At a time when we have come to expect the unexpected, Spain is emerging as a pillar of relative stability while much around it remains uncertain.
High rates of unemployment triggered by the financial crisis nearly a decade ago still dog this market, but the economy has gradually found its footing. Not only is Spanish GDP steady, it’s now growing at a rate that outpaces the Eurozone average.
Six years of recession gave way to a return to growth in 2013; growth has continued since then, led by a broader recovery in other European markets and Spain’s key trading partners, and helped by lower oil prices and burgeoning domestic demand. The pace of growth surpassed expectations in 2016 and GDP was up 3.2 percent, and while forecasts are lower for 2017 (2.1 percent growth), they are still higher than for many of Spain’s neighbors. The outlook in the medium term is bright.
The challenges of the past decade have been severe, and what has emerged is an economy that has realigned itself. There is a far greater emphasis on small businesses, on innovation, and on entrepreneurialism.
This is partly by design, and partly out of necessity. The unemployment rate, which peaked at 26 percent in February 2013, has eased somewhat but remains high by world standards. Young people, who have spent their teenage years watching businesses strain and seeing job losses across a swathe of industries, see that working for someone else no longer brings the security their parents expected it would. They are increasingly looking to start their own businesses, fuelled by a “can do” spirit, and with digital technology in many cases acting as a catalyst.
Ascri, Spain’s venture capital and private equity association, reports that investment in start-ups rose more than 80 per cent last year.
Madrid and Barcelona have become hubs of technological innovation; the availability of engineers and other IT specialists, coupled with low costs of hiring and the availability of budget office space compared to other major centers, are attracting global attention.
Google in 2016 launched an Innovation Campus in the Spanish capital; one of only six in the world, the campus is a place where entrepreneurs can use work space, attend training and join business-acceleration programs.
Amazon, meanwhile, has launched a Tech Hub in central Madrid to develop software for its operations across Europe, and a business-to-business development center, also in Madrid. It has also built a logistics center in Barcelona due to begin operations this year, and Spanish bank BBVA is fostering start-ups around the world through its “fintech incubator” programs.
On the World Economic Forum’s network readiness index, which assesses the factors, policies and institutions that enable a country to leverage information and communication technologies (ICT) for increased competitiveness and wellbeing,
Spain is ranked 35th out of 139 countries. Italy is 45th, France 24th, the UK 8th and Portugal 30th. And on the European Commission-supported European Digital City Index, which describes how well different cities support digital entrepreneurs, Barcelona is 9th and Madrid is 14th. London takes first place.
Spanish start-ups are also looking outwards. The transport app Cabify, launched in Madrid in 2011, now operates across Spain, Portugal and six Latin American markets; its biggest investor is Japanese e-commerce giant Rakuten. And in August 2016, eBay acquired Spanish-founded event tickets business Ticketbis, based in Bilbao and Madrid but covering events in more than 40 markets around the world.
Not all of Spain’s growth is coming from digital development. The country has a thriving biotechnology industry and is a leading investor in research and development in the field. Drugs and medical devices are also strong contributors to the nation’s exports.
Spain is the fourth-largest producer of textiles in the world, and brands flying the flag for Spain around the globe include Zara and Mango. Automotive manufacturing remains strong, and Spain is among Europe’s largest vehicle producers; the local SEAT brand is now part of the Volkswagen portfolio, but design still takes place locally.
Tourism continues to be a pivotal contributor to the economy and job-creation, as does food and drink. Spain is the world’s largest producer of olive oil, is a major wine exporter, and if you had breakfast anywhere in Europe today, chances are you have a Spanish grower to thank for your juice.
Looking ahead, looking up
Consumer confidence in Spain is currently buoyant compared to the average over the past decade, though down somewhat this year from an all-time high in late 2015. Inflation is putting pressure on household budgets, with consumer prices up 3 percent in February 2017 compared to the same month in 2016; the cost of transport and housing have been rising especially fast – at up to 8 percent in the past year – leaving consumers with less disposable income.
As consumers are forced to make decisions about where to spend and where to hold back, brands are competing for their attention, increasingly reaching out to a digitally connected consumer audience via digital and social media.
Kantar Millward Brown research into what sets the strongest brands apart from the competition shows that awareness is a key ingredient in consumer choice. But it is a brand’s ability to make a meaningful connection with a consumer that matters most. Brands must get noticed, but then they must have something of value to say.
There are opportunities, as consumers adjust to the changing reality in which they live, to make meaningful connections. They can be not just present but also relevant, enriching people’s lives, even in small ways.
For brands that fail to get the balance right between volume and meaning, there is a very real danger of creating a consumer backlash. The latest Kantar TNS Connected Life study shows that 32 percent of Spaniards feel they are being “constantly chased” by online advertising; the same proportion say they ignore branded messages in social media networks.
Successful Spanish brands are telling stories that resonate with people’s lives. Consumers are sophisticated and selective; they expect an increasingly complex relationship with the brands they make part of their lives.
Some of the names featuring in the BrandZ™ Top 30 Most Valuable Spanish Brands are not just a domestic success but are also world leaders in their field. In coming years, it is likely that more home-grown brands will start to realize global aspirations.