Put ten economists together and request an economic forecast from each of them, you will get ten different scenarios. This is because economics is not an exact science as mathematics is. New or unforeseen variables can manifest themselves which can change scenarios and sentiment from positive to negative, and vice-versa. It’s not easy being an economist.
In the resent financial landscape however, which has been classified as a “crisis” by economists and corporate media outlets alike, there is little disagreement that the world is facing a major recession or even a depression.
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Such expressions as “recession” and “depression” have a negative psychological impact on businessmen, national economies and consumer behavior. In this technological age of instant information flows, this impact is immediate and all pervading and is reinforced by the sheer volume of articles, comments and analyses published in the media. This leads many to believe that there is no way out of the promised economic and financial Armageddon waiting just around the corner.
For the leather, textile and apparel industries the implications signal falling demand and even falling prices. But wait a minute. Even if demand is falling and consumers purchase less, this does not mean that there is no demand but simply less. The world will not vanish and people will still need clothes, footwear and other essentials. Life continues but at a less frenetic pace with the end consumer looking for value for money and bargains to stretch the family budget. |
A year ago the main concern was the rising price of crude oil and its derivatives. Now fuel is back to “normal levels” so that is one less variable to worry about and for the average business is definitely good news. Freight costs have plummeted as have the prices of almost all commodities.
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Demand will still exist but the secret is how to, and where, to access it. If the demand for footwear in any country you wish to name is 60 million pairs and consumer spending in this sector dips by 10%, this means that the demand for footwear is still 54 million pairs. Someone is going to satisfy that demand and to ensure that they do, it is highly likely that bargains will be offered or special offers of “3 for 2” (often referred to as “bundling”) for example, so as to shut out the competition. |
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Most businesses automatically start to cut costs in a looming recession. The first costs to go are marketing and advertising according to traditional thinking. This is a grave error. If you have taken a deep breath and decided that your company will manufacture and offer products at lower costs or bargain prices, how will the embattled consumers know about this if you have hacked the marketing and advertising budget to pieces? In short, they won’t. Result, you will sell less and leave space for your direct competition to step in.
Where to sell
It is a good idea to reconsider where you are selling your products. In an economy where the GDP is falling, consumer demand will also decline since the result of a recession (negative economic growth in two consecutive quarters is the classic definition of a recession) is increasing unemployment and therefore less disposable income across the board. Thus, it makes consummate sense to sell to economies where GDP growth is forecast to be positive, since consumer spending will still rise albeit at a slower pace.
On December 9th the BBC published the global economic outlook for 2009 according to the World Bank. (http://news.bbc.co.uk/2/hi/business/7774199.stm) The report is basically negative on a global basis but one paragraph of hope shines through:
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“…..fast-growing emerging giants, India and China, are likely to suffer from the slowdown. The World Bank projects China's growth to slow from 11.9% in 2007 to 7.5% in 2009, while India's growth prospects will be cut from 9% to 5.8%...”
Any developed country would be highly satisfied with a growth rate of 5.8% in the case of India, and supremely so with the projected growth in China of 7.5% in 2009. Bearing in mind that the new middle classes in these countries have developed a taste for western designs, quality and fashions; does it not make consummate sense to direct your marketing and sales budget at these markets instead of hacking it to pieces? |
You can turn the feared “Great Recession” into a “Great Opportunity” for your company, open up new markets where there are hundreds of millions of potential consumers and sell them the western products they want.
Here follows a brief list of strategic guidelines to create a Great Opportunity in the forecasted recession:
· Gain a competitive advantage (enter new markets, increase market share, defeat competition)
· Increase productivity and efficiency
· Maintain visibility (trade fairs, advertising)
· Improve customer satisfaction
· Improve quality
· Standardise operations (increase ease of doing business)
Based on information currently available the outlook for Asian economies for 2009 is far more positive than in Europe and the US. APLF offers international trade fairs and events so that your company and take advantage of the opportunities available.
Please go to: www.aplf.com, www.primesourceforum.com and www.aplfindia.com to find out more about APLF events in Hong Kong, Shanghai and New Delhi covering the leather, fashion, footwear and apparel industries.
Remember - there will always be demand. Just make sure that it is satisfied and filled by your products rather than those of your competition.
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If you wish to contribute to the APLF News, with your experiences in the industry, your observations, or general thoughts on the direction the industry is going, we would like to hear from you. Email: aplf-news@aplf.com |
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How long has your company been attending APLF? If you wish to be involved in the celebration of the 25th anniversary of APLF, we would like to hear from you. Email: aplf-news@aplf.com. Subject Headline: APLF 25th Anniversary |
