Monday, July 21, 2008

The Economic Situation (5) - Retailing

We will see a shift in consumption patterns, rather than a big decline in consumer spending. Retailers that sell food and basic necessities will continue to do well. Their share of retail turnover may actually increase as prices of necessities go up.

Some parts of the retail sector will face pain. Retailers who are selling discretionary goods financed by higher purchase or credit card will find their customer base had disappeared.

Those who work in the retail sector may find they are getting less hours and their incomes might fall.

The consumption boom has lead to an overinvestment in shopping malls and retail outlets. Some of these investments will decline in value as the retail sector is rationalised as a greater share of household budgets are allocated to food and fuel.

Imports of consumers goods will decline, which will be good for the American deficit.

The auto industry will suffer. Cheap money has allowed the big auto companies to sell cars on tick. Those days are finished. Vehicles will be much harder to sell without cheap credit. Motor vehicle dealers that specialise in fuel guzzling vehicles will have to move to different segment of the market to survive.

1 comment:

Gene Redlin said...

Is overbuilding of Retail true in NZ as well.

Where we live malls and stores that were built in the last ten years are shuttered all over the place, replaced by malls now beginning to shutter in the last 5 years.

A guy can only buy so many pairs of jeans.

We have way too much retail (at least where we live).