1. Industry
Send to a Friend via Email
Barbara Farfan

U.S. June Retail Sales Decline Less Significant to Global Economy Than U.S. Retail Industry Would Like - Global Retailing's Future Will Not Be Defined by the U.S. (ANF)

By July 19, 2012

Follow me on:

News of the 0.5% decline in U.S. retail sales in June reportedly took U.S. financial experts by surprise, and sparked speculation in the media about the cause and meaning behind the third consecutive month of U.S. retail sales declines. But the question is not why U.S. retail sales declined in June, but rather why the experts on the Street were so surprised by it, if in fact they were.

The largest U.S. retail chains have made no secret about their increased focus on global expansion in 2012. They're intent on finding the low-hanging international retail market fruit to replace the revenue that they're tired of trying to rustle up with fickle U.S. consumers whose spending habits have become largely unmanipulatible. I doubt if there are many U.S. retail executives who were "surprised" by the June retail sales, so why were the prognosticators (if in fact they were)?

Pulling back from the hyperfocus on the barely discernible U.S. retail sales decline, the larger global retail story reads better. In a recently released report "The Future of Global Retailing to 2016," some global retailing trends reveal where retail optimism and opportunity can be found. The predictions for global retailing, according to market research firm Canadean include three overarching trends:

- The contribution of North America to total global retail sales is expected to decline in the next four years, but per-capita retail spending will still be the highest in North America.

- While North America's share of global retail sales is declining, retail sales in Latin America, the Middle East, and Africa are predicted to remain steady through 2016.

- Retail sales in the Asia-Pacific region are expected to grow 10% or more each year between now and 2016, and account for about 50% of total global retail sales by 2016.

This report, of course, will become a self-fulfilling prophecy as U.S. retailers take increasingly aggressive actions to move into the global retail markets which seem to hold the biggest promise for future profitability.

So far global retail speculating has created ridiculously competitive retailing conditions in what are perceived to be the hottest international retail markets. The result of this global retailing rush may be that foreign retailers will generate lots of revenue but very little profit in the retail promised lands around the world.

We see evidence of this already in the Comparison of Retail Rental Prices in the World's Largest Cities from 2007 - 2012. The demand for commercial retail space for U.S. retailers doing business in Hong Kong, for example, is so great that the rental price for retail space there has more than doubled in the past year. This is somewhat reminiscent of runaway real estate values that we experienced in the recent past that were fabricated and, therefore, unsustainable. So perhaps it would be a better strategy for U.S. retailers to wait for the bubble to burst, and then clean up the mess left behind by $7 million per month leases that have been signed by retailers like Abercrombie & Fitch (ANF).

While it's difficult for many to accept that North America in general and the U.S. in particular will not be the center of the retailing universe in the not too distant future, the numbers tell us that the shift has already begun and momentum tells us that it's not going to be stopped. All the overanalysis and dramatic reporting of short-term U.S. retail numbers is not going to help the U.S. retain its significance in the larger global retailing economy.

There are both positive and negative opinions about economic globalization from business, economy, and political experts. It's hard to know which philosophical stance will be the most helpful to a global economy that is more than a little dysfunctional at the moment. But perhaps we can take a cue from the Australians, who this month are celebrating 21 years without a recession, a record that is unmatched by any modern nation.

If we follow the lead of a nation that seems to have things figured out pretty well, then we will follow the global economic philosophy of Australia's Prime Minister, Julia Gillard who said, "My guiding principle is that prosperity can be shared. We can create wealth together. The global economy is not a zero-sum game."

Well said and well played, Australia.

Trending Retail Topics | Free Retail Newsletter | E-mail Quote of the Day | Pinteresting Retail Pins | Follow on Twitter | "Like" on Facebook |


No comments yet. Leave a Comment

Leave a Comment

Line and paragraph breaks are automatic. Some HTML allowed: <a href="" title="">, <b>, <i>, <strike>

©2014 About.com. All rights reserved.