Consumer Spending in the Great Recession - Zach Gottschalk

Interview with Nan Wilson. Nan is the owner and sole proprietor of Interiors of Edmonds, a small business in Edmonds which specializes in interior decorating. She is my grandmother.
1. Have sales for your business slowed down since December of 2007 (the start of the Recession)?
Slightly, but yes.
2. What makes you think that your sales have not dropped as much as the sales of other businesses?
I think I have a business that covers a lot of things for people in their homes and if people can't move and can't do major things, they will do small things. People like to be doing something, and my business allows people to do that without spending too much. I also have a huge clientele base.
3. How would you describe the social class of the majority of your clientele base?
Upper middle class to middle upper class. I have some pretty wealthy clients and they are secure in their finances. They're pretty situated.
4. In your opinion, if people in your clientele base spent more money than they do at small businesses, would it help end the Recession?
Yes, it most definitely would. Circulating money always helps. It's so far reaching, it helps everyone. Workers, suppliers, employees. It gives some confidence to the world that it's OK to spend.
5. Have you tried using any sort of incentive in order to increase sales?
Yes, a 20% discount that we do twice a year.
6. Did it work? If not, why don’t you think so?
Yes it does work.
7. If it did work, would you plan on using incentives in the future?
Yes, we plan on doing this more in the future.
8. If there was not a Recession, would you be more or less inclined to use incentives?
I've done this consistently throughout my years in business so I would likely continue to do it.
8.5.
They are not loyal because of the incentives, I have simply established a large clientele through good service.
9. In your opinion, if the media did not hype up the Recession, would sales be different?
They've hyped it up way too much. It would not be as bad. Honestly, it's probably mostly mental and a lot of it would not be as bad if people weren't being told it was as bad.
10. Have you ever tried collaborating with another small business owner to mutually increase sales?
No.
11. Why not?
Anybody who I would do that with would be a competitor, so I would not want to do that.

Interview with Jon Peder Bakken. Jon is the president of the northwest branch of Bergen's, which is a small company which specializes in alpine sportswear. He is the father of one of my best friends.
1. Have sales for your business slowed down since December of 2007 (the start of the Recession)?
Yes, they have.
2. What do you think the reason for this is?
People have less spending money. Less discretionary funds.
3. How would you describe the social class of the majority of your clientele base?
Middle class. Some upper and lower, but majority middle. Some at upper end.
4. In your opinion, if people in your clientele base were more willing to spend money on products made by businesses similar to your own, would it help end the Recession?
Yes. Anyone spending any money on anything puts money into the economy and it moves and it allows people to make money which generates jobs, more work. And those people earning money will again spend money, and so on.
5. Has your company tried to use any sort of incentive to increase sales?
Yes and no. Yes, we have. But no, because it's the same sale that we've had before, not a unique sale to this time period. We have not done anything different than we've done before since the recession, but our standard sales generation activities.
6. Did sales increase? Did profits increase?
Yes, sales do increase. But the reaction this year was not as much as in previous years. But it did generate sales when we had our promotion. No, profits actually decreased during the sale. The per unit profit was much smaller, but the total profit increased but it is not in a linear relationship with the number of units sold. Per units sold increase was smaller. 100 x 50 extra profit. So only 100 x 30. It increased at a much smaller rate.
7. If it did work, would you plan on using incentives in the future?
Yeah, we would. It's a standard time of the year sales promotion that we have. We would do it again next year. It helps generate a larger clientele base.
8. If there was not a Recession, would your company be more or less inclined to use incentives?
It would be the same. Neither more nor less. The reason for Bergen's is that we're a relatively small player in the industry in the US. So our focus is on incremental sales growth and we use a standard promotion at a particular time just to generate and flush out some particular inventory. And that allows us to get a product into the hands of the new customers that otherwise probably would not buy Bergen's, and thereby we get more people experiencing the quality of our product and that builds our loyalty so they'll come back and buy us at full price.
9. In your opinion, if the media did not hype up the Recession, would sales be different?
No, I think it would be similar because I think that most people make decisions based on their particular discretion. Not on whether or not the media is hyping it up, just based on whether or not they have money. Just on middle class people in our audience, people are smart enough to realize what they have to spend and they spend what they can.

Interview with Charles R. Gottschalk. Chuck is a Vice President and Financial Advisor to wealthy people at a company called Bernstein Global Wealth Management. He is my father.
1. Please describe your position and what you do.
I'm the Vice President and Financial Advisor at Bernstein Global Wealth Management, which is a Wealth Management company. We work with high end individuals to manage their money.
2. In your opinion, would you say that your clients are willing to spend their money on an above-average amount of luxuries?
It really depends on how much money they have and how secure they feel. If someone feels like they are being crunched by the recession, then they will not buy many luxuries. However, if someone feels like they are secure, they will spend normally.
3. In your opinion, has the recession that started in 2007 caused wealthy upper-class people to become more frugal?
Yes, most definitely.
4. In your opinion, would increased spending by upper-class people such as your clients help end the worldwide recession?
Yes. Anything that puts money in circulation has far-reaching benefits beyond what can normally be seen. It would certainly help quite a bit. Only a mild uptick would definitely help.
5. In your opinion, what could potentially end the recession, if not increased spending?
Increased spending by businesses would definitely help. Also, the world's economy in unstable throughout the entire world. Many nations are facing declines similar or worse than that of the United States. With a return of consumer confidence in the economy, spending will go up.
6. In your opinion, what main factors caused this recession to begin in 2007?
The burst of the housing bubble definitely was the main contributor. There were lax lending standards by banks which allowed for a run-up in investment far beyond what was realistic. Companies overextended with loans and business a lot. Values of houses plummeted when the housing bubble burst. There was a downward cycle, and a lot of credit froze. Nobody could borrow any money, and this caused massive layoffs by various businesses.
7. In your opinion, is the recession cause for more cautious spending by consumers (as opposed to needless worry or fear)?
It's not a cause to stop spending, but it's definitely a good reason to not overspend and be a little more cautious. It's certainly a wakeup call. It's just cause to be a lot more frugal if you are in unstable situation such as unemployment. It's OK to spend normal or slightly reduced amounts if you have some measure of stability. People need to get back to balanced spending.