Global Megatrends and Industry Division F
Updated: Sep 1, 2022
Wholesale trade is about the sale of goods in quantity. In use since the 1400s, the term is associated with the intermediaries that sit between producers and retailers. And just like other industry divisions, the wholesale trade division is changing. This article is a reflection upon this - what could happen in the wholesale trade industry (ANZSIC Industry Division F) over the next 10 or so years? What career or business prospects are likely to materialise or disappear? What follows are insights from a futurist on this industry – a perspective on what could be.
As with other articles exploring the future for different Industry divisions, the focus is just on the impact of two global megatrends – computerisation and climate change. Societal and demographic global megatrends are other ones (eg. about 3.5% of the world’s population can be classified as migrants, people who are not living in their country of birth, up from 2.8% 20 years ago.), but they may not be as significant as the two at the centre of this article.
About the global megatrend of climate change
Weather patterns are measurably shifting, ocean temperatures are rising, as are the number of extreme weather events. All of these impact local economies – whether rural or urban, coastal or inland (eg. over the last 50 years cities of global significance have reported increases in average temperature and reductions in average rainfall).
And so, without a globally significant and sustained effort at combating climate change we will witness a rising intensity and frequency of heavy precipitation. There will also be a continual increase in land and ocean temperatures over coming years, marked by an escalation in the frequency and duration of land and marine heatwaves (eg. there were about 20 marine heatwaves somewhere on Earth during the 1980s with a maximum length of about 50 days, last decade there were dozens with many lasting over 100 days).
About the global megatrend of computerisation
As the ability to process more data, and faster, has been a bedrock feature of the evolution of computer hardware – so has the complexity of computer software. The dominant computer operating system of the late 1990s, Microsoft Windows 95, was built with 15 million lines of code. Compare this complexity to their 2015 flagship operating system, Windows 10, which uses 50 million lines of code.
Compare and contrast these counts with other things which we are familiar with – the Android operating system has about 15 million lines of code and a typical new car has about 100 million. At the other end of the spectrum, a Boeing 787 has about 6 million lines and the Lockheed Martin F35 has about 8 million lines of code.
It follows that because the capacity of computer processor chips to do work has risen, so has the complexity of the algorithms that run on them. And in parallel to this rising complexity is the inclusion of self-healing, self-tuning and self-protecting functionality in software.
The impact of these two influences
Firstly to climate change, and its impact on the wholesale trade industry.
Its important to note, that the transport and warehousing of wholesale goods is not included in this article, they are for analysis of Division I. It is about the business of purchasing and onselling of goods, and due to a number of factors the size of intra- and inter-national wholesale trade is staggering. Take the international trading market – in recent years between $15 and $20 trillion dollars worth of goods are exported globally (up from about $7 trillion in the year 2000).
Thus, with transport and logistics set aside, and apart from the potential long-run negative impact on economic growth, the only impact climate change will have on this wholesale trade industry is on the profile of what is traded.
It is self-evident, that consumer goods, fuel, agricultural products, chemicals, clothes, and so on are components of wholesale trade. These goods can be broadly placed into two groups – those required some form of transformation (eg. elaborately transformed manufactures and intermediates goods) and those that don’t. It is important to note that 86% of the $20 trillion dollar flow is comprised of goods that have undergone some degree of transformation.
With fuels coming in at about 10% of this annual trade, decarbonisation efforts aimed at changing energy sources are unlikely to significantly alter the total size of the flows (especially given the year-on-year rise in global trade).
Carbon border adjustment mechanisms (CBAM) are another response to climate change that will affect trade flows. Although insignificant in gross terms (at an estimated $53 Billion annually), the European Union’s CBAM may well have induce second order effects across a selection of the “transformed” goods.
One last impact of climate change on wholesale trade is the one on food. While it is only about 8% of the total global trade, about one third of all global agricultural and food exports are traded within global value chains. That is, there are ripple affects right across the system. From changes to what can be grown at a locale, to the effects of drought or flood, or even the reduced resilience due to lack of biological diversity, the potential is for a set of cascading problems.
And now to the global megatrend of computerisation.
As we have seen in other industries, digital technology is also changing the structure of the wholesale trade industry. In the case of journalism, computerisation ushered in disintermediation. Where the gatekeepers of information were sidestepped with everyone having access to low cost, or even free, tools to publish their own content in word, audio or with moving images.
And in the case of private transport we have seen the introduction of goods such as autonomous vehicles and services such as ride-hailing platforms. Both the result of improvements in computer hardware and software.
So it is with wholesale trade. The growth in global value chains has been enabled by improvements in digital trading platforms. These platforms have lowered the barriers to trade for both developed and developing countries. Where flow-on effects include: the selling of more products in smaller quantities to more markets, the shift to “direct-to-consumer”, and reduction in responses to changing consumer tastes and trends.
What follows is the drive to improve the digital capabilities of those who engage in wholesale trade. From predictive analytics and automation to digital certificates of provenance and blockchain trading.
It can be seen quite clearly that both climate change and computerisation will shape the wholesale trade industry for the foreseeable future.
What are your prospects
From the preceding, and from a career perspective, there are several observations that can be made:
If you are more the “get it done” type: you’ll see shifts in the types and quantities as well as the sources and destinations of goods that you handle
If you are more the “thinking” type: there’ll be more data and a greater need to understand ever-shifting trade flows and end-customer trends
If you are more the “creative” type: you’ll have richer data sets to discover trading opportunities
If you are more the “helper” type: you’ll be needed to support suppliers and buyers to transition away from stagnating channels, to maintaining markets and to growing new ones
If you are more the “leader” type: you’ll need to be very comfortable with leading people in an industry with VUCA characteristics (volatility, uncertainty, complexity and ambiguity)
If you are more the “structure” type: you’ll be faced with not only changing trading rules and regulations, but also changing market dynamics
Overall, in the years ahead you’ll need to comfortable with using more computing technology to respond to shifting market structures.
Like with other industry sectors - from a business perspective, when it comes to responding to climate change it is all about mitigation (ie. shifting focus to reduce risk) and resilience (ie. fortification to handle risk). And, when it comes to computerisation its all about automation and using data. So, for those operating within the wholesale trade industry, likely business prospects are along the following lines:
Mitigation: changes what is traded, as well as trading rules and regulations
Resilience: understanding source and destination locale’s climatic trends. Bolstering insurance
Automation: improving trading partner coordination
Data analysis: improving the digital skills of the workforce and developing trading platforms
Overall, and quite obviously, for businesses there are both risks to be aware of and opportunities to exploit in the change that is happening.
While the two global megatrends of climate change and computerisation will affect the wholesale trade industry the type of influence will be different. The latter will shape the operations and structure of those who engage in this industry, the former will shape who is engaged and what they provide.
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