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Have you tried lo-name products lately?



Local and low branding products as a means to tackle globalization.

While big corporations have learned how to cash in on the global market, politicians and politically alert minds keep turning in circles on how to handle the collateral effects of globalization.

Their approaches, however, tend to sound terribly old-fashioned. Both the extreme left and the extreme right look at isolationism and protectionism as possible strategies. But trying to turn back the clock on the global market would throw countries back. Isolated economies such as Iran, Cuba, Serbia or Myanmar hardly inspire.

The free market is not tied to democracy at all

On a global scale, democracy is still considered as being twinned with free markets.

China is the living proof of how wrong the free market principle is. It shows how any non-democratic state can operate in free markets a lot more efficiently than western style democracies by denying worker's rights and human rights where appropriate. In this way, dictatorial systems can undermine the economic foundation of those democratic countries which created the global market. Any kind of dissent is firmly kept under control while permitting private consumption and creation of individual wealth.

The achievements of redistribution policies in the 1970s, which brought decades of rising living standards to the citizens of western democracies, are now being dismantled piece by piece by global players who are simply not playing by the old rules.

The free market was meant to have a functional anti-trust mechanism

Global and local monopolies are taxing consumers. Governments obviously don't like monopolies and cartels also levying taxes, but their anti-trust legislation is usually dysfunctional.

The European Union is currently the only political entity worldwide actually operating an effective anti-trust mechanism; yet, even the EU seems too slow and not powerful enough to face down global cartels and monopolies.

Consider the case of Microsoft: How sad can it be, if the only threat to the software giant comes from a worldwide grassroots operation? And why is it possible, that this grassroots movement is already providing a much superior product for free, and still hardly causes any trouble to the monopolist? Microsoft even devised a strategy to praise its few competitors to make us believe there really existed competition, however, only in fringe areas which Microsoft has not yet monopolized.

A factor that became important with globalization is global branding, and its mirror image, global counterfeiting. Companies that managed to establish globally recognized brands gained a quasi-monopoly position, usually accompanied by counterfeiting. Sometimes, the counterfeiter is the monopolist itself which uses fake "imitations" to flood low-income markets while strengthening its monopolistic hold on high-income markets.

A downmarket customer might be pleased to notice that "counterfeit" razor blades purchased in a street market are actually as sharp as "genuine" ones. More often, however, the brand addict will be cheated. In parts of Africa, for instance, most medicinal drugs sold are counterfeited and, at best, placebos.

Still, the consumer is not always helpless.

How the fall of the Berlin wall affected European economy

Inadvertently, Germany has become a market for interesting alternative forms of retailing. As regards everyday supermarket goods, Germany broke the stranglehold of global brands and moved into a phase of postbranding. This probably was an unexpected consequence of the fall of the Berlin wall.

Germany's former center-right government of Chancellor Helmut Kohl, popularly considered economically competent, when in charge of managing an unexpected reunification, blatantly failed at bringing the East-German industry into the western markets. Although eastern factories quickly learned to bring the quality of their products to western standards, they had a hard time entering the brands-oriented market. A few were successful establishing alternative brands, or even maintaining their eastern bloc era product names, but many had to close down. Several other factories, in trying to survive somehow, found market niches by creating no-name discount products. By lowering prices they succeeded in filling the shelves of discount supermarkets catering for the less affluent.

In Germany, the family-owned Aldi discount chain was the uncontested leader in bringing about this economic change. Early on, they rejected almost all major brands and replaced them by high-quality lo-name products which were not only less expensive, but occasionally even of superior quality.

The discounter started out as a supplier of poorer strata of the society, but after a few years, Aldi's combination of low prices and remarkable quality started attracting the better-off as well. Aldi's success — making their owner brothers Germany's richest people — led to the creation of several copycat discount chains which fiercely competed for the budget-minded customers.

These discounters were probably helpful in cushioning the impact of the decline of the German economy resulting from the fall of the wall and the many years of heavily subsidizing the moribund east German economy. Germans are on average much poorer now and have lost their rank as leaders among European economies but their domestic spending has considerably decreased. Over 40 percent of all supermarket goods are now provided by discount chains, and most supermarkets had to slash prices, as well. The Germans have learned how to live pretty well with less branded goods about the house.

When Wal-Mart entered Germany, they stepped into a market that gave them not a ghost of a chance. Wal-Mart's success story is still largely based on the American love of brand products: a concept which has pretty much evaporated in Germany. Wal-Mart just couldn't deal with it and left the country after years of losses.

Germany now has the lowest food prices in the entire European Union. The new lo-name economy has forced major global brand companies to seek a share in it. Kellogg's, for instance, was among the pioneers to embrace the Aldi principle and let them have their product at very affordable prices. It resulted in a landslide of families adding Aldi to their shopping portfolio. Some years later, Kellogg's stopped selling their brand products in discount stores, letting them be replaced by "Gletscherkrone" and "Leckermatz". Good products with potentially intentional ugly wrapping.

Who needs advertising if all you need is shelf space?

Of course there are dark sides to the victory of discount marketing in Germany. Discounters are known for ruthlessly squeezing their suppliers. The advertising industry is suffering because discount store suppliers forego advertising. All they need is shelf space acreage.

Germany's unexpected lesson learned from its re-unification is now slowly creeping into other European mindsets because German discounters are busy expanding into east and west, thus spreading acceptance of ugly-looking lo-name products, fighting global brands with increasing success.

In several western countries this might even affect the difference in wealth between locals and immigrants. While locals groan at ever higher prices of brand products like Italian pasta, immigrants find themselves with more money in their pockets as they figure out how to buy cheap products of equivalent quality.

The Swiss found an expression for this process. They call it "Aldification."

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—— Benedikt Brenner