The selling of goods and products to end users whether personal or household consumption defines retailing. It acts as the final link of manufacturer - distributor chain. Retail sector is globally acclaimed as the vital contributor to the GDP’s of countries. Retail sector of each country is unique due to its geopolitical and socioeconomic scenarios. The political stability to geographical specialties determine the momentum of retail segment of each country. Performance of the global economy, to an extent is determined by the retail sectors. Retail sector directly deals with the end user and hence all other units in the chain of production and supply management revolves around it.
Global Retail Market - Overview
The combined findings of World Bank, WEF and IMF states that the value of global retail industry in 2017 stood at USD 23,460 Billion and is expected to mark a growth of 5.3% (CAGR) for the period of 2018 - 2023. It also states that at the end of 2023, global retail sector will be valued at USD 31,880.80 billion. Eventhough the global economy is currently in the midst of geopolitical instabilities and crises, the prospective of global retail sector is still having a positive trend of growth. The annual GDP growth rate of the major economies witnessed a huge fluctuations in the recent years due to many scenarios prevailing or aroused in respective countries. Where the annual growth rate of developed economies of America and Eurozone countries shows a negative trend of reduced growth; still with a positive value while the emerging economies mostly from MENA, South and South East Asian regions shows a promising and stable rate of growth throughout these years.
Eventhough the technological advancements and globalization have brought the world more closer; the prevalence or the arousal of segregationistic and protectionist approaches in countries remains worrisome for the growth of interconnected global retails segments. The importing and exporting of goods to various countries are also often subjected to the political dysfunction and fragmentation, geopolitical tensions, stiff monetary policies, potential asset price bubbles, draconian nationalistic tariffs, taxes and regulations etc. The current positive growth rate of major economies and their strong economic stability made the retailers to rejoice by overcoming the above negatives to an extend.
The United States of America - Future Conundrum ?
The economic situation in the U.S.A is currently under scanner due to American Chinese trade conflict, the over protectionist attitude of U.S federal administration, Presidential impeachment political crisis and raising rate of national unemployment. U.S is assumed to be a matured market with the leading retailers across the globe headquartered there. The impact of drift in US federal foreign policies and economical policies are costing the retailers across the country too. The great trade conflict is still has not come to a conclusion affected many retailers in the country and it almost leads to the escalation of inflation in U.S. The U.S Federal Bank’s involvement to an extent helped to cease the upwards trend in inflation.
The trend currently shows that an increase in consumer spending with unchanged household income leads to to reduced savings and increased borrowings which cannot be sustained indefinitely. In addition to it; the protectionism ideologies of federal administration make the manufacturers and retailers to redesign their supply chains. The retaliatory measures taken by China to counter American actions will hurt the trades, businesses and leads to the economic slowdown on both sides of Pacific affecting various nations.
The United Kingdom & Euro Zone - An Economical Confusion
Meanwhile in U.K, the Brexit referendum has created a sharp impact on the economy leading to a steady decline in the pound value. Due to that, the import got more costlier which impacted the retail price and caused a surge in inflation level. The political volatility due to Brexit still remains and the companies determined to find safer zones in Europe; U.K faces a low level inbound investments. New economical frameworks with tariffs, taxes and regulations to be sorted out with other world countries and Eurozone to smooth the international trades, will be a time consuming process. Therefore the retail growth in U.K is crippled. The aggressive monetary policy framed by European Central Bank (ECB), to an extend have helped Eurozone countries like Germany, Spain, Netherlands, Italy and France to continue or rebound their economical momentum by increasing the national exports and the intervention by ECB has also helped the Eurozone countries to achieve higher growth rate than U.S.A & U.K. But the recent elections and emergence of left and right wing extreme parties are a matter concerns in the upcoming future which may impact the national foreign and economic policies. Possibilities of another referendums by other countries from Eurozone cannot be ruled out in near future.
China - Veiled Growth vs True Potential
On the other hand, China and India, two biggest Asian economies are maintaining a well growth rate even in their hardest economic times; particularly the the growth rate India have achieved in the last decade is still continuing with slight slump even after major economic setbacks. The slump in the economic growth of India is due to the economic frameworks of the ruling government but still India manages to grow at a modest pace along with China. In the current decade, China faced a huge setback in their economy due to the over valued currency which leads to the rising of wages and it hurts the export competitiveness which China have for years. There were considerable changes in the demographic conditions of China; the working age population is no longer expanding and a shortage of labor is all over there in China.
By easing the credit market condition, Chinese government has intervened in the market which helped to see a surge in the investments in property and heavy industries. But the tightening of the market in the later part by the government due to the pace of debt expansion is worrisome. Eventhough China’s consumer market is still seeing a positive growth trend; the trade conflict between U.S.A has lead to a catastrophic effect in their economy still the consumer spending remains relatively small share of their GDP compared with most other major economies. The U.S trade imbalance has hurt the Chinese sentiments to a greater extent due to the unprecedented activities of the POTUS and China is pursuing them for a better and fair trade deal. By accepting these many hurdles, China still ranks at the top of the major growing economies world wide. It is due to their impact in the global geopolitical and socioeconomic relevance across the globe and also their growing defence capabilities and technological advancements.
India - A Policy of “U”Turn
When coming to India in terms of GDP growth rate; there is a different perspective to say when comparing with all other major economies. The GDP growth rate of India was strong all along from the last decade and the starting of the last decade India even topped the chart of growing economies in the world by replacing China. India, however is a non dependant state on commodity exports but still managed to achieve a strong growth rate due to the combination of reform oriented government frameworks in the beginning of the last decade that stimulated the investment and favorable demographics.
The neoliberal policies of the previous governance was exceptionally well which outlays for an inclusive development of all sectors of the nation. The rural employment scheme was to be mentioned with high preference in equipping the Indian rural population for more consumer spending capabilities which helped India to built a strong internal market for their manufactured commodities. Comparing with the rest of the major economies, the speciality of India lies in their strongly structured internal market consumption which is far ahead than many. This was also a reason for the country to survive strong in all the major global and internal economic challenges recently faced.
But the growth of India is currently showing a negative trend due to implementation of demonetization and goods and services tax without necessary pre-planning and precautionary measures. The growth of the country has nosedived to its lowest level due to the unprecedented impact of those measures which impacted the entire economy of the country. The after effects of those measures are still jolting the country with highly fluctuating currency value, higher taxes for petroleum and domestic gas products, higher inflation rate, stagnant income, confusions due to GST and red tapisim. The economical frameworks of the Reserve Bank of India in regards to repo and reverse repo rate too burdening or easing the economy to greater extent occasionally. But in long term; eventhough with many geopolitical and socioeconomic challenges ahead, due to the strong internal market and favourable demographics, India still enjoys a favorable growth conditions for the upcoming decade too.
Japan - Is “Abenomics”the real fulcrum of growth?
The Japanese economy is currently rebounding after years of stagnation of growth rate. The economic policies outlayed by the Prime Minister Shinzo Abe hailed as “Abenomics”is yielding results due to its aggressive monetary frameworks. It helped them to suppress the value of Euro in comparison with Japanese Yen, inflation, asset prices and also helped to kept the borrowing costs low. Eventhough the consumer spending and the retail growth is modest, they achieved an improvement in export competitiveness within the limitation of the tight labor market and stagnant wages. Long term growth perspectives of Japan still looks good due to its technological advancement and positive global economic trend but its rapidly declining working age population is worrisome.
Rest of the World - The sleeping giants are raising. Aren’t they?
Apart from the major economies mentioned above, there are many other nations performed very well in their GDP and retail segment growth rate. Brazil, Russia, Canada, Indonesia, Turkey, Nigeria, Argentina, Algeria, Malaysia, Mexico, Singapore, South Africa; all are promising countries in terms of their growth potentials and perspectives. These countries roughly accounting for a major share of the global GDP are outlaying their best economic frameworks to meet their obstacles. The growth rate of the few countries mentioned above are stagnant or negative till few years before, but showing a sign of positive development due to the progress of global economy and increment in global consumer spending. In the coming years these countries will contribute majorly to the retail sector growth.
The longer term growth perspectives of these countries are promising due to the following attributes: favorable demographics; strong institutional protection of property rights and a system for adjudicating disputes; good and improving infrastructure; a financial system that provides capital to entrepreneurs and innovators; and relatively open markets, especially openness to foreign capital; controlled or strictly monitored inflation; national economic frameworks by the government and their central banks .
