Opportunities for retail growth remain in a number of emerging markets according to Deloitte Chief Global Economist Ira Kalish, who told World Retail Congress delegates in Amsterdam that despite concerns about protectionism impacting global supply chains.
“For a global retailer you want good demographics, low hanging fruit in terms of opportunities and a growing consumer market,” he said. “India, Africa - although fragmented - plus some Middle East countries and emerging Asian countries, plus some parts of South America all fir this.”
However, Kalish warned: “If I was a retailer I would open in my local market because the hardest thing to do is launch in a place you don't know very well.”
Looking at the impact of trade tariffs he said that if the US continues with its current action then this will “substantially disrupt” supply chains.
“A backlash about globalisation has meant companies involved in global supply chains have put investments on hold. That will be negative for consumers and retailers,” said Kalish. “But the question is who this actually punishes. The middle and lower income families will be impacted by higher prices.”
Looking at retail developments, Kalish predicted that online will continue to grow as a percentage of total retail sales. “Store based retail remains very large but a lot of online research and social media goes on before people buy in stores, therefore commoditising products,” he said. “So retailers have to make more theatre in their stores to make them worth visiting.”
He said that the first impact of artificial intelligence, which is increasingly being used in retail, will be to increase income equality. However, he predicted that the wider impact might be in changing what career choices people make, as some science and maths-based work is replaced by AI.
He added: “What won't be disrupted are jobs that require human interaction.”
In another session on macro-economics, Martin Wolf, Editor and Chief Economics Commentator, Financial Times, told World Retail Congress that protectionism is the one consistent part of US President Donald Trump's message, representing a decisive change from the past,
“The rise and rise of Asia, with emerging Asia easily as large as North America economically now, has meant there has never been as big a shift as there has been over the past three decades,” he said. “And it isn't over.”
He said that Asia is far and away the fastest growing area of the world and that India is the fastest growing country but warned that the global economy remained at risk from a variety of challenges.
“Typically, when we look at crashes there are a number of factors – major wars, huge financial crises, wars in the Middle East that destabilise oil prices. There is as much debt around as there was pre-crisis although more biased towards government and the non-financial corporate sector, so it is not quite as volatile as before,” he said.
However, he added that debt sustainability looks “quite good” as 10 year bond rates are low compared with GDP growth.
But low interest rates mean that room for central bank manoeuvre is essentially gone. “If something went wrong, central banks have very little ammunition left of a conventional kind,” he said. “In addition, China's post-crisis debt explosion has been the result of encouragement of domestic investment and it now has an enormous debt over-hang.”
One of the results has been the rise of populism, a lot of nationalist views and inward looking politics, he reflected. The result has been a slowdown in globalisation.
“Prior to the crisis world trade grew at about twice the rate of global GDP, but now is about the same. So the world has stopped being more open but is not yet more closed,” said Wolf. “If this continues, the US will have moved from being the most open market bin the world to one similar to Brazil and India.”
