miércoles, 3 de febrero de 2010

ENGLISH: Messing with the Shopsumer is not a solution

Just as one of my professors at IESE Business School said: "When things go badly, you mormally have bad ideas." In this moment, Shopsumers across Europe are faced with economic problems on both sides of their personal economy, income as well as expenditure. The main problems are:
1) Reduction in income due to (potential) unemployment, salary reduction, higher retentions (taxes, social security etc.), lower return in the future (e.g. increase of retirement age to 67 years in Spain) and substantial decline of the value of the assets they possess
2) Increase in expenditure due to (potential) raise in interest rates, growth in indirect taxes (e.g. VAT from 16% to 18% in Spain), increased prices of raw material and (potential) scenarios of "co-financing" the growing public debt.
Looking at all this, I would like to comment on the multi-million fine that the Spanish National Commission for Competition (Comisión Nacional de la Competencia) has imposed upon a number of manufacturers of shower gel brands. Yes, not to compete under some market rules has to be considered a delinquency, but with 8 bottles of shower gel that each Spanish household buys per year at an approximate price of 2.40 Euros, a joint raise of approximately 15 % of the shower gels made by the corresponding manufacturers has an impact of 1.80 Euros per annum in the pocket of each household, because 3 out of every 8 shower gels sold belong to the so-called Private Label brands who have not been fined at all. The fines mean a cost that is superior to the annual EBIT of the affected brands for the majority of the companies that own them, which affects the shareholders of these companies (amongst them a large number of Shopsumers), which in turn de-motivates these companies to continue their investments in these products, with the subsequent sacking of their employees in the factories and in administration. By all means, it is important to underline that not all manufacturers participated in this initiative and therefore the Shopsumer always had the free choice to exclude the involved brands for having diminished the content of their bottles without a proportional reduction of their price. But we, the Shopsumers, continued to buy these brands, not because we're stupid and did not notice the change, but because we like them and they inspire trust for us. The price difference between a branded shower gel and the private label is a lot bigger than the 15 % mentioned before, and even so "only" 40 % of all Shopsumers' shower gel shopping is spent on private label, purely because of trust, not price. Now, if the state does not trust in the companies' ability to generate employment and therefore investigates and fines them, and if Shopsumers lose trust both in the companies' as well as in the state's ability to generate employment and therefore do not spend money on their products or do not vote their representatives, then we DO stand no chance to compete with the enormous productivity of China, India and other countries in the world.
By the way, dear Shopsumer, don't allow for illusions! The 8.2 Mn Euros fine will not be reimbursed in your next tax declaration. Possibly it will finance good salaries for new inspectors at the National Commission for Competition to increase the state's income. And don't worry! Once all manufacturers of branded shower gels have closed their factories, the manufacturers of private label brands will employ you immediately with the same salary conditions, at least! Because that's how they could always afford to be so much cheaper: buying the same quality ingredients and paying higher salaries.
I only listen to great laughter in China when they see how we mess around with each other despite being struck by an important crisis...

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