NRF Retail’s Big Show opens with economic uncertainty key focus

The annual NRF Retail’s Big Show kicked off in New York Sunday focusing on the key theme of internationalisation and the uncertainty of the economic situation facing retailers trading overseas.

Dr Ira Kalish, global director of Deloitte Research, laid out the brutal facts of trading in the eurozone during the current monetary crisis, saying the most likely scenario is that Europe would “have a recession this year and in the longer term fairly slow growth”.

He predicted more consolidation this year in non-food retail in Europe as this offers the only growth option left to retailers looking to increase market share.

However, Kalish warned that ‘Armageddon’ could happen in Europe so retailers trading in the region should plan for the worst-case scenario – the eurozone crashing - which would mean disentangling old euro-based agreements and renegotiating all contracts.

For US retailers, China’s growth still offers a more positive outlook but he warned that in 2012 the market could see its slowest growth in 10 years, perhaps falling below double digits. And he warned of further challenges in the long term.

He said: “Here the US economy has been growing but not as fast as we would like. There’s been a pretty decent consumer spending growth over the last couple of months although real incomes are not growing and that’s an issue.”

“Over the past three years US consumers have paid down their debts, taking consumer debt levels to their lowest since 1993, so they are willing to spend but that won’t go for ever unless real incentives rise.”

He added the housing market continues to decline and a quarter of US homeowners are in negative equity which restricts their ability to move where jobs are available.

Kalish forecasts the continuing bifurcation of retail based on the fact that the US has a high number of uneducated and unskilled workers. Meanwhile, the educated, skilled and high-earning consumers will continue to spend on luxury and brands but the middle market will remain the worst place to be as a retailer.