13 August 2010
Where's The Economy Really At?
I have been intrigued by comments by Mervyn King and others about the state of the economy, as I am not sure whether they ever take into account the real situation for small companies. So I thought I would briefly blog some notes about Steenbergs at present.
Employment - Unemployment : one of our members of staff has just left to another business on site and we are advertising to fill that post at the Jobcentre Online (our favourite way of advertising), which is just the best service. In the past, when we have sought to recruit for this same role, we would get maybe 3 or 4 applicants, but this time we have 20+ applicants and they are still coming in.
Firstly, it's a warehouse role, so where are the ladies who would like to do this, as while it is being offered as part-time and for anyone, we are only getting men applying and of all ages, but not a single woman. Secondly, there appear to be a lot of local people who have been made redundant recently. Thirdly, I am not sure whether there are really more people available, or whether because of the gloominess in the air, people have set are prepared to look at a part-time role where in the past they would only have looked for full-time.
Finally, we are changing a full-time role into a part-time role, or perhaps no role if we do not find the right person. Are we simply part of a general caution in the economy that has become fearful about recruiting, because of the fixed costs of financing such a role and the structural rigidity of hiring someone (and the emotional desire to keep that person employed once taken on) rather than bringing in temporary staff as and when we need them.
Credit quality: We have noticed a real fall off in the credit quality of businesses we deal with over the last 6 - 9 months. Now my dad always says that "only businesses with no business have no bad debts", but still people who do not pay their debts frustrate and waste a lot of time and energy. I know that some of you will say use credit checking agencies and that will mitigate your risk, but most of the people we deal with have no credit history as they are small, start-ups or have no real debt history, hence we need to make our own judgment calls. So while we have not had such a big bad debt as we had 3 years ago (I am crossing my fingers and touching as much wood as I can find as I write that spookily self-prophesying line), we certainly have had more in volume. Most have been small debts of less than £100 each, but they add up and are truly infuriating.
Many people this year just seem to be disappearing or telling us that they are closing down without paying out their debts, or the administrators get called in to protect the creditors - has anyone ever been paid out by the administrators as it is mysterious how the banks and the administrators themselves seem to take any available cash and leave the small creditors out to hang and dry? It's that eternal thing of the big being protected and the weak being screwed.
Our worst recent experience was The Natural Kitchen that went down last year after they had ordered lots of kit from us just before going into administration - the annoyance was they only bought from us because as Northerners we did not know they were in dire straits (I am sure everyone in London knew!) and when we asked for the stuff back they said they would pay for half of the invoice as they knew they did not really own it, but they never did - rightly assessing that we would never drive from Yorkshire to London to take back the remaining stuff from the shelves; serves me right, I guess. And Natural Kitchen are backed by millionaires from the property world and investment banking, who quaff their premier cru wines without a care for the hard earned cash of others - disgraceful, but completely legal - aaaargh, it still makes me grumpy!
Sales: actually, they are doing surprisingly well, but we continue to innovate, tweaking our designs, range and recipes. A few buyers of bulk ingredients are trying to switch to non-organic from organic, but some of the less active ones from last year like Spicemanns/Kerry Ingredients and Elgar Foods and Walkers Shortbread are buying again, while new ones are coming on stream, such as Northumbrian Fine Foods and John Morley; we seem to do well with small batches of blended spices for organic Fairtrade mixed spice and organic sausage seasonings (e.g. for Northumbrian Quality Meats and Riverford Organic) that no-one else will or can do, including exports of our organic curry powders to the Continent. Prices are stabilising with less currency turmoil, even though commodity pressure is still upwards, which gives better pricing forecasts overall; everyone was nervous in 2009 as costs were all over the place, and contracts from previous years had became onerous.
General retail is only slightly up, but that's partly our fault as we have chosen not to embrace with the big bears of the retailing world as we are not ready to lose control of who we are and what we stand for, even if it means sales will not go into the stratosphere; we are seeing good sales of Steenbergs organic bakery ingredients via distributors like Hider, Queenswood, Suma and Tree of Life and continued good sales into some of our bigger stores like Fenwicks, Selfridges and Wholefoods on High Street Kensington, as well as really exciting enquiries from overseas, such as Whole Foods Market in the US.
Then the web store is going a storm, but that's more to do with increased tinkering by Sophie and me on search engine optimisation and playing with social marketing (the challenges of Facebook, Flickr, Linkedin, Twitter and we are even looking at how to use Youtube), allied to a massive increase in the range of products that we sell. We genuinely think we do www.steenbergs.co.uk differently from anyone else's way of retailing (whether www.tesco.com or www.ethicalsuperstore.com), and will continue to do it in our own eccentric way, for better or worse, chosing products that fit with Steenbergs image as ethical, green and different.
It's tough trying to change the world, but every small step forward is a step in the right direction - we will not give in to the temptations of a quick, easy buck, however nice that would be.
Given that ramble, where are we then? Cautiously optimistic about Steenbergs, but gloomy about the state of the economy.