The Age of Austerity

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The world’s major retailers, particularly Wal-Mart and Tesco, keep a very close finger on the global economic pulse.

They spotted looming recession 18 months ago – long before it became more widely apparent this year.

Yesterday, Wal-Mart’s UK head went further, referring to “the dawning of the age of austerity”. He added that “this won’t be a recession where it is a blip, and then we are back to where things were”. Instead, he forecast that “the era of conspicuous consumption is over. Saving money by cutting out waste of all kinds will be the priority”.

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Wal-Mart’s view is echoed by Tesco CEO, Sir Terry Leahy, who noted that “the main thing is that we have to reshape the business”. Customers have “less money to spend” and “you can’t just buck a downturn”.

Wal-Mart President, Lee Scott, also told analysts last week that there was “very little visibility as to what the economy’s going to do”. Scott’s view is that it is now critical to “position yourself as a company that saves people money so they can live better”.

Chemical companies largely ignored last year’s early warning from the retailers. They have paid for this oversight in Q4, as they have had to dump inventory at firesale prices. It is vital for the future health of the industry that companies now respond quickly to the emerging new trends being highlighted by Wal-Mart and Tesco.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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