Business Successes From The 2008 Financial Crisis
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Businesses of all sizes are facing hardships right now due to the global pandemic of COVID-19. Layoffs and furloughs are sweeping the country leaving many without a job. Many are looking to compare it to the 2008 financial crisis because it is the most similar thing to happen in recent history. In 2006 the housing market began to see some trouble, as housing prices began to fall. At first, it was every realtor's dream, and it was assumed to bounce back naturally. The Commodity Futures Modernization Act came into play and used mortgages to back loans, creating an unsustainable demand. Eventually, mutual funds, pension funds, and corporate assets were all at risk. The real crisis kicked up in 2007 when banks started getting scared and stopped lending to each other as these mortgage-based collaterals became worthless. All the fear surrounding banks caused the stock market to deteriorate during the summer of 2008, leading to the crisis as we know it today.
Now, why all these depressing statistics, you ask? Because, while the country was facing a full-blown financial crisis in 2008, some businesses continued to thrive, and rise on top. It could have been the product or service they offered, savvy business maneuvers, or sheer luck, but let's take a look and see how these businesses rose from the ashes of the 2008 financial crisis.
If you haven't heard, Groupon is an e-commerce coupon service. It was launched out of Chicago in the middle of 2008, starting as a deal-a-day subscription service where they connected subscribers and local services including activities, dining, services and more. Just two years after launching Groupon was valued at $1.35 billion in 2010. How did they achieve such utter success smack in the middle of a financial crisis? Because it was a great idea at an optimum time. The overhead startup costs were minimum, all you need are a few companies willing to promote coupons and an email list. This worked in favor of both the local companies and subscribers. Being in the middle of the 2008 financial crisis, people were holding their money close to their chest- if they had any at all. Businesses and individuals both suffered because fun is the first thing to go when you tighten the belt. People are staying inside, depressed because they can’t afford to have a good time anymore, and local businesses are therefore stuffing. Enter: a coupon delivered to your inbox. The rest is history.
The birth of Netflix technically comes before the 2008 financial crisis as it was founded way back in 1997, by Marc Randolph and Reed Hastings. Hastings is often quoted saying that he decided to start Netflix after being fined $40 at a Blockbuster store for being late to return a copy of Apollo 13, but it's a little more complicated than that. They went up against the then-behemoth Blockbuster, introducing a by-mail movie subscription model which seemed doomed at the time. But, something interesting happened. Netflix grew as DVD sales plummeted between 2006-2011. How? Streaming. So, to what do we credit Netflix’s success in times of financial crisis? It seems that they knew what the customer wanted before they wanted it. No one ever thought Blockbuster would die, but as the world changed it simply did not make sense anymore. The history of Netflix is a masterclass in predicting trends. And, when all else seems to have fallen apart, few will sacrifice an almost unlimited, streamable catalog of entertainment for around $10 a month.
This simple idea came about when two college friends turned roommates put an air mattress in their living room and marketed it as a bed and breakfast in, you guessed it, 2008. They lived in San Francisco, a notoriously expensive place to find lodging, and people seemed to jump at the chance to visit for cheap. Those reeling from financial troubles had stopped traveling and vacations were a thing of the past. Airbnb presented a cheaper alternative to hundreds of dollars a night hotel rooms and allowed a new generation of traveling. Now they have expanded globally to shared spaces, quaint houses, and Miami beach mansions for nightly rent. By 2019 two million people were staying in an Airbnb every night.
What do all these recession-busting companies have in common? A few things. One, they are simply great ideas that may have never come to fruition without the pressure of the 2008 financial crisis. Secondly, they are mostly based on e-commerce, something that people can access easily online. They bring true value to the customer and predict market trends. The three of them changed the way travel and entertainment had traditionally worked because during and after the financial crisis the world changed. The world is changing again now during COVID-19, and ways of traveling, entertainment, and business may never be the same. So, instead of mourning the loss of our past way of life, use these examples of inspiration to predict the next big thing. If down the line you need funding for your idea, First Union Lending will be here, we can set you up with the right financial product for your success. Click here or call 863-825-5626 to get started today.