Businesses which can stand the onslaught of recession
Speaking about the far-reaching effects of a global recession, billionaire inventor James Dyson had once said: “So I think the winners during recession are the people who produce new technology that does things better, which people really want.”
Businesses often spend too much time analysing how a recession will adversely impact their businesses. And with good reason. With a sudden shift in political ideologies and leanings, the global market economy awaits an impending impact. Factors like shift in import-export levels, as well as devaluation - can always lead a country to a state of recession, inherently affecting businesses it is in economic contact with.
For instance, reports suggest that the UK could be on the brink of experiencing a technical recession, by the end of this year. The effects of Brexit is already drawing on the island nation, as its economy grew by a mere 0.2 per cent, and as far as the numbers go it may remain stagnant for the second quarter as well.
Across the world too, Brazil is undergoing its worst recession in history. With unemployment rates soaring to 12.6 per cent in January, leaving 13 million Brazilians out of work. Experts suggested that even the USA might face the same fate, due to the ever fluctuating market trends and the unexpected election of Donald Trump as President.
While most businesses struggle to stay afloat, there are several which are either resilient or remain significantly unaffected by it.
No matter what the economic or market conditions, healthcare is a sector which can truly stand the test of recessions. It even fared well during the global meltdown of 2008. Despite some cuts, American federal funding for healthcare rose 16.6 per cent from 2008 to 2009, to promote healthcare reform efforts and support federal insurance funds (primarily Medicaid).
As a result, healthcare spending increased and resulted in 17.6 per cent of its national GDP in 2009. Furthermore, according to the Bureau of Labour Statistics (BLS), in the post-recession period in America (from 2010 to 2011), employment in the healthcare industry increased by 265,000 jobs, or 34.3 per cent.
People will continue to seek out medical help, hence be it hospitals, doctors or even pharmaceuticals - the healthcare industry is always up and running. At the same time, since health care costs are mostly covered by insurance (in most countries), the money thus allotted to healthcare expenses are already pre-funded and thus not in competition with other types of purchases in a recession-ridden market.
“Patients spend less on cosmetic products such as dental implants, but they cannot postpone life-sustaining procedures and treatment for heart disease and other ailments,” said the then co-President, Aaron Dickson, of Millennium Research Group.
The business of wedding planning is one of the rare ones that does not rely wholly on the current market situations. Spending on weddings, will never be compromised on, even during the time of recession, as can be indicated by the standard or even increased rates that most families had spent on a wedding, even during the global meltdown of 2008.
The US had witnessed a 5.2 per cent increase in wedding-spending in 2008. The survey conducted by KNOT proved that despite the growing economic concerns of the 2008 recession-hit market, there was an overall increase in wedding spending. Another report suggested that in the same year, about 16% of brides had a destination wedding, a significant increase in the last ten years. The numbers have only risen since. in 2016, the average wedding spending rate was $36,978 in the US.
According to an earlier cited report, in urban India alone, there are roughly 10 million weddings taking place every year, and each one on average costs Rs20 lakhs or more. Even though the demonetisation of 2016 caused a bit of a stir amidst the industry, it was far from a significant one, as urban Indian families continued to pay exorbitant rates to get the knot tied.
Even amidst a recession-hit economy, taxes need to be filled. In fact, during recession, countries often increase the tax rate levied upon its citizens. As a result, the job of an accountant becomes top-valued, given that people would be scurrying to protect every penny and dime.
Analyst Libby Bierman had said: “We know taxes are unavoidable even during a recession, and hence the dependence on accountants remain. In fact, the accountancy industry’s revenue spikes during a recession due to the fact that clients need advice on how to save the maximum."
Businesses involved in carrying out courier services are also less vulnerable to a recession to a large extent. While financial constraints may limit individuals from purchasing a great many things, the need to send across packages – be it local, national or international locations, are usually left unperturbed. At the same time, several companies which include home-delivery services, may wish to cut back on the same for the financial constraints at hand - and thus choose instead to outsource their orders to courier services.
In some countries, the courier service industry fared even better during the onslaught of the 2008 recession. In Canada, the couriers and local messengers industry included 19,546 establishments back in the year and despite the recession, the industry generated operating revenue of $8.7 billion in 2008, up by 4.2% from 2007.
With pockets clipped as a direct consequence of recession, people tend to usually curb dining out, and choose to save every dime by eating at home. As a result, there is an increasing dependence on grocery stores because everybody needs the basic amount of groceries to get by on a daily basis.
A recession is not an excuse for people to not look and dress their best - the ‘lipstick effect’ proves the point. According to economists, the lipstick effect is the phenomena by which people substitute extravagant purchases like cars and holidays for smaller luxuries like make-up. It was first identified during the Great Recession of 1929-1933, where while industrial production in the US halved, the sales of cosmetics rose. Similarly in 2008, cosmetic giants like L'Oréal reported that its sales were up 5.3 per cent.
"The evidence shows that when budgets are squeezed, people simply substitute large extravagances for small luxuries," says Dhaval Joshi, analyst with RAB Capital.
At a time when people are hard-pressed for money, they won't be looking to purchase new items- be it cars, televisions or other household appliances. This provides for an avenue for those in the repair and fixing industry. Recession have always ensured an upsurge of customers as repairing an existing product is a cheaper option.