and almost any other place there was room for one. By last year, they were specialized to the point of "donate old eye-glasses here," "old books, CDs, video tapes," and "used clothing and shoes only, please." Last week, I went to donate some old clothing. There isn’t a donation box within five miles of my house in any direction. Not for clothes, shoes, books, eye-glasses, anything. I guess the donation craze is over, too.

I can’t help wondering if the first few people in each of these businesses made money, the next few iterations of them just got by, and the last batch failed miserably, taking all or at least most of the earlier efforts with them.

The good news is there always seem to be a few survivors in each of these businesses. The bad news is they weren’t always the best businesses, sometimes they were just the stubbornest. So, I can still find a place to donate my old jockey shorts; I’ll just have to drive a little farther to get to it.

A question pops up. Who made money on those failed ventures? Landlords and suppliers of fixtures and equipment had to have made money for at least a while. Governments at all levels had to have been paid, at least initially. Banks and other services had to have been paid in the beginning. Employees, if any, had to be paid except for the last paycheck or two. The owners might have recouped their costs and even shown a profit if they were careful.

This list of fad businesses is by no means complete. Surely, you can think of others to add to the list. Some are just off-shoots of prior businesses, like nail salons and costume stores.

Lesson learned: Beware of following the crowd into a business. If a business takes little capital to set up and little skill to do, unless you are among the very first in your area, be careful. Even the businesses that seem like they’ll always be around can be disrupted by sudden change. Buggy whips and ladies’ hats are still with us, but where those businesses were once on every street corner, now they’re rare.

A pie can only be split so many ways before the size of the slice satisfies no one. The beauty of capitalism is we’re always baking more pies. And seeking better ways to sell them.

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