As the economic crisis in the South of Europe keeps getting worse, its consequences too continue to gain visibility. Spain seems to be the next victim: its retail sales went down 10% last month and international distributors now adopt tactics they developed for sales in the Third World.
22 consecutive months of sales decrease
According to the Spanish Statistical Institute, the 9.8% drop was just the latest in a series of 22 consecutive months in which the Spanish retail sector shrank. Unemployment is higher than ever (more than one in four adults currently has no job), so many Spaniards struggle to pay their interests – which in turn weakens the Spanish banks.
This forces the Spanish government to borrow money to support the financial sector, raising the national debts and increasing the need to cut spendings... which only adds to the lack of consumer confidence. According to Nielsen's survey, Spanish confidence - though being one of the lowest in the world - was still higher than six other European countries in the first three months of 2012; but a heavy crash can be expected for the second quarter.
Third World tactics
Lower consumption and growing poverty force international retailers to engage in strategiesthey adopted for emerging markets, as the Wall Street Journal reports. Unilever is trying to produce alternative versions of its brands for these countries, which are almost half as expensive as the normal ones.
“With around one in five people now officially living beneath the poverty line in countries like Spain and Greece, it's critical that we find new solutions to ensure that people across the region continue to enjoy our brands, while keeping in control of their household budget," says Matt Close, Unilever's head of European marketing.
Swiss Nestlé is also struggling to stay in the favour of southern consumers. Using cheaper versions and smaller packages , the brand hopes to be able to fight off the cheaper private labels, which are growing ever more popular.