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Trends Report: January 2019

Business · 8 min read

Trends Report: January


Businesses love to look at the long-term. We build five-year plans and craft forward-looking KPIs. It feels good setting ambitious year-end targets at the start of the financial year. And of course these long-term business plans, objectives and strategies are essential. But the short-term eddies and undercurrents felt by businesses around the world are often forgotten about. After all, it’s what is happening right now that will shape the future.

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With the US-China trade war  and Brexit on the horizon for the UK, we’re living in a world that hasn’t been thinking this short-term since the financial crash of 2008. But despite the fluctuations all around us, globalization is still the guiding hand in world commerce. It's been the driving force of most major national economies for the last 30 years, most notably giving China the step-up it needed to rise from developing nation to the world’s second-largest economy. If you're unsure which tariffs apply to your imports or exports, ask our DHL Express experts.

At its peak, globalization was a seismic success, opening up international trade, creating whole new markets and breaking down the barriers of international trade, lowering everything from shipping costs to telecommunications prices. Commerce flourished. Globalization is at the heart of the World Economic Forum’s objectives – but does this esteemed gathering of world leaders and the corporate elite still make sense in today’s short-termist world?

Get ready for ‘Globalization 4.0’ 

The 2019 World Economic Forum took place from 22–25 January in Davos-Klosters, Switzerland, where global political and business leaders discussed the latest fiscal and developmental trends. This year’s theme was ‘globalization 4.0’ and the ‘Fourth Industrial Revolution’, a reference to the pace at which technology is impacting our everyday lives worldwide. The central discussions focused on how to prepare the world for AI and robots in the workplace.

Yet the World Economic Forum at Davos also prompted a backlash. With the world’s rich and powerful flying in from around the world, accusations of elitism came from online and in the media. Are these people out of touch? And did it still have authority when so many world leaders missed the event to deal with pressing issues in their home countries? It’s arguable that the detractors missed the point of the Davos conference and the WEF’s simple mission statement: “Committed to improving the state of the world”.

apple watch and laptop

China was at the center of Apple’s recent profit warning

On 2 January 2019, Apple CEO Tim Cook sent a letter to all shareholders after new figures were released, showing that shares had lost more than 9% of their value: “While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China. In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline occurred in Greater China across iPhone, Mac and iPad.”

After becoming the first company ever to reach a trillion-dollar market valuation in August 2018, Apple’s share price has fallen in uncertain financial market conditions since last quarter. Apple’s financial results were released at the end of January and confirmed what we all suspected: demand for iPhones has slowed (but there was some good news: revenue from all of Apple's other products and services grew 19%).

Benedict Evans, analyst and partner at investment firm Andreessen Horowitz, suggests Apple’s profit warning is simply a consequence of two factors: China’s slowdown and the plateauing of the smartphone market: “The mobile market is reaching saturation, and so is the smartphone market, and Apple has won the high end of the smartphone market. This is not 'the fall of Apple' – it's just the shift of smartphones to boring maturity, as we look for what's next.” So if you’re asking yourself “what does Apple’s problems mean for me?” The answer might be this: the smartphone market has reached its peak, so seek to exploit what's next. 

And that brings us neatly to China’s economic performance. We’re undoubtedly witnessing a slowing of the Chinese powerhouse economy. A report from Canvas8 notes that a decline in Apple sales in China, “may signal a decreasing interest in American tech among Chinese consumers. The net of slowing economic growth, a spill-over from politics into consumer sales, could contribute to Chinese people redirecting their demands towards tech from homegrown brands.” Since 2000, 150 million people have been born in China. This young, mostly middle-class cohort has grown up in the biggest economic boom in China’s long history. But are they the super-connected, forward-looking, empowered group you’d imagine them to be? They certainly feel pride in their country, and they have a preference for home-grown brands and goods over foreign ones.

One thing’s for sure, Chinese Gen Z are well-connected. Online subcultures can serve as an extended social community. So any brand exporting to China needs to have an online presence on China’s big networks, like Tencent and Weibo.

44% of Chinese Gen Z say tradition plays a significant role in their life, while less than 15% say it doesn't have a big impact.

RTG Consulting, 2016.

Figures show that sales of the iPhone in China throughout 2018 fell, causing Apple to lose its second spot in smartphone sales to Chinese brand Huawei. Although Huawei is facing its own challenges, with the arrest of its CFO in Canada and accusations of spying on behalf of the Chinese government. Yet its growth is unquestionable: it's already competing with market leaders Ericsson and Nokia in the mobile infrastructure market, while it's smartphones have taken a sizeable bite out of Samsung and Apple.

However, are Chinese consumers actively shunning overseas goods, or simply favoring what feels naturally closer to home and more in-tune with their lives? It shows the power of cultural sensitivity across the products you sell to Chinese buyers. The illusion of ‘West is best’ – that Chinese consumers love US or European imports – is just that, an illusion. We all love what’s familiar, and the same is true of even China’s young Gen Zers. Brands that export to China need to work hard to make their goods look, feel and sound culturally appropriate.

China makes the next move in the US trade war

At the time of writing, the escalating trade war between the USA and China has been called to a truce. The tit-for-tat trade war, seeing each of these superpowers slapping each other’s goods with trade tariffs and thereby causing price and costs rises for consumers and companies, has now been given a new deadline: both parties have until 1 March to make a deal. And some commentators, such as the BBC’s Karishma Vaswani, are seeing the balance of power shift in favor of the USA and Donald Trump. New tariffs harm trade, so there is renewed confidence that a deal will be struck.

In Europe, Japanese electronics giant Sony is planning to merge its £3.3bn European business arm into its Dutch base to soften the impact of a no-deal Brexit. The move will see Sony’s register its corporate seat, effectively its legal headquarters, in Amsterdam. The deal will be completed on 29 March 2019. 

The firm follows in the footsteps of Panasonic over no-deal Brexit fears, but Sony said the merger was to "continue business as usual without disruption" and would not result in job losses. And while we're talking tech, we should take a look at what's happening in the healthcare sector. Health tech is arming patients with more information on their health than ever before. At CES 2019, brands revealed remote monitoring products, wearables and new diagnostic solutions confirming that the health care industry is embracing new tools and technologies to enhance the patient experience. 

Fashion season begins

If your business is fashion, then prepare to take advantage of the halo effect from the various fashion weeks happening around the world. London Fashion Week Men’s ran from 5–7 January, and the world-renowned seasonal fashion show cycle runs until 5 March, taking in New York, London, Milan and Paris.

Successful challenger banks

Challenger banks such as Starling Bank, Monzo, Tandem, and N26 are changing the sector by offering new, smarter services that go beyond traditional bank services, providing customers with useful information, services and even AI features that help them take control of their finances. They’ve introduced only limited constraints for customers – no (or almost no) caps on what you can take from an ATM machine, no additional fees etc. Starling has also launched a business account within its regular app and a competitive service facilitating cross-border transfers. It also makes it easy when you’re traveling, with competitive rates and immediate conversion to GBP. N26 has a strong presence in many countries globally, and while it doesn’t have all of the banking features yet in the UK, it’s just a matter of time.

Berlin-based challenger bank N26 has just launched in the UK. N26 head of international markets Alex Weber said: “The UK is one of the most advanced markets for online banking, but with 85% of users with big banks.” Meanwhile, UK challenger bank Monzo has set up a team to begin laying the groundwork to bring a version of the bank to North America. The plan, which could still be subject to change, lays out plans for Monzo to launch in the US, in much the same way as it did in the UK – with a pre-paid debit card, before eventually offering a fully-fledged bank account. 

Shift from ‘mobile-first’ to ‘mobile only’

A new year begins – and should it herald a new mobile-only strategy for your website and e-commerce strategy? Generation Z (people born after 1996) are the first truly mobile generation. They’re not just mobile-first, but, according to Julie Ginches, CMO of Kahuna, “they're mobile-only”, too. Members of Gen Z, according to Paul Gottsegen, CMO of Mindtree think that they “won't want to spot things as marketing”.

Although they leave digital footprints everywhere, marketing to them is predicted to be difficult. Gottsegen said: “Kids today – Gen Zers – they don't watch commercials on television. We all grew up with commercials. Even the Millennials got loaded with commercials the way I did a generation earlier. But that doesn't happen between apps and Netflix. The concept of marketing being this obvious thing to spot is totally foreign to Gen Z." 

woman holding mobile phone

US Millennials and Gen Z ditch wine

A report published on 11 January 2019 by US wine industry consultancy Wine Intelligence, suggests that the sector is seeing a “marked decline’ in wine consumption by people under the age of 35. The report summary states: “Despite the adult population growth, a declining proportion of alcohol drinkers, coupled with a decline in wine consumption frequency has caused the monthly wine drinking population to drop from 88 million in 2015 to 84 million in 2018.”

Elsewhere, spreads like peanut butter continue to grow, except for one: jelly (or jam if you're not American). The theory goes that jelly is very high in sugar, and sugar has a bad name right now. This and alcohol are victims of a shift towards healthier diets, especially among the young.

Veganism. Has the world turned over a new dietary leaf?

As this healthy eating trend continues to rise, 2019 might be remembered as the year veganism really hit the mainstream. Veganism has stepped out of the shadows and been embraced as a viable dietary choice, no longer the niche choice of a few sandal-wearing tree-huggers. The global 'Veganuary' movement has brought vegan diets to a broader audience, encouraging even committed meat eaters to give veganism a go throughout January each year. Veganuary goes hand in hand with flexitarian diets – diets that aim to reduce, but not necessarily eliminate, meat and dairy. 

Major restaurant chains and high-profile celebrities have helped drive adoption, while the climate change argument for veganism was strengthened by the publication of a proposed diet to save the world from climate change (most carbon emissions generated by food are from meat production). This diet, unsurprisingly, doesn’t feature much meat or fish, comprising only around a third of this planet-saving culinary suggestion. But going vegan has never been easier, with large restaurant chains and supermarkets now catering to plant-based audiences with high-quality dishes. 

Get your teeth into Veganism

Europe was the leader of the pack when it came to meat substitute products, accounting for 39% of sales around the world. Southeast Asia is another growing market for alternative diets, increasing by 140% for vegetarian items and 440% for vegan products. And of course, the US is always a safe bet, with plant-based products and meat substitutes are all showing double-digit growth.

Google helps Indian shoppers go digital

Google has launched a shopping interface to bring seamless e-commerce to internet users in India. As more Indians go online, the Google Shopping interface enables personalized online shopping experience to those still dubious of bypassing bricks-and-mortar stores. India is also the first country in the world to get a separate shopping homepage on Google, a company spokesperson said. Google is also dipping its toe into an industry currently dominated by Amazon, which accounts for about 32% of the e-commerce market, and Walmart subsidiary Flipkart, which controls an estimated 40%. The multinational Morgan Stanley has estimated that the Indian e-commerce market will be worth $200 billion by 2026.

man looking at tablet screen

And finally, in Africa, mobile payments continue to be the primary payment method across most of the continent's 54 nations. If you're offering products to Africa's 1.3 billion-strong population (725 million of which own a mobile phone), make sure you support mobile payments, also known as ePayments. Three times as many people in Africa have mobile money accounts than have traditional bank accounts.

Ride the waves of global commerce

Global commerce hasn't seen a period of uncertainty like this for over 10 years, but with trade still flowing freely despite trade wars, the slowing of globalization, and a shift to populist politics, there are many reasons to be cheerful about trade in the near future. Get in touch with DHL Express today and start shipping to one of 220 countries and regions across the world.

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