By Barbara Thau
NEW YORK–Move over U.S.
Asia and other emerging markets, such as Russia, are beginning to steal the global retail spotlight as an engine of economic growth in their own right, said Ira Kalish, global director for Deloitte Research, during a National Retail Federation press briefing, entitled, “The Global Retail Picture: Today and Tomorrow.”
Stateside, even when the housing market malaise abates, it’s unlikely that home furnishings retailers will return to the heady days of the housing boom, Kalish said.
It’s ugly out there, and uglier yet for home furnishings merchants.
“It seems to be a kind of perfect storm of bad things,” Kalish said. The mixed brew of negatives includes a slowdown in the economy, rising energy and food prices, and the collapse of the housing market.
“The most damaged retailers are the ones that benefited most from the housing market [boom]: home-related retailers,” Kalish said.
Many consumers were funding their retail purchases by taking equity out of their homes, which has since dried up, he said.
In home, merchants would be wise to carve a “product niche” versus a demographic niche, Kalish said. “Even if consumers aren’t moving or buying a home, they’ll still be doing some redecorating, with small-item accessories for their home,” he said.
Overall, retailers would be wise to avoid going “head to head with the big boys and instead dominate market segments.”
But the United States isn’t the force it used to be.
“It used to be that when the U.S. sneezed, the rest of the world caught a cold,” Kalish said. “Now it catches a sniffle. China has become a significant engine of growth for the rest of the world. The U.S. is not having as much of an impact on the rest of the economy.”
In turn, a rebalancing of the global economy is taking shape.
“In the past, the U.S. has spent more than it produces,” which accounted for the strong growth at retail, Kalish said. But now, “More growth in the U.S. will be based on exports.”
At the same time, China has seen its exports to the United States remain flat over the past few months.
The country’s growth will come from consumer spending in the nation, with its burgeoning middle class and the resulting growth in discretionary income, Kalish said.
India, Russia, the Persian Gulf, Korea and Taiwan are other markets where consumer spending is on the upswing, which opens up opportunities for U.S. home vendors, Kalish said.
In China, for example, “Vendors have an opportunity to sell competitively priced, high-quality goods to the growing number of modern retailers.”
Stateside, expect to see more retail bankruptcy filings to add to the list that now includes merchants such as Linens ’n Things, Fortunoff and The Sharper Image.
But the recessionary U.S. economy should start to see some signs of recovery later this year or early 2009, Kalish predicts. “The recession we are now in will be mild.”
As for the make-or-break fourth quarter, “It’s going to be a weak holiday season” for retailers, he said. “It would make sense for retailers to be cautious with their holiday inventory. … The somewhat more inflationary environment might give them a little more pricing power, but not much.”
