The concept of internet marketing is considered by many the new paradigm in value interchange. I personally think that retail sales online will probably grow exponentially over the next 2-5 years. Why? If we consider the state of the economy and the high levels of consumer debt in the american family, we probably would think that purchases based on low cost are going to take a whole new meaning. As we all know, the internet is the right channel for this strategy.
In my opinion, the shifting of local purchasing and impulsive buying, will be radically exchanged for more programed savings-based purchases online. What this means is that the United States will cease to be the place that we use to know.
The economy in third-world countries, where spending and debt are reduced, is not a “walk at the park” for everyone. Having a harder competition for jobs and for clients translates in highly trained middle classes with a severe increase in poverty. Not to mention criminality.
The creation of jobs is, in my opinion, the only way to slow down the decline of the American capitalism as we know it. Most people would agree with me that the average American is in trouble. According to the Plastic Safety Net survey (http://www.responsiblelending.org/press/releases/page.jsp?itemID=28011726) the following things are true:
* $8,650 is the average credit card debt of a low- and middle-income indebted household in America.
* 59 percent of respondents were in credit debt for longer than one year, with an average length of just over three and a half years.
* Seven out of 10 low- and middle-income households reported using their credit cards as a safety net—relying on credit to pay for car repairs, basic living expenses, medical expenses or house repairs.
* One out of three households reported using credit cards to cover basic living expenses on average four out of the last 12 months; households that reported a recent job loss or unemployment, and those without health insurance in the last three years, were almost twice as likely to use credit cards for basic living expenses.
* 20 percent of survey homeowners had paid off some credit card debt with a mortgage refinance in the last three years, reducing their home equity $12,000 on average. Further, these households still had average credit card debt over $14,000. As a result, they were carrying 18% more debt than homeowners who had refinanced a mortgage but not paid down credit card debt—even though their incomes were almost identical. In other words, they were trading unsecured credit card debt for higher mortgage debt secured by their home.
This, made sense when 1. mortgage debt was at a lower rate than credit card debt and 2. home values where appreciating at a higher rate than the cost of financing that home.
20% of Americans have refinanced their homes in order to pay, partially, their consumer debt. It is going to be impossible for this 20% to pay their consumer debt and therefore the only option is bankrupcy. Even more alarming is to understand that some of this people will have to compite harder to preserve their jobs: lower payed jobs.
The solution: There has to be a complete change of the American mentality; is it going to happen? Do you think that advertisers will stop associating pleasure to buying new stuff?
Alex Centeno MBA.
