Thursday, November 15, 2007

Earliest. Christmas. Ever.

The Apple Store in King of Prussia closed for remodeling at the end of October, and is scheduled to reopen November 16. Just in time for the Christmas shopping season, right? Well, maybe not. By closing for the first half of November, this store might have missed almost half of the Christmas shoppers.

Black Friday, the day after Thanksgiving, is the beginning of the Christmas shopping season according to the traditions of American retailing. Yet Christmas shopping has been getting earlier year after year. Shopping early is especially important now that consumers are comparing online offerings to products they find in stores. Some of the purchasing decisions need to be made by the middle of November so that the products can get shipped to the purchaser and again, in some cases, to the gift recipient. So this year, many retailers started their seasonal discounts three weeks early, and shoppers got an early start.

Today, November 15, I saw heavy traffic and crowded stores and parking lots. It is clear that the Christmas shoppers are already out in numbers.

And so Black Friday, which has not really been the beginning of Christmas shopping for many years, may this year mark the middle of the Christmas shopping season, the point where retailers can figure they are over the hump. Retailers are worrying for the first time this year about how many consumers might have finished their shopping before the Black Friday sales circulars arrive in the mail.

The problems of high energy costs have consumers feeling pessimistic and, according to surveys, likely to spend less on holiday gifts than last year for the first time in years. But a feeling of caution is not the only reason for cutting back on gifts.

All this early holiday shopping is a sign that giving gifts has become an obligation for many of us, something we want to get out of the way so we can get on to the things we enjoy about the holiday season. And if something that was supposed to be an inspiration has become a burden, it makes sense to scale it down to try to bring it back into balance.

I have heard so many stories of people who have given up holiday gift-giving entirely that it doesn’t surprise me any more. It is not that people want to keep their money — in many cases they’re giving it to charity instead, and sending around cards with pictures showing where the money will be used. They just want to avoid the hassles of gift-giving.

I have to imagine that it is the competitive side of gift-giving that is causing people stress. As soon as you imagine that the gifts you give have to be at least as good as the ones you receive, you turn gift-giving into a competitive arena, a sport with winners and losers. It’s no wonder then if it starts to feel stressful.

But instead of giving up gift-giving entirely, it makes some sense to not make such a big thing out of it — to focus on nice, simple, pretty gifts that don’t necessarily have to be valuable, memorable, or perfect. This puts gift-giving back in its original place, as one part of a larger social occasion.

Whether it’s a matter of scaling back, spending cautiously, or a combination of the two, it seems that people are doing less Christmas shopping this year — and they’re getting it done early.

Wednesday, November 7, 2007

Looking for Real Money at General Motors

General Motors today announced an astonishing financial loss during the latest quarter — a loss so big it amounted to twice the company’s total value.

One of the world’s largest auto makers, GM is worth around $20 billion according to the stock market. GM already had a negative net worth last quarter, so the loss of $39 billion would seem to give it a book value of negative $43 billion — a head-swimming number that you have to look at several times before you realize it is not a mistake. That works out to something like negative $75 per share — again, not a misprint. You would think any company that owed so much would be bankrupt, but GM says no one there is losing any sleep over it. It turns out it wasn’t real money, but a mysterious and hard-to-explain tax-related asset that expired. CEO Rick Wagoner put it this way: “No impact whatsoever on our cash position, no impact on our ability to use the tax offsets in the future, and from my perspective, really no change whatsoever in our outlook or optimism about the future of getting the business turned around.”

The problem with this explanation is that the losses, all $39 billion of them, are entirely real. GM was actually losing money faster than it reported for the last several years. It made its losses look smaller than they were by accumulating this mysterious no-cash-value tax-related asset. They just now reached the point where the accounting rules they follow said they couldn’t stretch out this imaginary asset any longer. So the losses didn’t really occur all at once, but they really did occur. And the fact that these losses occurred does have an impact on cash flow and does cast a shadow over the company’s future prospects.

One reason companies get themselves into trouble is that they start making distinctions between “real money” and “pretend money.” It’s no surprise, then, when the “pretend money” seems to disappear while no one is watching. Yet all money is real. If you have to say it’s there, then it exists. It doesn’t matter if a company tells you they’re only losing funny money or Monopoly money — it’s still money and the company’s managers are showing an insufficiency of skill in losing it rather than gaining.

The world has placed a great deal of confidence in General Motors — that is the only way any company that is $43 billion in the hole can keep going. The sooner the people at General Motors start to see the confidence the world has in them as a real thing — not a mere abstraction, but something they can actually use, as real as the “real money” people have entrusted them with — the sooner they can make the company relevant in the world again.