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Philadelphia - August 2011
After barely surviving the scorching Philadelphia summer, Seema returns to Australia and reflects on shocking state of the Retail Industry in the US
Founded on October 27, 1682 by William Penn, who planned the city along the Delaware River to serve as a port and place for government, Philadelphia was the largest city and busiest port in the original thirteen American colonies. During the American Revolution, Philadelphia played an instrumental role as a meeting place for the Founding Fathers of the United States, who signed the nation's Declaration of Independence and wrote the Constitution. Philadelphia also served as the nation’s temporary capital from 1790 to 1800 while Washington, D.C. was under construction and by the 19th century, was a major industrial centre and a railroad hub.
The fifth most populous city in the United States with an estimated population of 1,526,006 (2010 US Census), Philadelphia’s “history” attracts large numbers of tourists each year. The Liberty Bell alone received over 2 million visitors in 2010.
In all the years I have visited and lived in the US, I had not visited Philadelphia until a couple of weeks ago. I had the pleasure of attending my sister’s wedding reception in a small suburb located approximately 30 mins outside the city. Arriving only two days before the event, I asked to be rushed to the nearest hair and nail salon as any severely jetlagged female would. Conveniently, there was also a shopping mall located just opposite the hair salon where I could purchase some last items I needed to finish off my “maid of honour” outfit not to mention a well-deserved break from the blistering heat and humidity of the Philadelphia summer.
The Federal Reserve Bank of Philadelphia’s Survey of Professional Forecasters released GDP and unemployment forecasts for the country this month highlighting that the pace of economic recovery will to continue to be slow. The table below presents the forecasts to 2014.
The US has fallen into a vicious cycle, where unemployment is high and disposable incomes low, with decreased consumer spending and a lower demand for goods as a result. Consequently companies are not hiring as they cannot increase production levels. Add to that increased costs of gasoline, groceries, and decreased consumer confidence, the outlook for the Retail Industry in the US is not encouraging.
There are almost 140,000 retail businesses in Australia, accounting for 4.2 per cent of GDP and 10.7 per cent of employment with the industry being one of the nation’s largest employers. Over the last three decades, retail sales growth in Australia has trended down with consumers spending more of their rising incomes on a range of non-retail services including financial, property, travel and entertainment.
The industry has met many competitive challenges in the past and online retailing and the further entry of new innovative global retailers are just the latest. This intensified competition is great for consumers, but challenging for the industry which, as a whole, does not compare favourably in terms of productivity with many overseas countries. And the productivity gap appears to be widening.
Australia also appears to lag a number of comparable countries in its development of online retailing. The Productivity Commission’s best estimate is that online retailing represents 6% of total Australian retail sales; made up of 4 per cent domestic online ($8.4 billion) and 2 per cent from overseas ($4.2 billion). However, as it has done in other countries, online retailing will continue to grow as suppliers and consumers fight for cheaper prices in the global marketplace.
In Australia, we can purchase almost anything online today, from electronics, furniture, clothing and shoes to groceries, which are delivered straight to your door. How is the fight for the cheapest price going to compare with the preference for the “shopping experience” for example? Perhaps the step forward is for retail businesses to excel in providing quality and competitiveness in the non-price incentives for the consumer.
On the weekend I returned to Australia, I rushed myself straight to the nail salon as any severely jetlagged girl would. I walked into a salon filled with noisy customers, a distinctively different atmosphere than Philadelphia. As I sat there while they massaged and pampered me, I thought to myself, here is one thing I cannot purchase online!
