Three cheers for retail
If the preliminary buzz is correct, this season y'all are supporting your local retailers with somewhat less enthusiasm than you have in prior years. However, even if you can't see your way clear to lavishing outrageous sums on his extensive array of silvery consumer geegaws, you might take a moment to say thank you for everything he's done for the American economy.
As Nick Schulz reports:
Within countries, the McKinsey researchers observed startling variety in productivity rates across industries. For example, some countries might have high productivity in automobiles, but low productivity in construction. Others might be tops in electronics but laggards in transportation.
The study’s most striking conclusions were about the economic importance of the retail sector. William Lewis, the founding director of the institute, tells this tale in his book The Power of Productivity: Wealth, Poverty and the Threat to Global Stability. Productivity in the retail sector is critical for understanding the relative success rates of national economies.
For example, India’s antiquated retail sector has yielded bizarre market distortions. “In India, the price of ready-made shirts from domestic manufacturers is about 35% higher than the price of a tailor-made shirt,” Lewis says. “The manufacturing cost of the shirt is about the same as the tailor-made price. However, the manufactured shirt has to get to the consumer. In India, that’s a huge problem because of the undeveloped retail sector.”
Lewis points out that productivity gains in retailing have dynamic effects throughout a nation’s economy. For example, when most Americans and others think of the drivers of the US economic performance, they immediately think of successful tech firms such as Microsoft and Intel, or innovative financial services players such as Goldman Sachs. However, it is efficiency gains in the retailing sector that powered much of America’s economic performance in recent years.
Assessing the health of the economy, we tend to get obsessed with stuff: how much are we making? This is why lost manufacturing jobs so obsess trade foes. But manufacturing isn't where the economic beef is, and hasn't been for some time. Distribution is the dominant force of change in our lives now, whether the distribution vehicle is Wal-Mart, and iPod, or the internet.
Retailers: God rest ye merry, gentlemen. Hopefully not atop your piles of unsold merchandise.