In My Opinion
by John Fiske
Editor-in-Chief

Bubble or Burst

I’ve previously shared with readers the British studies (we don’t have equivalent American ones) that show that the antiques business is more closely tied to the housing market than the stock market. The housing market? Oh no, that’s not a market, that’s the spattered remains of a bubble! But, hold your breath, screw up your courage, and ask the question: were we in a bubble, too? Are our faces covered in soap suds because we were in a bubble that’s now burst, and we’re refusing to recognize it?
I’m not at all sure what, precisely, qualifies as a bubble. But it may be instructive to assume that we’re in one that’s on the point of going pop, or has already, and to figure out some of the consequences and appropriate behaviors. There are certainly some bubble-like conditions: there have been a number of years of steadily and sometimes rapidly rising prices. The constant records being set at auction and over-enthusiastically reported in the media have had an inflationary effect throughout the market, not just at the top. The result, I’m sorry to say, is that antiques have soared out of the reach of most people, leaving the business with a small, aging, and diminishing sector of the population. That’s not only true for the top of the market; our mid-range antiques have outstripped the finances of most of our middle classes. We have lost much of our market because large numbers of people who like antiques are not willing, or able, to pay the prices that face them in our shops and shows. The result is that, like housing, the market has slowed, and in some cases, stalled.
A burst bubble is not a temporary downturn that will end in a few months and everything will be hunky-dory again. A burst bubble entails a sharp price correction, maybe of 25 to 30 percent. At the end of it, prices will remain where they fell, and it’ll be a slow climb back to the good (?) old days.

I believe that a price correction will be a good thing in the long run, because it will open up our shrinking market. But in the short term it’s painful – very painful – particularly for dealers. Assuming that the bubble has burst, we dealers are sitting on inventory for which we paid fair market value in a bubble market. Now its value is falling every day that it sits there unsold. Our income-source is shrinking, our sales are slowing, yet our expenses keep rising – gas, food, booth rents, insurance, you name it. (A plea here to show promoters: please try as hard as you can not to raise booth rents when dealers are suffering.)
Is there anything we can do about it? Marketing gurus keep telling retailers who want to survive the recession to discount prices and reduce inventory. Discount, reduce. OK. Get it? Let’s see how far their advice might help.

Discount prices
Our customers are fully aware that, with some exceptions, the antiques business is slow; they know we’re part of the general retail environment, which is also slow. If they don’t see that fact reflected in our prices, they’re going to be put off doing business with us. It seems that every date in the calendar can provide shops with some sort of a reason for DISCOUNT SALE of one sort or another. American business is market-driven, and if we behave as though we’re not part of American business, we soon won’t be.
So we need to discount. But how far? Always at least one step below what, in normal times, you’d be willing to be bargained down to; sometimes even below cost. Then hold firm. “I’m sorry, I’ve reduced my price to the absolute minimum because of the recession – I just can’t go any lower and still stay in business.” She’ll understand, and she’ll buy. Make her feel that we’re all in these hard times together, which we are.
Customers will notice if your prices are discounted (they’ll certainly notice if they’re not). People go antiques window shopping on the internet for fun these days – it’s much more interesting than TV. All the time they’re not buying in shops or shows, they’re noting prices. People are more price-conscious than ever when times are slow, they’ll know if your prices fit the state of the market. If they don’t, antiques buyers, like house buyers, will hold off until prices fall even further (tell me about it, we’re trying to sell a house as well).
Now I do have to admit that it hurts to cut prices. When we did it, I felt as though I was insulting our antiques – cheapening them (in the bad sense of the word). Every cut felt like a cut to my heart – “It’s great, it’s worth way more than that!” But, after a bubble, it isn’t. To a lesser extent discounting also made me feel that I’d been stupid when I bought those items, thinking that I could sell them for ‘x’ when ‘y’ is the best I can get for them. But that feeling quickly went away when we started selling them for ‘y’. And we did.

Reduce inventory
Inventory that’s sitting around not selling is as much use as a lump of cold pudding. Cash is what gets us through a recession, not inventory. If your inventory sits still and your expenses and overhead keep roaring along, your business is out of balance. What kills small businesses when times are tough is lack of cash, not lack of inventory. So look at your old friends, sitting dustily on their shelves, and think how you can turn them into cash. Forget what you paid for them, we’re not calculating profit at this stage, we’re turning inventory into cash.
The bubble will pass into history, they all do; the recession will end, they all do. But we should resist succumbing to the vain hope that post- and pre-bubble prices will be the same, and that we’ll eventually get our asking price. It’s not gonna happen, no way. When prices are falling, the last thing you want is inventory; sell it before it falls in value even more.
Be strategic, but be tough with yourself. Figure out the smallest inventory you will need when the market recovers. Then identify the individual pieces that must be included in it. Turn the rest into cash. To be in good shape for the post-bubble economy, you need a small inventory of items that people will really want to buy and will be able to. And buy they will. Americans hate not being able to buy; recessions create pent-up demand.

And afterwards?
OK, buyers will return when the recession ends, but who will they be? They might just be those young buyers whose current absence causes us frequent fits of wailing and breast-beating. Post-bubble pricing might be just what is needed to bring them into our market. You’ve heard people moaning that tastes have changed, that people no longer want antiques. How do they know? Young people may be buying new and ethnic and funky-junky because that’s what they can afford, not because they actually prefer it to antiques. The design gurus, from Martha Steward downwards (if there is anyone downwards of her) are doling out the advice that people actually need – which is how to achieve the impossible and make funky-junky look like something you actually want to live with. When real antiques are more widely affordable, just see how quickly funky-junky will go out of fashion!
In our own business, we followed the gurus and tried a discount sale. Up to a point, it worked. We sold a gratifying number of pieces gratifyingly fast. What’s more, our new prices attracted new buyers, even in a recession. We had enquiries from people we’d never heard from before, and a few of them bought. When we told them that these were our sale prices, they paid them without asking for a discount. This lends some credence to the idea that many of the current problems of the antiques business are problems of price – bubble problems.
Perhaps we had fortuitously hit on post-bubble pricing. If we did, and if your margins are similar to ours, expect to lose money on a few sales, break even on some, and make a small profit on some. If that sticks in your throat, remind yourself that cash is good, and that an antique you’ve sold, even at a loss, can’t lose you any more money.
Hang in there. It’s quite possible that the cure for our ailing business is being poured down our throats right now, and post-bubble prices may be exactly what our business needs to return to full health.