2012 set to be a good year for retail

As we move beyond Australia Day and Auckland Day into the real start of the year in our unique countries, it’s worth looking at how the US has traded through its holiday and New Year sales season.

For all the talk of the US being a major manufacturing country, the reality is that it hasn’t seen any growth in job creation in absolute terms, not just percentage terms, since the 1950s.

The US jobs growth in this period was confined to the services sector, within which retail remains the largest part. That doesn’t mean that the manufacturing sector isn’t important in the GDP and wealth of the US. It just means that the majority of jobs, taxes, rent and construction happen because of the retail sector.

It’s good to see, hear and read US news outlets using an upbeat tone. I have seen headlines proclaiming “GDP rising”, “US turns optimistic” and “The consumer is back”. All of these claims are due solely to the positive retail results seen since early November, as retail sales have now lifted well above 2009 and 2010.

In turn, these sales feed into factory orders for US manufactures and US importers, which then feed into factories around the world. This results in optimism among retailers, which leads to an increase in hiring and a refocus on store expansion.

I highlight this because Australia and New Zealand aren’t there yet. Our retail sales were sluggish at best over the Christmas and New Year period – albeit with much lower shelf prices than in the previous two years.

Looking at my own personal shopping between late November and late January, across food, alcohol, electronics and homewares, shows me just how far prices have fallen for shoppers, when compared with equivalent items year-on-year.

This is exactly the process that the US went through over the past two years, in order to come out the other side of its recession.

Prices at retail dropped, new brands appeared, old brands reengineered themselves and their offerings and shoppers began to shop with confidence again. It’s worth noting that the vast majority of people in the US are shopping with no more, and in many cases less, money in their salary cheques. And if they haven’t lost their job, they know several people who have.

The interest they are paying on their houses, cars and credit card loans is extremely low and tax cuts are just starting to feed into their take-home pay. So US shoppers are feeling better with the “new reality” that is the second decade of our new century. And feeling better makes us confident to spend on retail.

This year interest rates and shelf prices in Australia and New Zealand will continue to move downwards slowly. As this happens, we will try new brands as we finally upgrade our old car, motorbike, outboard motor, mobile phone, TV, lawnmower, dishwasher and air-conditioner.

As a result our economy will shift gears again – ceasing to be led by a mining boom. Instead it will be led by jobs growth, in services and retail in particular. All things considered, it should be a good year.

In his role as CEO of CROSSMARK, Kevin Moore looks at the world of retailing from grocery to pharmacy, bottle shops to car dealers, corner store to department stores. In this insightful blog, Kevin covers retail news, ideas, companies and emerging opportunities in Australia, NZ, the US and Europe. His international career in sales and marketing has seen him responsible for business in over 40 countries, which has earned him grey hair and a wealth of expertise in international retailers and brands. CROSSMARK Asia Pacific is Australasia’s largest provider of retail marketing services, consulting to and servicing some of Australasia’s biggest retailers and manufacturers.