Europe: Wall Street vs. Main Street

Over the last few weeks you would be hard pressed to open up the financial section of any newspaper and not feel at least a little disheartened by the headlines: “Spanish debt yields rise to record highs”, “will Greece be able to get their fiscal house in order?” and so on and so forth.  There is a link back to main street; consumer confidence. The better the markets are doing, the wealthier you feel, the more money  you spend. A recent article from businessreport.com does a good job of summing up this link: “At the same time, households may be feeling less wealthy, as Europe’s debt crisis roils share prices, raising the risk that consumer spending will stagnate”.

While the markets may be bearish, we at Active have a brighter outlook as many of our CPG customers have been historically less volatile than the market (for all you finance people out there-a beta <1). Combine this with an observed general upward trend in revenues and ad spending approaching pre-recession levels and the world looks a little brighter. For all our readers out there outside the world of CPG there is a silver lining; that vacation you have always wanted to take to the French Riviera has gotten a whole lot cheaper.

The Emergence of the World:

This past month CPG giants met in Istanbul to take part in The Global Summit Consumer Goods forum, a three day conference to discuss the direction of the global retail market. Probably the best summary of the conference comes from Coke CEO Muhar Kent in a write-up by ValueWalk.com. To summarize, the immediate future will see a focus on emerging markets as their huge consumer base becomes increasingly affluent (See China: A More Westernized Consumer), shifting power into the hands of the consumer. The baby boom generation will also command more attention as seniors will eventually outnumber young people, maybe as early as 2015. Finally, with the global population set to grow to 8.3 Billion by 2030, there will be a long-term focus on sustainability as demand grows globally.

Wal-Mart versus the Internet: What it means for other Retailers

In a follow-up to our June 19th now trending on online versus brick and mortar, Bloomberg has done a nice article on Wal-Mart and its consistent quest for lower prices. While the company does not make the direct connection, the article raises a number of interesting points for retailers who face significant online competition. It first confirms that shoppers are generally not willing to shop around for a couple of bucks. This offers an opportunity for companies who cannot meet the prices of Wal-Mart or online retailers to offer something intangible, such as better service, convenience or other non-dollar measures of the shopping experience in order to convince customers of their value. Secondly, the fact that Wal-Mart does not come out and directly say that they are looking to compete with online retailers suggests the type of power online retailers possess almost purely because of their business model (as it’s a fairly safe bet that they don’t possess more buying clout or a smoother supply chain than Wal-Mart). For other retailers, this point emphasizes the power of e-commerce. When managed properly, such a system can provide incredible scale, evidently bordering the giants of the industry. Moving forward, this fight will undoubtedly play out again and again as internet usage grows in the aforementioned emerging markets and every market puts its own weighting on Brick and Mortar versus online.

That’s all for this week. Be sure to follow us on Twitter @ActiveIntlCA