8 Business That Prove Economic Downturns Are Not Always Bad
Mon, April 19, 2021

8 Business That Prove Economic Downturns Are Not Always Bad

 

Microsoft now has become one of the most valuable firms worldwide. / Photo by Volodymyr Kyrylyuk via Shutterstock

 

When there’s a significant decline in economic activity that lasts for more than a few months, it can impact small and large businesses. Some only suffer moderate losses, others tighten their belts to cut costs and discard their annual forecasts, plans, and models. However, there will be a few companies that will be spared from the recession and become more agile. Scarcity makes them more creative. Here are some businesses that prove economic downturns are not always that bad.

 

Microsoft

In the 1970s, there was a recession in the United States that lasted a year and 4 months. The Organization of Petroleum Exporting Countries (OPEC) was blamed for quadrupling the oil prices although there were other factors aside from the oil embargo that caused the deep recession. It resulted in five quarters of negative gross domestic product growth but it was during this time when Harvard dropout Bill Gates and friend Paul Allen co-founded the now Microsoft Corporation. Back then, they developed easy-to-use computing for offices and homes, leveraging technology. Microsoft now has become one of the most valuable firms worldwide.

 

Netflix

American media services provider and production company Netflix was founded in 1997, a period nearing the dotcom bubble. It was referred to as the stock market bubble fueled by investments in the internet-based companies during the bull market. Yet, the bursting of the bubble followed. Investors lost trillions of dollars. According to American business magazine Inc., Netflix nearly succumbed to the economic hardship by putting itself up for sale in 2000 for the $50 million offer by Blockbuster. During the era when download speed was slower, the DVD-by-mail rental service of Netflix was catching on but it was not enough for the firm to be near profitable. It seemed like the perfect solution to be acquired by Blockbuster and keep Netflix afloat but the meeting with Blockbuster went downhill. Netflix weathered the storm and used its creativity to transform itself into a streaming-on-demand service.

Netflix’s paid streaming subscribers in 2015 reached 70.8 million in both international and domestic users, 89.1 million in 2016, 110.6 million in 2017, 139.3 million in 2018, and 167.1 million in 2019.

It became the world’s most popular video streaming service with 151.6 million subscribers as of November 2019 data followed by other video streaming services, such as iQiyi in China (100.0 million), Tencent Video (94.0m), and Youku (82.1m), according to app development news platform Business of Apps.

 

Netflix weathered the storm and used its creativity to transform itself into a streaming-on-demand service. / Photo by pixinoo via Shutterstock

 

Apple

Technology company Apple was around in the 1970s but it was during the dotcom bubble burst or the collapse of the internet stocks in the 2000s that the company transformed itself. It was also in the wake of the 9/11 attacks that increased defense spending led the country to a debt crisis. Steve Jobs returned to Apple and introduced the $499 iPad. It became a hot commodity. Apple’s former COO and present CEO Tim Cook was also inspired by the company’s resilience despite economic downturns. He said, “We believe in investing during downturns.”

 

MailChimp

MailChimp is an email marketing company originally focused on big corporate clients that have yearly retainers. During the Great Recession, it was forced to rotate its rotate model by adding freemium business in 2009. In a freemium model, the business gives away service at no cost to the consumer as a way to establish the foundation of future transactions. It enables companies to utilize the basic features of their software and simply charge for an upgrade. Within a year from adopting such a business model, MailChimp’s user base grew from 85,000 to 450,000.

 

Airbnb

Airbnb is an online marketplace for offering and arranging lodging for homestays or tourism experiences. Back in 2007, Joe Gebbia and Brian Chesky came up with the idea of renting their air mattress in their living room. In December of the same year was the beginning of the Great Recession but it paved the way for Airbnb’s opportunity. They also received funding in 2009 and since then experienced an explosive growth rate.

The biggest Airbnb cities in the world outside the US include Vienna (3,820 for entire home listings, 1,705 for private room listings), Prague (4,392 and 1, 230), Tokyo (4,295 and 1,458), and Lyon (4,624 and 1, 617). The cities in which Airbnb hosts make the most money are London ($209 average daily rate), Dubai ($192), Cabo San Lucas ($184), and Zermatt ($171), Cannes ($159), Venice ($157), and Sydney ($153), according to short-term rental data and analytics company AirDNA.

 

 

Lego

Imagine families cutting costs to save money during a period of economic struggle but purchasing plastic building toys as a form of luxury. This is what happened to Lego amid the global financial crisis in 2009. The stock market plummeted and investors panicked. The unemployment rate also rose in the US to 10% for the first time since 1982. But Danish toy company Lego thrived during the recession, posting a two-third rise in its pre-tax profits to £99.5m. Part of the appeal of Lego was its longevity.

 

Domino’s Pizza

When the US entered the recession, Domino’s pizza was not the favorite pizza chain of Americans. However, the restaurant company was just not ready to give in to its rivals. It announced in 2009 that it was changing its signature pizza recipe, spending millions of dollars on new marketing campaigns and research. It was a massive success and drove profits and sales.

 

Warby Parker

It was during the Great Recession when online retail company Warby Parker was founded. It highlighted a pain point or a specific problem that prospective customers of the business were experiencing: it was difficult to purchase a pair of fashionable glasses on the internet. Inc. reported that Warby Parker capitalized on the opportunity and it paved the way for its growth. Now, it is an e-commerce leader of prescription glasses and sunglasses.

Some takeaways for companies is to search for new opportunities. If the target audience is suffering, change the offers or find a new audience. Also, do not be afraid to reinvent the company. As both businesses and consumers are struggling in an economic recession, it would be helpful and profitable for the company to serve those in need with new opportunities and lower prices so both can make it through.