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Some businesses are doing quite well, thank you very much

The Great Recession has wreaked havoc across industries with very few exceptions.  Still, there have been a few bright spots.  Today, we read in the Financial Times about two very different companies that are both doing quite well, at least relative to their peers.

British airline EasyJet (the no-frills Southwest Airlines of the UK) reported that it’s passenger numbers rose at the fastest level in five months in September.  Year-over-year traffic is actually up 5.3% — not bad during one of the worst economies since the Great Depression!  Irish low-cost competitor Ryanair also posted good numbers, but British Airways continues to struggle.

So, in an environment where fewer people are traveling for both business and pleasure, we see those that do travel switching to lower cost alternatives.  EasyJet says that some of its increase in passenger traffic is from business travelers who are “trading down” to cut costs.

It’s not too surprising that cheaper alternative are doing well in the downturn.  But it is quite surprising that demand has remained so high for certain luxury goods.   High-end handbag maker Hermes still has a waiting list of two years for some of its purses.   In the worst recession since the 1930s, there are still people willing to pay $7,000 and wait 2-3 years for a handbag — and enough of them to justify the opening of new stores and hiring of new staff!

So what is the secret to be gleaned for aspiring entrepreneurs from these two very different stories?  We wish we knew.   At the very least, we can say that one size does not fit all.

For the mass market, it comes down to price.  The common man looks to stretch his dollar as far as it can go in a downturn.  For wealthier consumers, perhaps it is more about perceived value.  At any rate, it is certainly refreshing to see a few companies doing well in what has otherwise been a horrid year for the retail and transportation industries.

Charles Sizemore, CFA
Co-author of the recently-published Boom or Bust: Understanding and Profiting from a Changing Consumer Economy