The turmoil in the financial markets over the past few weeks has now become public knowledge and Thursday 16th August has been nicknamed 'black thursday'.
There have been a variety of bubbles over the generations, the Tulip Bubble, Wall Street Bubble, Canal Stocks Bubble, Railways Bubble, and the grandaddy of all credit bubbles South Seas Bubble. This credit bubble has the potential to be bigger than them all and would be the first global credit bubble. A normal credit bust would take 16-18 years to play out.
So where did it start, has it really started and where will it end? Well the first hole appeared in mortgage credit. We all know that credit borrowing is at record highs, and a firm rule for a bust is that the more debt involved, the more people involved and the longer the bubble goes on, the worse the denoument will be. People spending borrowed money for a couple of decades will have to relearn how to spend only earned money. This could all lead to a decline in retail sales and it doesn't matter where both online and highstreet retailers could be effected. A further cut in retail may happen once the severity of what's happening has hit home, paying the debt will result in saving being the only option.
It's claimed that 2/3rds of the UK economy is dependent and related to retail, these companies are likely to go into recession should this bubble burst. That means the big marketing agencies will have to review their rates as clients start to pull marketing budgets on the back of poor sales. This could mean that sales will drop, prices could become more competitive and consumers will no doubt be cautious. Affiliates are an example of type of business who are dependent on retail. I predict that cashback affiliate sites and comparison sites will be popular with consumers, although will still suffer from a decrease in sales in relation to the overall market. Ebay may be a good example of a surviving retailer, as people will be loathed to simply throw items away and will want to sell items they bought in the boom but really don't need in a bust. People will mend and make do rather than throw stuff when it's broken, which reduces the need to spend spend spend!
So what business will thrive online? People will have less money and so will move from expensive to cheaper past times. Communication lines which have broken down through jealousy will be rekindled. Families will unite on the basis people need to know there are other people to help when they're in trouble. Forums and social group sites may do well - but making money from advertising may be a struggle as budgets get cut.
Dare I mention house prices...If you think you are imune to falling house prices you are very much mistaken. All the above will lead to job losses in the city, trades and retail and their dependent businesses.
So what will the central banks do? Well, they may try to stop
deflation by printing money and showering it liberally upon the economy. Like the ECB is doing at the moment. The other option will be to let people borrow money at ultra cheap rate. The Japanese cut heir base rates to zero for a decade. Their house prices still fell 50% to 90% and the deflation still went gaily on.
In short, times will change, but not all the changes will be bad ones.
My advice, if you run paid search campaigns stay in control and be prepared to pull if necessary. If you run an affiliate program remember you pay on results, so you should think about upping your commissions as this will soon become your most cost effective marketing channel. Starting working on reciprocal partnerships, it won't cost you anything and retailers will need to pull together if budgets are cut. Offers, Sales & Discounts will need to be on the table if you want to be the retailer or company to clinch the sale.
