2019 started just as 2018 finished – dominated by turbulent global events, from the US-China trade war to Brexit and the ever-present specter of climate change. However, there are reasons to be cheerful.
We’ll start with the positive findings of DHL’s own Global Connectedness Index. The latest edition of this survey of the state of the world’s supply chains and trade routes has just been published. The Netherlands secured the top spot – the Global Connectedness Index found the European nation to be the most globally connected country. But it’s about more than cross-border trade: the Index weighs the flows of trade, capital, information and people. After the Netherlands, Singapore leads on the size of its international flows relative to domestic activity, while the United Kingdom has the most globally distributed flows around the world (it’ll be interesting to see how, and if, Brexit affects this in the future). Reassuringly, the analysis found that the rise of nationalism and inward facing politics around the world hasn't had a major impact on trade: the world has never been more freely connected.
Is globalization a force for good that’s lifted millions of people out of poverty, or is it the big bad beast that benefits developed nations at the expense of underpaid workers in developing countries? Whichever view you subscribe to, most people believe the world is more globalized than it really is, and such misconceptions exacerbate mostly unfounded fears of globalization. In fact, the vast majority of flows that could take place either within or between countries are domestic rather than international.
For example, about 20% of economic output around the world is exported while foreign direct investment flows equal 7% of global gross fixed capital formation. Roughly 7% of phone call minutes (including calls over the internet) are international, and only 3% of people live outside the countries where they were born. Sometimes hard facts challenge our perceptions.
The internet has democratized commerce – almost anyone can set up a business overnight and start trading around the world. It’s one of the many faces of globalization. Another is that large economies become indicators of the globe’s financial performance. And in recent weeks and months, the Chinese economy has been slowing down. Should we be alarmed? The news that iPhone sales were down 15% in China (covered in last month’s Trend Report) is just the tip of the iceberg. China's growth rate has dropped to the lowest level since 1990.
What’s also not helping is the China-US trade war. Started by the US, it’s beginning to look like Trump’s risky strategy is paying off. One of Trump’s aims was to give the American manufacturing sector a shot in the arm, famously proclaiming that Apple should make iPhones in the USA, not China. So Trump added tariffs to certain products, distorting the import/export balance between the two nations. Chinese companies are now even considering a change of location – the tariffs have made it much more enticing to manufacture products in the US.
But this trade war is far from over. While tens of millions of Chinese families have been propelled into higher earning wage brackets and even stepped up to ‘middle class’ status, labor is still cheaper in China than it is in the USA. And that isn’t likely to change for many years to come. What really annoys Trump is the massive trade surplus China runs with the USA. China exports four times as much to the US as the US exports to China. Over an 11-month period in 2018, U.S. exports to China totaled US$111bn while China notched up US$493bn of exports to the US.
The trade war won’t last forever – and there is hope on the horizon. As we roll into a new Chinese New Year, the Year of the Pig, Trump has indefinitely extended the initial deadline to raise tariffs on Chinese goods. The deadline was been set by the US, which is planning to raise tariffs across US$200bn of Chinese goods from 10% to 25% if no agreement is reached. China’s negotiating position has been bolstered by some surprise positive news from January: economists were expecting China’s exports to fall by 3.2% and imports to drop by 10%, but the actual numbers told a very different story: exports rose by 9% in January year-on-year while imports slid by only 1.5%. A dramatically different outcome and good news for the slowing Chinese economy.
Perhaps Huawei’s troubles best illustrate the wider attitudes of Chinese businesses. The giant technology and telecoms company has run into trouble on multiple fronts: the US government has accused Huawei of being a conduit of the Chinese state, accusing it of spying on a grand scale by monitoring the massive amount of internet traffic that runs through its many different tech products. At the same time, its chief finance officer Meng Wanzhou (and daughter of Huawei founder Ren Zhengfei), was arrested in Canada under suspicion of ignoring US trade sanctions and stealing trade secrets. Despite all this, it is bullish about its prospects, even without US customers. In an interview with the BBC, Ren Zhengfei said there is “no way the US can crush us […] The US doesn’t represent the world.” In other words, growing markets elsewhere in the world can make up for losing the US market. After all, it’s a global world out there …
Another looming deadline is 4,000 miles away in Europe. Britain leaving the EU is one of the greatest challenges the EU has faced in recent years, even with the German economy only narrowly avoiding recession and Italy bucking against the EU’s financial advice. The only thing anyone knows about Brexit is that no one knows anything – with no indication if a deal will be struck between the UK and the European Union or if the UK will crash out without a deal and revert to World Trade Organization trading rules. And that would mean tariffs applied to goods that currently move from between the EU and UK tariff-free.
Negotiations are, it seems, happening across the world. British, EU, US and Chinese negotiators might appreciate a yoga session to help them unwind after a hard day thrashing out compromise after compromise at the negotiating table. So it’s timely news that yoga has taken off around the world, and for men too – yoga is a fast-growing activity, with brands such as Nike and So We Flow are seizing the gap in the market and developing men’s collections. According to figures from men’s yoga brand OHMME, the men’s market is growing at 26% each year compared to 16% for women’s yoga. Lululemon, the high-end women’s yoga brand, “plans to grow its men’s category to a US$1bn business by 2020.
“Men all over the world are seeing the benefits of yoga, from improving strength and athletic performance to simply staying trim and active” says Gabriel Cabral, OHMME’s head of marketing.
American men are getting into yoga: up from four million in 2012 to ten million in 2016 Yoga Alliance and Yoga Journal, 2016. Between 2019 and 2023, the global market for yoga apparel is set to grow by 6% each year Technavio, 2018.
OHMME’s focus on making clothing that reduces its impact on the environment is part of a larger move from some parts of the fashion industry to promote sustainability and improve the fashion industry’s reputation as being wasteful, and promotes the idea of ‘buy it cheap, wear it once, throw it in the trash’. Few people understand the scale of the problem. It takes 10,000 liters of water to produce just a single pair of jeans (cotton needs a lot of water to grow), while the textiles industry alone produces 1.2 billion tons of greenhouse gases every year – that’s more than all aircraft journeys and maritime shipping combined. But attitudes are changing fast.
Fashion designer Stella McCartney is one of those leading the way for ethical fashion at the high end, but there’s a growing army of consumers that reject the very idea of buying new clothes. They’re instead buying more and more used clothing. So far it’s a niche industry, but it shows the appetite for ethically made, sustainable clothing. If you’re a fashion company selling around the world, get in touch with the Ellen MacArthur Foundation or organizations like Fashion For Good and the Sustainable Apparel Coalition.
We’re in the era of ‘New Retail’, a term popularized by Alibaba founder Jack Ma to describe the merging of online and offline in a way that redefines the shopping experience. Part of this New Retail world is being driven by AI – it’s no coincidence that in 2017, the Chinese government released its Next Generation Artificial Intelligence Development Plan. This plan outlined its objective to become the world leader in artificial intelligence (AI) by 2030, building an industry worth US$150bn. Facial recognition uses AI to identify individual faces, so the retail industry in China (which is set to surpass the US retail industry in size later this year) is embracing the technology to offer personalized in-store shopping services.
Matthew Griffin, global futurist
How does it work? The technology scans customers as they enter the store and matches them against an existing database of known customers. If they’re a positive match, the store can offer the customer tailored suggestions based on their purchase history. It’s also being used online to deliver the same experience.
- Facial recognition in the retail sector is predicted to grow 24% each year between 2016 and 2022 Market Research Future, 2017
- AI automation could help reduce time spent on sales-related activities by 40% McKinsey Global Institute, 2018
- Retail sales in China are expected to reach more than US$5.6trn in 2019, which would make it the largest retail market in the world eMarketer, 2019
In Australia, shoppers have different opinions on AI. They want retail shopping experiences to be more personalized but think that retailers’ use of tech is falling short of achieving this. They do not believe that more AI or VR would have much of a positive impact, instead preferring a more visible and streamlined space to shop in. Findings from a study on Australian shopping habits, conducted by Oracle NetSuite, Wakefield Research and The Retail Doctor, show that what retailers think consumers want and what consumers really want aren’t always the same.
For example, while the vast majority of retail executives think people would feel more welcome if sales assistants interacted with them more, less than half of consumers agree, with 29% saying they would actually find it annoying. Similarly, while most retailers believe that AI and VR would increase in-store sales, only 14% of shoppers think these technologies would positively impact on their shopping experience. The research also shows that 85% of Australian consumers don’t feel they're offered enough of a personal approach in their online and in-store shopping and 58% feel uncomfortable with retailers’ current use of technology to improve personalization in-store. However, with mistrust of techremaining a barrier, they don’t want technology to be too present in their shopping journey.
Technology is also modernizing Chinese New Year traditions. Along with exchanging red envelopes filled with 'lucky money' and setting off fireworks, friends and family will come together for a 'reunion dinner' to celebrate the start of festivities. But instead of spending all day preparing a meal, more people are opting for precooked options – e-commerce platform Tmall reported selling 800,000 partly-cooked food products during its week-long New Year promotion – 16 times more than the previous year. And it’s not just Gen Y leading this change, with Taoxianda – the Taobao mobile app’s fresh-food delivery service – experiencing the number of users aged 50 increasing 172% over the previous year.
57% of Chinese people are active internet users. WeChat has more than 50 million users aged over 55.
Folding clam-shell phones like the Motorola Razr – once so popular in the early 2000s – are relics of the past, overtaken by touchscreen smartphones. But the fast-moving smartphone market has now reached saturation point (some would say a stagnation point), and innovation has slowed or stalled. So what's next? Mobile World Congress (MWC) was expected to see the launch of a number of new folding phone designs, but before the conference stands had even been set up Samsung dropped its Galaxy Fold – the world's first folding screen phone. Samsung's device uses a hinge to open out like a book, with a continuous OLED screen delivering a tablet-like experience when unfolded. It uses a second smaller screen on the outside of the device when in the folded position, much like a standard smartphone form factor.
At MWC itself, Huawei stole the show with its own take on the folding phone idea. The Huawei Mate X is slimmer than Samsung's, and takes a different approach to the South Korean giant's design – and Huawei has impressed many critics so far. The Huawei Mate X's screen folds around the outside of the device (and they've thrown in 5G for good measure). Both devices are pricey at way past US$2k, so does this mark the birth of a new mainstream category or just a new tech niche that won't find an audience beyond the enthusiasts and early adopters?
Ex-Microsoft exec Steven Sinofsky believes the new transforming 2-in-1 devices will be around for some time to come ("no one ever complained about having too much screen real estate"). But are foldable phones a solution in search of a problem? Owen Williams believes so – his final thoughts: he'll be sitting it out until tech companies make foldable phones that are thin enough, light enough and usable enough for everyday use. This form factor took some time to become popular in the laptop/tablet hybrid segment, but it’s now a multi-billion-dollar market. Analyst firm Market Research Future predicts the 2-in-1 laptop segment to more than double in size by 2022 compared to 2016. Can foldable phones follow in the footsteps of its larger laptop brothers? Only if manufacturers can refine the designs and keep the devices super-slim.
South Korea has traditionally had strict expectations of how men and women dress and style themselves. Women in particular feel forced to perform laborious beauty routines every morning, but now they’re rebelling against beauty standards to take back their time, money, energy and feel free from oppressive rituals. There’s an opportunity for beauty brands in, or those exporting to, South Korea to use their platforms not just to sell fashion and beauty items, but to take a stand and empower women. Brand purpose (the current marketing trend of brands taking moral or ethical stands, such as Gilette’s recent 'The best men can be' campaign) won’t work for every business, but it could work in South Korea given the current tone and direction of the conversation around gender politics.
- The South Korean beauty market is a world leader, valued at nearly £10bn Euromonitor, 2018
- When it comes to getting a job in South Korea, appearances make a difference – according to 60% of HR personnel in the country Business Insider, 2016
- Cosmetic surgery is normal: one-third of South Korean women between the ages of 19 and 29 have gone under the knife Gallup Korea, 2015
Perhaps brought on by a desire for clarity and clear thinking amid the confusion over Brexit, the UK has seen a big rise in alcohol-free beverages. This fits with the trend of choosing health-conscious options in preference to more indulgent choices, as we saw in January as vegan options – often seen as the healthy choice – grew and grew around the world. Most high-profile low- or no-alcohol beers are lagers, offering limited choice to those cutting down on their alcohol consumption, but the key to success is showing people that a drink can be enjoyed in its own right, rather than as a second-best option: 41% of people cite taste as the most important factor when choosing a beer (Heineken and Canvas8, 2016). The market is ripe, growing 15% between 2016 and 2018 (Global Market Insights, 2018), while spending in 2018 increased 28%, to £42m, from 2017 (Nielsen, 2018).The UK likes a tipple, but the major barrier to success for low- and non-alcoholic beverages has already been crossed – 52% of Britons believe that drinking low- or no-alcohol drinks has become more socially acceptable. (Carlsberg UK, 2018).
The health-conscious efforts in the UK continued in February with a campaign urging consumers to give up sugary drinks for ‘Fizz-Free February’. The UK has seen a 70% rise in the number of teenagers with diabetes in just four years, and the campaign's organizers believe sugary soft drinks are at least partly to blame. The UK has followed other countries like Finland and France by introducing a sugar tax in April 2018, but the soft drinks industry has already complied with sugar-reduction targets. Quoted in UK newspaper The Guardian, a spokesman for the British Soft Drinks Association said: “Soft drinks is the only category to have already hit Public Health England’s calorie-reduction target of 20% by 2020.”
Reddit is the forgotten social media platform, yet it has about the same number of monthly active users as Twitter (roughly 330 million). And despite drawing hundreds of millions of dollars in investment and being valued at US$3bn, it’s hasn’t made big money. But a news report from Axios suggests this is about to change, as advertisers wake up to the potential of Reddit as an advertising platform that can reach an almost exclusively under-35 audience.
So, that's February’s trends picked apart, chewed up and spat out as a detailed analysis of what might affect your business in March. But a word of warning: no one knows what the future holds. It's down to you to follow your instincts and assess the market to see where your customers are going next. After all, that's the game: taking risks today that might reap rewards tomorrow.
That's what DHL Express does every single day – we take logistical risks to help us deal with a predicted number of packages. And we get it right, which is why thousands of businesses like yours trust us to deliver goods and products to customers across the world. Get in touch with DHL Express today and start shipping to one of 220 global countries and regions.