From conspicuous to inconspicuous consumption, a concern for shipping

From conspicuous to inconspicuous consumption, a concern for shipping

For nearly a decade marketers have been talking about the rise of ‘inconspicuous consumption’, elite consumers growing affinity for discreet rather than traditionally branded luxuries.  Giana Eckhardt, a Professor of Marketing at Royal Holloway, University of London watched with interest as the trend developed in Europe and the United States.  But it took a sabbatical in China to convince her that this was a global phenomenon to which she and every chief marketing officer in the luxury sector should devote full attention.  

China was supposed to be the land of conspicuousness, butall of a sudden people were making fun of overt wealth and even taking the labels off their clothes, Eckhardt recalls.  Now that luxury brands have spread to the middle class through diffusion and accessory lines, services such as Rent the Runway, fast-fashion copycats and high-quality counterfeits, logos don’t signal wealth the way they once did.  As Warton’s Jonah Berger pointed out in a 2010 study, ‘if most of the buyers are merely thousandaires, rather than millionaires, the (product becomes) a signal of the wannabe rich’.  

Moreover, upper-class consumers have become intrinsically less drawn to overt status symbols.  Eckhardt and her colleagues say that although this may have started with a reluctance and stand out during the economic downturn of the late 2000s, it has persisted. Further, social media have enabled the rise of niche brands (Goat women’s wear, Bottega Veneta leather goods, Kimpton hotels and Blue Bottle Coffee, for example) through which like-minded people of any socioeconomic stratum can send what Berger calls ‘subtle signals’ to one another.  

His lab studies have shown that the educated elite say fashion students choosing which bag to buy have a significant preference for discreetly marked products, subtle but distinct styles or high-end brands that fly beneath the radar which gives the providers of those offerings greater longevity than their more blatant counterparts. Of course, all this poses a big problem for companies that have bet the farm on conspicuous branding.  80% of the organisations we talk to are not on top of it, Eckhardt says their reaction is ‘What are we going to do?’

Our entire strategy is based on people buying products to signal their social status to others.  That’s what they learned in their MBA programs. But we think this is a long term shift, not a cyclical one.   Some companies, including Louis Vuitton, Michael Kors, Tesla and Audi have begun downsizing their logos, hiding them (putting them on the lining of a handbag rather than on the exterior, for example) or making them optional. Patron has reduced the gilding on its tequila bottles and Tiffany has dropped the spelled-out brand name form its fashion jewellery line in favour of a simple ‘T’.  

Eckhardt compares the Chinese luxury apparel brands Shanghai Tang (part of the Richemont group) and Shang Xia (owned by Hermes). She says that the former emits very loud brand signals and is floundering while the latter has a quieter presence emphasising the artisans behind its products, its tasteful stores and its high-quality customer service and is growing rapidly, especially in China. Eckhardt also cites the hotel and resort chain Jumeirah, which markets the unique qualities of each of its properties for example, tea service with honey collected from a rooftop hive (Frankfurt) and access to turtle rehabilitation projects (Dubai).  

Other examples include the UK department store Selfridges, which has created ‘intimate shopping spaces’ that de-emphasise brand and price.  Apple which competes with luxury watch manufacturers by highlighting the practical benefits of its iWatch, not its social signalling power and high-end farm-to-table restaurants that tout locally brewed ciders, free-range chicken and organic heirloom tomatoes, not Dom Perignon Champagne, Kobe beef and Almas caviar. 

Eckhardt’s team notes that some companies manage to have it both ways, however. Take Daimler, which still markets its conspicuously branded Mercedes line in China but has also launched the subtler, all-electric Denza brand there, or the fashion brand Tom Ford, which famously puts no logos on its clothes and packages its Private Blend fragrance collection in an equally plain way but sells the scent in oversized bottled in the Gulf. The balance in a brand portfolio depends on the geographic market and the consumer the company is trying to reach today, Eckhardt says.  

We see inconspicuous as an overarching global trend going forward.  Luxury is becoming more personal than social.

 

Asia set to lead 3rd wave of globalisation

Global container demand growth may be stuttering while China’s huge trade contraction in October sent analysts into a tizzy, but the long term outlook is healthy.  According to a new landmark report from HSBC, Asia is poised to lead a third wave of globalisation that will see worldwide exports quadruple to an estimated $ 68.5 trillion by 2050. 

HSBC’s Trade Winds report, commissioned by HSBC Commercial Banking and compiled by Oxford Economics, concludes that future trade growth will be led by expanding intra-Asia movements, new technologies and increasing economic integration. This will lift Asia’s share of global exports to 27% by 2050 from 17% at present. The report identifies three distinct trade development phases, the first form 1865 to 1913, the second from 1950 to 2007 and the third set to run from 2015 to 2050.  

The map of world trade created by this third wave of globalisation may look very different form today’s as shifting demographics and economic catch up with almost 3 billion people joining the middle class by 2050, most of whom will be in emerging markets lead to significant shifts in trade patterns, said HSBC. Asia-Pacific’s share of global exports is forecast to rise form around a third in 2015 to 46% in 2050. Western Europe’s share is expected to decline form 34% to 22% and North American’s to all from 11% to 9%.  

China is also forecast to extend its lead as the world’s leading exporter, with its growing influence in Asia further extended by projects such as the ‘One Belt, One Road’ initiative and the Asian Infrastructure Investment Bank.  

 

Chinese ports handle fewer containers

China’s 10 biggest container ports handled 1.2% fewer boxes in October than in same period last year as the global appetite for goods form the world’s second biggest economy has weakened. The ports which included Shanghai, Shenzhen, Ningbo-Zhoushan, Qingdao, Guangzhou and Tianjin moved a combined 13.2m TEU in October from 13.3m TEU in the same month previous year, data form the China Ports and Harbours Association showed. The ports of Dalian, Xiamen, Yinkou and Lianyungang were among the top 10 ports, according to the data from the Shanghai based group.  

Shenzhen, the second busiest port as well as the ports of Guangzhou and Dalian posted year-on-year falls in container throughput, with Dalian leading the decline as its container volumes slumped 35.6% on year in October. Shanghai, the world’s busiest container port, moved 3m TEU in October; flat form the same month in 2014.  

New port on India’s East Coast gives shippers another option

Kakinada Container Terminal (KCT), a joint venture between Singapore’s PSA International and two local groups, Kakinada Infrastructure Holdings and Bothra Shipping Services, last week began operations, offering India East Coast shippers another port option. KCT begins operations as terminals on India’s East Coast struggle to grow volumes in the wake of a growing capacity glut and slowing cargo growth. Part of Kakinada Deep Water Port, KCT is located between Visakhapatnam and Chennai.  

Kakinada is a minor port project under the control of Andhra Pradesh State Authority.  KCT is well connected by national highways and rail to key cities in the region. Coupled with its proximity to the cargo centres, the terminal is the preferred choice for shippers as it allows them to achieve significant savings in transportation cost and time. KCT currently has a quay length of nearly 1,000 feet with a capacity of 200,000 twenty foot equivalent units per year. It is equipped with mobile harbour cranes and reach stackers. 

“KCT will serve the agricultural, seafood and commodity trade and cater to the growing demand for containerization of such products in the Kakinada region,” said PSA Managing Director India Mike Formoso.  

 

Logistics confidence slips again in November

The monthly Stifel Logistics Confidence Index (LCI) continued its slide in November, with confidence among European freight forwarders falling for a sixth consecutive month to a three-year low. November’s index reading fell sequentially by 3.4% to reach 47.4  the reading in a row where it has been ‘sub-50’, indicating a contracting global trade environment. It is also the lowest reading since November 2012 and just 0.1 index points above the all-time low in October 2012 when the market was in the depths of the European Sovereign Debt Crisis.  

The index is calculated based on approximately 200 responses from a monthly survey, administered and analysed by a number of logistics professionals. The survey questions participants as to volumes that they are currently experiencing, relative to the time of year, as well as how they expect volumes to develop over the next six months. The total index covers four European based trade lanes, including: Europe to Asia, Asia to Europe, Europe to US, US to Europe. These trade lanes form four sub-indices, from which an overall index for both the air freight industry and sea freight industry is calculated.  

 

European migration crisis adding $ 1 billion to supply chain costs

Essential shipments of goods and medical supplies being delayed and destroyed as a result of the European migration crisis have cost a collective $ 1 billion to the UK economy in the last year alone, according to the latest BSI Supply Chain Security Risk Index, which indicates that the costs of such factors to shippers may increase. According to the Index, in September, Europe was the highest number of border closures since the signing of the Schengen Agreement in 1995. 

With the number of families and individuals displaced by war across Africa and the Middle East growing 50% year-on-year, BSI warns that costs to international shippers will continue to rise.  Losses due to contamination of cargo shipments by stowaways were particularly serious for the pharmaceutical and food industries, with an entire shipment of medical supplies worth $ 3.9 million having to be destroyed after stowaways broke into the container, BSI noted.

(The writer a Maritime Economist is a Chartered Fellow (Logistics Transport), Chartered Shipbroker (UK), Chartered Marketer (UK) and a University of Oxford Business Alumni. He is also a Fellow of NORAD/JICA and Harvard Business School (EEP).)