Developing Nations Offer Hope for U.S. Retailers

Even as economic news continues to be stormy, a silver lining is discernible in the continued advance of globalization. As a new report on department stores indicates, the progress of developing economies promises to benefit the rest of the world as well–an outcome that comes as no surprise to those who understand international trade to be a win-win proposition.

The report, titled “Departmental Stores: A Global Outlook,” by Global Industry Analysts, Inc., shows developing nations emerging as centers of growth for department stores. “Booming economies, rising consumer affluence, changing purchasing patterns, and relatively lower levels of competition are driving departmental stores to benefit from the vast growth potential of the untapped markets,” it says.

The new study highlights the fact that while developed countries offer limited growth opportunities because of market differentiation and competition, department stores are moving into developing nations such as India, China, Pakistan, Malaysia and Indonesia. Thanks to free-trade agreements and globalization, traditional American retailers are able to survive by offering new products and services in other countries.

This is good news for both developed and developing nations. Expanding international markets in the retail sector create jobs both in the United States and abroad.

For example, Toys “R” Us, with more than 680 stores in 33 countries outside of the United States, has successfully translated its business into foreign markets. The chain first entered the international scene in 1984 with stores in Canada and Singapore. In the first quarter of 2008, net international sales increased by $100 million, or 11 percent, to just over $1 billion, accounting for more than two-thirds of the company’s growth. That $1 billion in sales helps sustain the firm in the United States and enables it to provide improved products and services here and abroad.

This single example points to a simple but significant truth: globalization positions companies to remain vibrant here and throughout the world. In the States, Toys “R” Us faces an intensely competitive environment filled with strong companies like Target, Walmart, and KB Toys, as well as other Internet vendors. For the company to remain viable, it must move into new markets.

In developing countries, specialty retail stores and department stores introduce products, services, and jobs to people who previously had fewer choices. The wonder of international trade is that, even as companies pursue improvement in their bottom line, positive consequences accrue to all parties. Companies can grow and create opportunities while new beneficiaries gain access not only to the goods and employment generated directly, but also to those resulting from the ancillary business created by the interaction of local and international markets.

As department stores struggle with dynamic markets and changing demographics, there can be real local costs. When we hear news that our local department store is closing while new stores are opening oversees, it’s important to remember that our temporary loss is the gain of the world’s economy (of which we are a part). The interim task is finding new opportunities for those who lose their jobs. There are many partnerships among government, business, and the non-profit sectors that have been successful in smoothing these transitions.

The mutually beneficial character of international exchange underscores the moral imperative for expanding free-trade agreements and encouraging companies to explore opportunities abroad. Doing so is the best strategy for helping the poor. Although some business leaders are surely driven by greed and power, it is wrong to assume that the expansion of multinational companies is thereby morally tainted. An alternative vision affirms multinational activity because it supplies the investment necessary for developing countries to create more wealth in their domestic economies.

Why would we not want to increase the standard of living of people in developing countries? Putting arbitrary limits on international trade through subsidies, tariffs, or measures intended to “stop shipping jobs oversees” actually weakens businesses at home and contributes to keeping in poverty the truly disadvantaged around the world.

Global interdependence is not only the best hope for lifting people out of poverty. It is also necessary for keeping the rest of us out of it.

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  • gk

    Fantastic points in this article.

    As an engineer, I have lost a job due to global competition. But, I do hope that my loss means that those in developing countries are moving up. The fact that developing countries are a huge market for department stores and other types of business … is a great relief and provides for hope.

    I am glad to see that prosperity provides for growth and more opportunity in the world. Christ’s redeeming grace is slowly making the world a better place – even though we try so hard to make it in our own image.

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