Wednesday, March 19. 2008Business Remains Stronger Than It Should Be....John Linton .....and I'm not sure why that is or what to do about it. With the latest US catastrophe (Bear Stearns, fifth largest investment bank going broke) forcing US interest rates down to 2.25% (don't you just wish) and the Australian stock market down 20% so far this year I'd have expected to have seen that magnitude of bad news reflected in most of the new orders/retention rates in at least some of the services and products offered by Exetel by now. Not the case. Heading in to the Easter long weekend and the various holidays associated with this time of year, I would have expected to see the usual slight downturn in order in takes negatively affected by the financial bad news that has been omnipresent since November 2007. However, a record January was followed by a record February and March (allowing for Easter) is looking pretty much the same - across all services and products. Taking in to consideration our own decision to stop selling the AAPT/iiNet based ADSL2 services (around 10% of our total new ADSL order intake) the orders remain strong and, within three days, the loss of the AAPT/iiNet ADSL2 orders has almost been fully recovered by a 10% increase in the other ADSL orders - despite the fact that this time of year generally sees a slight decline in orders received. I know that there is nothing we have done to 'improve' our offerings in any remarkable way and I still see the targeting of our ADSL1 customers by Telstra and the appeal of TPG's 150 gb off peak downloads dividing up the churns away from Exetel at the same rate - but not increasing any more. Puzzlingly, I'm now seeing an increase in churns to Exetel to the highest daily rates for over 12 months. What is going on? Perhaps the 'resources boom' continues to provide so much money to so many people that the bad news just isn't registering? Perhaps, in reality, there is no bad news other than media hype? I'm beginning to think that we've been over cautious over the past three months and a down turn in the Australian economy isn't going to happen after all and we'll somehow be magically protected from the problems in the USA - despite the Australian share market falls. In the mean time it makes planning for anything more difficult as all planning has to be based on some underlying marketplace 'health' assumptions. I see that 'luxury' new car sales in Australia are at new record levels which, apart from anything else, seems to indicate that some large section of people see no reason not to spend their money on non-essentials. The restaurants I go to seem to be even more crowded than usual and the staff/owners with whom I have some acquaintance all say that their business is good - so spending on another non-essential doesn't seem to be affected. (I couldn't get a table at Sydney's top restaurant for my birthday on the Tuesday after Easter - always a very slow night - which means something). Maybe business will remain good for the rest of this financial year at least? So what does it all mean? I absolutely have no idea and I also have no idea of where or how to look to try and get some understanding of what it all means in terms of the types of businesses we are in. Perhaps it would be better just to have an extra long weekend and forget about the whole thing? Seems to work for some people I know. Trackbacks
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( "Perhaps the 'resources boom' continues to provide so much money to so many people that the bad news just isn't registering?" )
Or perhaps when times get hard, people move away from high-cost services, and look for budget solutions... like Exetel. ( "I see that 'luxury' new car sales in Australia are at new record levels which, apart from anything else, seems to indicate that some large section of people see no reason not to spend their money on non-essentials. The restaurants I go to seem to be even more crowded than usual and the staff/owners with whom I have some acquaintance all say that their business is good" ) No slight intended, but hard times don't usually affect those people in the higher socio-economic bracket, and there are still plenty of people like yourself who aren't scratching for every dollar. Those who do (the greater proportion of the Australian population, particularly those who are struggling with a family and a mortgage), look for budget solutions. Someone in your financial position might not realise that there are huge numbers of people who haven't been able to afford to go out to a restaurant for dinner for several years, due to their economic circumstances. Again, no slight intended. Comment (1)
My comments about restaurants weren't intended to be callous/offensive - simply examples of an industry that tends to feel the cold winds of economic down turns first.
Similarly (not having bought any sort of car for over four years) I found the luxury (above $A54,000) car sales surprising considering the 20% stock market drop (and the resultant margin calls) would have removed a huge amount of 'discretionary' spending power from those sorts of people. Comments (3)
I agree. The spending patterns of consumers don't seem to be tightening up fast, but they are beginning to turn.
House prices for example, in Sydney have taken a change recently, and with just a few more rate rises, it should push things back into place. Exetel is in a unique market, they have the lowest plan prices, so rather than go without a service, you try and reduce the cost of it, which generally means finding the cheapest price you can get a service for, regardless of quality, and taking that. In the next few rate rises if they happen, I'd expect to see Exetel gain even more customers for those trying to pinch an extra $50 from somewhere to pay that gap. I think the term for it is something like 'scratching every last cent' - they are beginning to feel the pinch, and those that don't want to go without, will find the cheapest they can get before going without. Whether they wise up to the scam marketing of "$14.97 internet for 6 months" remains to be seen. It'd be better if many woke up to themselves and started saving their hard earned money and realising, TV doesn't look different on a plasma. Comment (1)
I compared current to past figures the other day and realised that I'm (or my wife and I are) now paying around $113 more interest per week, or $5,900 per year, then I/we were when we bought our house a little over a year ago.
$5,900! That's enough to cover our internet, home phone, both mobiles, pay TV, rates and electricity! That must be hurting the over-committed. Comment (1)
No suprises that the losses from the AAPT/iiNet based ADSL2 services have turned into connections on other plans, Exetel has a wide range of offers and there is pretty much something to suit most users anyway, when asked I still more often than not reccommend an Exetel plan
Perhaps you are right though, I often feel that a lot of the negatives in the market are born out of media hype rather than reality Comments (2)
I really think its media hype. Really, economically, things couldnt be better for myself and my family, and judging by what you say, things couldnt be better for you either. If this is a bust - bring it on.
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It depends on which industry sector and state you are in. Some are going gangbusters while others aren't
JL have you noticed any trend changes between each state along the eastern seaboard? Comment (1)
The media is all doom and gloom, if you want a good barometer for spending watch petrol prices, when prices at the pump are up retail spending goes down and vise versa.
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