Opinions & Advice

American memories are shorter than ever

If there is anything 2008 taught me, it is that America’s memory has shortened even further than it was before.  It is amazing how fast people switched their car-buying habits based on gas prices going up and coming back down.  I can’t get over the speed at which truck sales died and came back.  Do people really believe we’ll never see an increase in gas prices again?  Did the environment take a back seat in our Hummers once again?

The housing market died and interest rates are at their lowest, but even with housing still in the toilet people flocked to new purchases enough to have every mortgage broker and Real Estate agent I know working through Christmas.  All indications show the housing market is going to continue to drop, so why invest now?

Never try to catch a falling knife.

Wall Street is a bloody mess, but I hear more and more people are throwing money at it thinking a big return is going to happen next week.

Wait for the knife to hit the floor first.

Don’t get me wrong, I am super happy to hear people are spending money – we need it to happen more!  I’m ecstatic some faith is being restored to the system.  I’m just intrigued by the month-to-month mentality we seem to have in this country now.  One of my degrees is in History and maybe it is that dorky academic side of me that finds this whole mess fascinating.

One thing these consumer trends are showing me is that we can either get away with more experimental advertising or have to get more long-term with our campaigns.  It is obvious people are not going to remember when you made a mistake.  Sure, a few folks will, but the masses won’t.  At the same time, maybe it means we need to start thinking about spreading our messages farther and longer.  Maybe it means we have to beat people over the head until they say stop.  Maybe we have to get extremely targeted…more-so than before.  Maybe we should concentrate on branding more than ever.  Maybe we should do more guerrilla marketing.

Whatever the marketing tactic is for 2009 it is going to be an interesting year to say the least.  No matter what, it will be tougher and require better strategizing than ever before.  I think it will be a good year for online and anything that is free to consumers (non-subscription based medias).

Who knew an argument with Jeff Kershner, in 2005, would lead to Alex becoming a partner with him on DealerRefresh. Where will the next argument take ...
  • G
    Gerald Hand
  • December 26, 2008
No kidding! We see everyday how our attention spans seem to retract daily, but what is really funny is how inane the customer really is!

You point out the customer running away from trucks when gas went up, but then gravitate back to them after prices fall. What slays me is- Why did you buy the truck in the first place!!!? Did you NEED a truck? If so, how did that need change when gas went up, and now that need magically come back when prices of gas rise again?

I don't remember that many people riding the short bus to school, but geez, maybe I was wrong.

As a fellow Historian, I find this as entertaining as you. But it is nice to have a good understanding how your buyers will behave in some situations.
I'll take the opposite side of the debate. I’ll employ yet another old trader mantra…


Where have our customers gone? They’re not in ANY stores! The TV news these days is full of fear and we all know nothing rivets an audience better than some good old fashioned "the world is ending" fear (see wikipedia: Chicken Little) haha...

Ok, the news on TV is grim, but what news is brewing behind the scenes? Good news I say! First, we know that 93 out of 100 of your customers are still working and second, they ALL have to drive to work and BETTER NEWS! 93% of the US population has been given a BIG raise recently!

Since July 4th, gasoline has fallen just over 60%. In NY, it’s fallen from $4.30 a gallon to $1.60’s. Where ever you live “The Oil Bubble of 2008” has popped, but, the Credit Crisis on TV has us all paralyzed.

Ok, while we're in our fox holes watching TV news dispense doom and gloom, how are things at your customer’s home? Let’s look at their gasoline bill, this month vs July (5 months ago).

Mr. and Mrs. Average Joe have a sedan and a SUV and drive 15,000 miles a year each.

Chevy Impala = 56 gallons per Month

JULY: $4.30 p/gal fill up = $240.80

NOW: $1.65 p/gal fill up = $92.40

Save = $148.40

A Ford Explorer = 78 gallons per Month

JULY: $4.30 p/gal fill up = $335.40

NOW: $2.65 p/gal fill up = $128.70

Save = $206.70

Combined gas savings per month: $370.10

That is sweet news indeed!

Drop this Credit Crisis news and we’d be over run with consumers! Alas, the credit crisis news is grim and hides this windfall. But, as the weeks pass, the Fed intervention will make its way into the system. Fear will ebb and your customers will get that “all clear” signal to come out into the sun.

In the mean time, they’ll have been enjoying a windfall of lower energy (and falling food prices). This windfall is enormous and is piling into our laps. Remember, it was just a few months ago when everyone (me included) had resigned ourselves to the new era of $4 gasoline.

When the time comes for your customers to dump the old car and buy new, they’ll be more conservative and far more open to the value of a used car then ever before. There has never been a better time for the future of selling used cars than here and now.

oh, one last thing...

July's gasoline shock crushed everyone's retail appetite. Septembers stock market fall sealed every families resolve to have a very simple (low cost) Holiday.

So, average Joe's gasoline windfall keeps piling up AND add a low cost Christmas and Average Joe is paying off those Credit Cards with glee!

All the while, since July, he keeps racking up miles and miles on his aging ride. He’s holding back from buying new, waiting for the smoke to clear...

While Average Joe is holding back, auction yards are spilling over with excess inventory. Lease returns, cash strapped dealers looking to raise cash, rentals, are all trying to find a bidder.

Manheim's Auction Index has had the steepest price decline in its 15 year histroy, now 2 months running.

At this point, there is NO PROOF that Average Joe is going to show up and save the day. But, you can see the potential for a rebound.

I am a firm believer that the 1st Q of 09 will be a banner year for used cars. I hope your dealer is poised to "catch a falling knife" and bravely go where no sane man dares pass… step in there and buy some really cheap inventory to flip into spring's new market.

A strategic optimist,
  • J
  • December 26, 2008
It's not a knife falling, it's a sword, and it's only just begun to fall.

thanks for the positive post Joe!
John you can stay in your foxhole :)
Joe, I love the gas price raise math! I believe the turn in consumer confidence is coming soon. Look at how many stores had half price or better offers through the holiday shopping season. So many of us love spending the money we work hard for and with prices on everything including cars being a good buy right now how can it not bounce back? The retailers that understand consumers will consume when the perceived value is greater than the price will capitalize in all economies. I know we intend on being that retailer.
Joe we've gotta get on the phone soon,
Man this is an interesting post.

First off, John as I mentioned in a previous comment, and has been reiterated here-- the spread of bad news and belief that things are terrible will continue to make things worse, not better. Hence the term "consumer confidence."

Yes, our overall economy is at an all-time low. Unemployment is high (unless you live in ND apparently). But the reason things will continue to get worse will be because of consumer confidence.

As Grant Cardone said, the power to turn this economy around is in the consumer. If the consumer is empowered (tax incentives, loan incentives, Madoff gets the chair... just sayin') then it will spur our economy.

There are still good investments to be made. Good money to be spent. Heck, if you bought trucks when gas was high, you're making good money on them now!

As a real estate investor I have followed the market very closely. I haven't bought a house in 2 years because I smelled it coming (it hit us a little later than most of the country).

But as mentioned, houses are still selling. Freddie Mac and Fannie Mae are getting their crap together. They're doing what they can to NOT put houses in foreclosure. It would be a spur to the market to start buying some of these foreclosures in the months before summer, and have them market-ready by summer, keeping in mind they won't sell for what they would have 3 years ago. BUT it's a market adjustment.

I may be wrong on that, it is just speculation. Ideas?
A fellow cyclist acquaintance runs this site
if you ever want some positive news http://positiveeconomicnews.com/
that's why I like cyclists they always seem to find the positives in everything.
Back in the day, before 24hour TV News discovered how well paranoia sells, we had to ask ourselves....

When do you know you're in a REAL REAL DEEP Recession?

You see tires being driven down to the chord.
Restraunts (all of them) totally empty.
Cigar butts smoked all the way down to the filter.
Car pooling chatter heard all the time.
You reuse coffee filters.
You add coffee to day old coffee grounds.
You don't buy jeans with holes... you earned them.

No one talks about how recessions can produce MORE of a lot of stuff...

You see a lot More...
More hitch hikers
More noodle casserole meals
More drinking
More neighbors helping neighbors
More cars on jacks in neighborhoods
More college grads doing trades work (God help us all if we need to kick the illegals out to take back work in this arena)
More patches on jeans...

Not all places are suffering the same. Some areas are bearing most of the downturn. In the Great Depression, if memory serves me right, I recall that San Francisco missed the whole event.

Joe - that's great. I have to admit that I've gotten a little caught-up in the down side of the market lately...if that wasn't obvious. Thanks for lightening things up!
The negative spiral can only be stopped one way. By spending money! All those folks that are afraid to spend money because they do not know whether they will keep their job or just wait for the market to turn around. Well, it won't unless we start spending money.

Although I agree with Joe that their are gas savings currently. The oil prices have been going down because of the slowing/declining growth of the economy. So as soon as the economy turns around, the gas prices will shoot up again. The economy is a funny thing. You lower the rates to improve the economy, but indirectly this will affect the economy in a bad way to.

Really the answer is that we all need to go shopping our a** off, so companies will start reporting positive sales numbers, which will lead to more jobs and more people spending money.

My 2 pennies.