Thought Leaders Circle

Source: tradingeconomics.com

In the ground breaking book the Cluetrain Manifesto, the authors made the claim that marketplaces are a conversation. It is true, it is the information we get from our peers which sets the scene for our willingness to take risk, to borrow and spend. Those sectors that are dramatically impacted by the high Australian dollar, are sowing the seeds of doubt in consumer confidence.

Just take a look at the consumer confidence index, I could have tracked this bobbing line of consumer confidence, just with the pulse of my network of friends and family. In the words of marketing services colleague of mine “the year just never started”, another peer confidentially disclosed that their online stellar performance of last year was  going pear shaped this year. I could hear the plunge in confidence from March to May. In May 2013 it stands at 97.59 from 11.54 in January 2013. With a historical high of 127.67 and a historical low of 64.61, we can see the shift in just two months represents a significant cliff.

I can see the context, marketplace uncertainty, the ‘wobbles’ in  the Chinese appetite for Australian commodities, the forthcoming elections, patchy rainfall for agriculture and discussions about our dollar falling as low as $0.85USD.  Only 18 months ago I heard it could be up to $120 USD. How on earth do you do any business strategy around that? As a client of mine said when I presented a proposal to him in March, 2013, “I am just going to take it real slow”. There is money out there, but people are waiting for the music to stop to grab a chair.

Another friend of mine who just started buying manufactured goods from China, and stopped manufacturing in Australia, said his advice on the currency from one Australia’s top currency experts, “I don’t know and nobody knows.”

This is a time when people can act from a place of panic and consider changing their business model, which is something business should do a regular basis irrespective of how the market is doing.

But it is not all doom and gloom, every so often I bump into someone who is really upbeat. The National Sales Director of a major retail brand told me over a beer when I asked him why they were doing so well, “some people just don’t now how to trade in a down market”. The  curiosity was killing me, after all I have always heard the trick to retail is to know “when to get in and when to get out”. I just had to know what he was doing because every business I talked to  is becoming an online store of sorts, from tourism to healthcare, it is all part of their strategy for growth. This insight is gold.

“So”, he reveals, ” the stores that are doing well for us in the down time are our discount stores. Our  Homebush based discount store is the 6th highest trading retail store in our world network”. Ah ha that is it, people are still buying, but more on price. It would explain why the www.brandsexclusive.com.au online discount shop, with the tagline 70% off, is one of BRW’s Fast 100. It also explains why small marketing agencies are rising, while big agency services are falling over.

This is backed up in the marketing services sectors where those businesses who are doing well are providing discounted services, through buying services internationally through O Desk and elance. This is driving service delivery to overseas vendors. Add to that the rise of blogs at the expense of advertising spend and you are driving down what is an acceptable spend for marketing. As an investment banker said to me a few weeks ago…“only the thinking is getting done in Australia, the rest” and that includes her $10 an hour Indian Personal Assistant from elance “is getting done overseas”.

Even food, which has held its ground in retail recessions has been feeling the heat, especially our traditional food traders.

Yesterday, while talking to one of Australia’s most highly regarded primary producers, he told me that “due to the dollar, one of our food manufacturers goes bust every week”. Take the case of SPC,

“We are not competing on a level playing field against the overseas sourced private label products,” said Peter Kelly, Managing Director SPC Ardmona. “We are competing against products from countries that have considerably lower labour and production costs and arguably lower quality standards than we have in Australia,” he said.

“A more than 50 per cent appreciation in the Australian dollar in the past four years has made cheap imported food even cheaper and has also severely impacted on our export markets,” Mr Kelly said.

SPC Ardmona said market share of imported private label canned fruit had grown to 58 per cent, while SPC Ardmona canned fruit share had declined to 33 per cent and the Company’s export market volumes had declined by 90 per cent in the past five years.  (source www.ausfoodnews.com.au)

So where to from here?

Business needs to be nimble, it needs an up time and a down time strategy, it needs to be able to shift gears with the value of the Australian dollar and consumer confidence. As a nation we need strategies that develop sustainable GDP. We need to consider sectors, such as health, that are more recession resistant. We also need to remember our long term strategies, that hold their ground. In the words of an esteemed investor advisor friend of mine, the people who loose the most are those people who  panic and break their strategy in the down time.

We can’t afford to be a mono economy of miners, we need economic diversity and let’s face it, discounting is not a strategy it is a tactic. Picking and riding market trends is the only way to keep economic diversity in shadow of a over heated dollar.

Louise Kelly

Managing Director

Hearts and Minds

http://www.heartsandminds.com.au

Founder Thought Leaders Circle

http://www.thoughtleaderscircle.com