Philly Deals: Aging population, oil prices will make China more expensive

Travelers line up to buy tickets in Beijing.
Travelers line up to buy tickets in Beijing. (JONATHAN KAIMAN / Los Angles Times)
Posted: May 04, 2012

Cheap labor in China helped make Apple Inc. the richest company in the world. But those days are nearing an end, says Marshall Mayer, veteran Wharton School management professor and regular visitor to America’s top competitor.

“Things are happening to drive up manufacturing costs in China,” Mayer tells me. One, there’s the “incipient labor shortage.” China (like Mexico, Brazil, and other fast-growing economies) temporarily benefited from the shift to small families, with more workers and fewer dependent seniors and babies.

“But, beginning about now, China’s population begins to age. This will throw a huge burden on everyone in China. In the countryside, they can’t get enough cotton-pickers. Tomatoes are rotting on the vine.”

Won’t other Asian nations take up the slack?

Clothing manufacturers “are migrating to Vietnam, to Indonesia. But those countries are [no larger than] a single province of China.” And their birthrates are falling, too. “So yes, you could see some of the manufacturing migrate back to the U.S. The cost advantages are considerable.”

And not just because of labor: ”Logistics” — transportation and scheduling — “are going to be a huge factor.”

But isn’t this a global economy, a flat world?

“We’ve underestimated the true cost of the global supply chain. In 2008, we saw that lengthy supply chains are vulnerable to collapse.” That year, it was the sudden inavailability of bank letters of credit, basic finance for exports, that stalled contracts, shipping, and plants down the line.

Resurgent oil prices will make global trade more expensive, Mayer predicts. That will help revive local manufacturing; it will be cheaper to build locally than ship around the world. Factories in expensive cities like Shanghai will close, and “China will become a normal economy quicker than anybody thought, as a consequence of labor and logistic pressures.”

A smooth transition? Not assured: China’s Communist Party remains locked in a debate over whether to open the economy further or extend central planning. “We don’t know where the new government stands,” Mayer concludes. “It will have enormous consequences for us. My sources say, ‘Don’t do anything for 18 months.’ There could be a wave or reform. Or a cultural revolution, again.”

New menu

Last summer, O’Neill Properties,Brian O’Neill’s King of Prussia development company, took over management of the shuttered 2,500-seat Mount Laurel Performing Arts Center at Bushkill on the Delaware. It planned and sold out four shows last summer: Kiss, ZZ Top, Larry the Cable Guy, and a twin bill of the Beach Boys and Frankie Valli and the Four Seasons. This summer, it’s scheduled Little Feat, Ziggy Marley, Three Dog Night, the Temptations, Lyle Lovett, Johnny and Edgar Winter, and others you’ve heard of if you’re my age.

Last year, the firm used Ticketmaster to sell seats. “But this year, we recommended TicketLeap,” of Philadelphia, to operator Mount Productions, said Dan Mita, project manager for O’Neill. O’Neill himself suggested the switch. (No, he’s not an investor.)

Why? “Ticketmaster’s markup is 3 percent to 4 percent of the ticket price; TicketLeap fixes it at a flat rate,” $2 or $4, for tickets ranging from $30 up to $100, Mita told me. “It’s cheaper for us, easier for the consumer.”

Plus, TicketLeap “does a lot of things from the branding and marketability point of view,” Mita said. “You can buy your tickets on our website, as opposed to having to flip over to Live Nation or Ticketmaster.” Mount Laurel beta-tested a new TicketLeap service, which gives a map and photos of the venue on the theater’s own website, so you can see the seats you’re buying. It’s now live.

“The industry has been dominated for such a long time by these larger ticket services. There are some advantages to using them,” such as heavy traffic, Mita told me. “But TicketLeap gives us the ability to track sales, to use social media, and to see what sites are generating traffic between our website and Facebook and Twitter. It’s huge for us. It shows us where we can channel our marketing dollars more effectively.”

Contact columnist Joseph N. DiStefano at 215-854-5194, JoeD@phillynews.com, or follow @PhillyJoeD on Twitter.

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