Robert Avila is Managing Director of Future Crunch, and has advised companies on strategy and market environment issues for more than twenty years. FutureCrunch develops mission-critical, data-driven insights and recommendations for businesses in times of discontinuous change. Prior to founding FutureCrunch, Mr. Avila worked at a number of major consulting firms, including Deloitte, PwC and Coopers & Lybrand, where he was the chief economist for the firms’ strategy practice and director of Economics & Policy Analysis. He has also worked as chief economist at The Futures Group doing scenario-based strategy development for Fortune 100 companies and at SAGE Associates doing public policy analysis.
There was a time, not too long ago, when “global” was a concept, but hardly a reality. As a corporation pushed its horizons beyond the relatively homogeneous local market, it encountered increased diversity and complexity, strange customs and even stranger legal environments. There were no global markets, no truly global products and few global brands. Corporations at best were multinational, jerry-built conglomerates of local institutions, each catering to relatively homogeneous local markets, each differing from the next.
Much of that has changed. Today there is an ever increasing array of truly global products, sold through global advertising campaigns to global consumers who dress in global fashions, travel to global resorts, all run by global corporations using global supply chains, administered globally by world class executives. And now, when things turn sour, we have global financial crises, followed by global recessions.
At the same time, as this homogenized smear of products, services and business practices has been covering the globe, another much less noticed, parallel and strangely complementary transformation has been taking place: local markets are becoming increasingly diverse and complex.
Back to Tribes
Of the many reasons for this transformation, the increased ease of global migration is perhaps the most obvious. There are few metropolitan centers in the world today that do not feature a noticeable mix of foreign residents. These range across the economic spectrum from huddled masses yearning to live better to growing communities of expats tending the interests of their global employers.
In addition, well beyond the major cities there are Indian doctors tending to the ills of Iowa farmers, Chinese entrepreneurs running specialty textile mills in Italian towns, Rastafarian musicians entertaining in Istanbul, and Russian Orthodox congregations in Israel. Thanks to all the factors that have created the global market, this mass diaspora is able to use global transportation, global communication – television, telephone and internet – and global supply chains to maintain their identity and more strongly resist assimilation.
Migration, however, is not the only factor. As economies have grown more affluent, regional differences within nation states may be seen to be reasserting historical identities. In Europe it is not just the Basques and the Walloons who are seeking to assert themselves. Provençal is once more being taught in the south of France, and The Northern League seeks separation from Southern Italy and Sicily along boundaries reminiscent of the 1400’s.
Once the Iron Curtain was lifted in Eastern Europe, the multiplicity of local nationalities and ethnic groups that had so tormented the pre-WWI Russian and Austro-Hungarian empires all began reasserting themselves. Czechoslovakia split relatively peacefully into two states while Chechnya foments and bleeds. As China and India grow more affluent and the first blush of access to global products begins to fade, the extensive and complex cultural diversity of both countries will become increasingly important.
Another even less understood by-product of rising affluence is the emergence and spread of sub-cultures – groups of individuals self-separated from the mainstream. These range from over-publicized terrorist groups to religious sects, computer gamesters, avid fans, and obsessive hobbyists. The money and time that goes into everything from eccentric hairdos and body art to PunkinChunkin machines to yoga studios is not trivial in some local markets and generally is completely below the radar of the marketing departments of global corporations. A casual Google search of almost any seemingly peripheral topic will generate hundreds of thousands of hits (eccentric hairdos – 608K, body art – 212M; PunkinChunkin – 119K; yoga studios – 17.9M).
In this rapidly changing environment, today’s corporations, which are able to source, distribute and market globally, are just beginning to discover that their knowledge of and distribution to local markets may be the weakest link in their chain. In most cases they totally lack the tools to identify, quantify or track market segments that are outside the traditional mainstream.
Most retail distribution of goods and services is still predominantly supply-push: product ideas are shoved out, invariably paying retailers for the shelf space. If it should by chance sell, it may be reordered. If the product fails to move as the producers had hoped, it is killed. Demand-pull is non-existent because it is impossible for consumers to demand what suppliers fail to offer.
What does happen is that specialty markets develop at a local market level, which either creates new product lines or sources types of products not readily available. If the trend gets big enough, it appears on marketers’ radar and it gets rolled out, often poorly, on a national basis as yet another attempt at supply-push.
Another even less understood by-product of rising affluence is the emergence and spread of sub-cultures – groups of individuals self-separated from the mainstream.
The problem is not that the existing systems are incapable of handling any additional SKUs. All one has to do is walk through a major shopping mall or a massive suburban supermarket where vast expanses of only slightly differentiated products overflow in vast profusion of sameness in almost total disregard of the location beyond traditional regional differences. What is missing is any systematic classification, collection and mapping of diversity at the hyper-local retail market level. The data and technology exist to create the needed profiles, but implementing such strategies runs counter to most current marketing, sales and distribution cultures.
Various location mapping tools are used to situate retail outlooks according to the correct age/income/household demographic - maybe even to the occupational location, but then the same generic mix of products is routed through these outlets in total disregard of whatever diversity may be latent in the market. To the extent that there is any acknowledgement of cultural diversity, the response is to provide mainstream products with a cultural flavor – for example, painting a razor pink for women, or describing products in Spanish for a predominantly Hispanic demographic.
What is striking is the fact that the same technology that has enabled the global market is supporting, sustaining and strengthening the growing diversity of local markets. Local specialty retailers are increasingly able to leverage the global supply chain and logistic system to stock their outlets with an ever richer mix of products at competitive prices. It is not inconceivable that local specialty retailing, with the right market data, might morph into tightly focused, highly efficient, cost-competitive retailers capable of fully leveraging the global supply chain. The critical strategy in the coming decade is going to be built on the ability to use the tools developed for the global economy to service increasingly complex and diverse local markets.