With the explosion of the credit-fuelled global financial crisis, people’s accumulated suspicion and distrust of government, the financial system and bankers, coupled with a growing sense of powerlessness, has finally come to a head.
Except for token displays via sporadic street demonstrations, and ‘letters to The Times’, the consumer has seemingly come to the conclusion that little can be done at individual level to bring about macro change. The result has been, for those that can, a paying down of personal debt, reduction in expenditure, increased saving and generally ‘making do’ in postponing repeat purchase. Thus savvy consumerism has spread to all levels in society, and such moves continue to take demand out of the market…
With this sense of helplessness resulting in getting mad whilst re-voting in more of the same, and having to continue dealing with traditional banks, resentful at the lack of any real alternatives, consumers have been seeking ways of doing more than simply resisting passively. What is emerging is a growing realisation that as consumers they can get even by exercising some influence in one of the areas not yet legislated for, the freedom to choose brands, the freedom to buy or not buy… Incidentally, those in the travel retail trade will have seen early signs of this ‘worm-turning’ in observing how airport shops are often ‘punished’ by travellers refusing to buy duty-free goods following the endurance of overlong security checks, a small but significant step…
However, the big breakthrough in the demonstration of people’s ‘brand-power’ recently spilled over into the high street via the public’s reaction to Starbucks’ apparent failure to meet its UK Corporation Tax obligations… This resulted in local protests, but more importantly, active pursuit of the only freedom left available to a ‘wronged’ consumer, brand-switching…
According to The Guardian, Starbucks had allegedly paid less than £7m in tax since 1998, on UK sales of £3bn, and in response to the public outburst, the chain allegedly made a couple of £10m payments to the Treasury, presumably to cover corporation tax on future earnings. This move was mishandled on several levels in that a savvy consumer, assuming a net profit margin of 5% before tax, would translate this into a net profit of £150m, attracting corporation tax of say 25% i.e. £33m, minimum. For a major company to then apparently ignore this past obligation and appear to simply put 2 x £10m on the table as an advance on future tax, was at best naïve and merely compounded the perceived insult to savvy consumer intelligence. The return of the demonstrators should not have been a surprise…
Having thus ‘tasted blood’, many consumers are now sensitive to other possible cases of avoidance of local corporation tax obligations, and are willing to act accordingly. For the first time it would appear that consumers are now drawing a comparison between financial cause and effect, a link between tax income and public expenditure, and a realisation that they still have the freedom to choose between purchase and non-purchase…
In practice, this means that consumers now feel that they can exert some influence in the market by ‘punishing’ a brand that they perceive is not meeting its social obligations. By switching to a more ‘conforming’ brand, they can still meet most of their functional needs and in the process demonstrate to the rejected brand their unwillingness to tolerate a lack of fair-play in the marketplace. This social movement will gradually impact all brands, both retail and supplier…
However, the problem for suppliers and retailers is that this consumer use of power at point-of-sale can gradually extend back up the supply chain… As consumers are helped to understand more about supplier-retailer business models, and increasingly appreciate the impact of consumer-power on a company’s market capitalisation, so they will gradually understand that companies that appear to exploit scale-power via the imposition of excessive delays in paying ‘powerless’ creditors, are passing unfair costs back up the supply-chain, eventually resulting in less choice and increased prices at point-of-sale.
For their part, major companies’ defence that they observe the Prompt Payment Code misses a key point in that the code merely spells out the need to pay an invoice promptly on or shortly after the contracted period, whilst the savvy consumer ‘naively’ believes that ‘prompt’ means shortly after receipt of the goods, say within five to ten days… Again, the dawning realisation that they have been wrong will provide consumers with another ‘corporation tax’ reason to punish a shop or brand…
In other words, the savvy consumer has found a way of ‘getting back’, of exercising real power in these unprecedented and ‘powerless’ times, and woe betide those who fail to realise that ‘all is changed, changed utterly, a terrible beauty is born’… (apologies to W.B.Yeats)
