About a decade ago, I came up with an “idea” of opening a shopping mall filled with stores I loved that have gone out of business. Of course, I never imagined retail institutions like Circuit City, Linens ‘n Things and Sharper Image could be tenants in my fantasy shopping center. Yesterday – a day the media are calling Bloody Monday – brought even more devastation to the retail sector and beyond. Seven companies (including retail giant Home Depot) announced layoffs on January 26th, totaling 71,400 jobs lost.

Is anyone winning the retail battle?

The list of retailers in my make-believe mall ebbs and flows, but one constant is a store that existed in The Columbia Mall in Maryland called Cedar Post. They sold select must-haves from trendy designers (e.g. Guess? and Esprit – it was the ‘80s). If they had a private label brand, it wasn’t the focus. Their retail strategy reminds me of a current store called Buckle that’s actually thriving despite the economic downturn. According to a recent article in BusinessWeek, the main secret to its success is that 70 percent of the chain’s products are from independently owned clothing lines – such as Affliction Clothing and MEK Denim – as opposed to designing and selling branded merchandise. This “shallow and wide” inventory approach enables the company to respond to the rapid changes that are the norm in the fashion industry. The chain has 388 stores and 2008 sales were up nearly 30 percent. Another trend-bucker referenced in the article was Aeropostale.

Yesterday, when I arrived at the office, I noticed a clothing boutique on the first floor of our building was cleared out. While I found it surprising that there was no notice or liquidation sale, I assumed it too was a victim of the retail meltdown. I had mentally added two (the owner and her assistant) to the 71,400 jobs lost yesterday. Imagine my delight when I found out this afternoon that she simply moved her shop to a better location where she’ll have more foot traffic.

There are clearly lessons to be learned from those who are surviving these tough times. At a minimum, they seem better prepared to listen and respond to the voices of their customers. And I – normally the eternal optimist – need to remember not to always assume the worst.

While the current economic crisis is creating a great deal of uncertainty, there are definite trends developing in our industry. We put our heads together to come up with our top five predictions for 2009. Here goes…

1. From magazines to mattresses: Media companies will overhaul their business models. It’s not news that people are becoming less and less dependent on traditional media channels for information. And, as a result, traditional outlets are receiving less and less advertising revenue. So how will the survivors continue to thrive? In March of 2009, Meredith Publishing will begin selling Better Homes & Gardens-branded mattresses. And we think a lot more of this type of drastic diversification is on the horizon. Of course, what hurts publishers also hurts advertising agencies. According to a recent story in The New York Times, agencies are now creating their own brands as opposed to solely marketing others’. So far, we’ve seen chocolates, furniture, clothing and pre-made meals. What’s next? 2009 should reveal even more business model twists and turns.
2. Smaller is better: Marketers will look to boutique agencies that can do great work for less. Every time there is an economic recession, it presents an opportunity for brands to rethink their agency relationships. In the past, we’ve seen companies consolidate their agencies to create economies of scale. And we’ve also seen even the most venerable brands open to working with smaller agencies to maximize the value they receive. What’s different this time is the depth and breadth of the economic downturn. New technologies have leveled the proverbial playing field for smaller shops that can now compete with global giants. Given the unprecedented squeeze on marketing budgets, we think companies will be more inclined to work with boutique agencies than ever before.
3. Long live YouTube: More companies will succeed using social media to connect directly with their customers. It’s no longer acceptable to brush social networking off as a fad reserved solely for the fickle youth. Barack Obama proved that more effectively than anyone in 2008. Novartis also became the first pharma (read: heavily regulated) company to launch a user-generated content contest on YouTube late last year. The Israeli Consulate even used Twitter to answer questions about the latest conflict with the Palestinians just before the New Year. We believe more companies (and governments and non-profits!) like Novartis will take the leap in 2009.
4. Traditional media outlets will continue to join – not beat – their blogging rivals. (But will it be enough?) Most traditional media outlets blog by now. Some build, others buy. Just last week, Consumers Union (the publisher of Consumer Reports magazine) purchased the Consumerist.com blog from Gawker. For Gawker, it presented an opportunity to offload one of its properties before online advertising revenues took a hit. For Consumers Union, who is not dependent on advertising revenue, it provided access to millions of younger users to whom they can sell subscriptions to Consumer Reports. We think more of these types of marriages are forthcoming. But while online advertising has been more stable than offline, how long will that last into 2009? And will bolstering an online presence through blogging be enough for a traditional outlet? To that end, we predict independent bloggers as third-party influencers are here to stay.
5. It’s the economy, stupid: Companies will try to stay relevant while Americans struggle to make ends meet. All marketers will have to be sensitive to the challenges faced by their customers in 2009. We predict companies will create messaging that shows the value of their products and services like never before. They will also show how they fit into downturn trends, such as nesting and the search for greater value. What will be interesting is to see how they do so in a way that allows a seamless transition once the economy begins to recover. We imagine a few marketers will stumble as they find their way. Remember when Wal-Mart tried to be more like Target once it realized shoppers want more than savings? Square peg, round hole.