The future of mass retailing is global - Column

Discount Store News, Oct 5, 1992 by Robert Verdisco

It's no big secret that times are tough in the retailing industry. Pick up any analysis of our industry and you will see the same story: too many retailers chasing after a static or shrinking customer base; consolidation and increased competition among and between distribution channels. The winners in this current competitive game have long-range strategies which focus on the price and value of merchandise mixes, niche marketing or high levels of customer service.

A small but growing number of forward looking mass retailers will also be taking a good look at how exporting their format, name or retailing expertise fits in with a long-term growth strategy in a tight U.S. market. Why open another store in an already crowded environment when it might be possible to seek out a new, less-competitive market with untapped demand for consumer goods: markets like Japan, Mexico or Eastern Europe?

Going abroad is a new, and sometimes scary, concept for most American retailers. After all, the U. S. consumer market has, until recent been pretty generous. American retailers already account for almost a third of U.S. GNP and employ more workers than any other sector. U. S. retailers have played an important role in creating worldwide envy of the American lifestyle. On balance, no retailing industry anywhere provides better assortments or value, faster than does the U.S. retail industry.

But this new awareness of our success coupled with the market pressures of a maturing U.S. consumer market will continue to make the prospect of going abroad more attractive as we move through the 1990s. Already, some of our most successful companies are showing that global retailing can be a strategy for success. Woolworth, Costco, Toys "R" Us and, of course, WalMart, are all competing in the global marketplace today.

There are risks and difficulties, of course. Some of the early pioneers in exporting retailing services have found investment barriers from closed distribution channels and discriminatory store licensing requirements, to the lack of infrastructure in critical associated industries such as banking, telecommunications or transportation.

In the past, the U. S. government has had a large blind spot when it comes to negotiating an end to such barriers. But no more. Increasingly, the U.S. economy depends on the service sector to create prosperity and new jobs. More important, both the government and U.S. manufacturers understand the link between opening markets to retailer investment and creating open distribution channels in foreign markets that provide access for U. S. exporters.

This new understanding has taken root in several import trade negotiations over the last few years. Retailers played a pivotal role in the so-called "structural impediments" negotiations dealing with the closed Japanese distribution economy. The result has been the creation of new opportunities for large-scale retailers (both Japanese and U. S.) within Japan. Another example is the Uruguay Round of multi-lateral trade negotiations, which has also been attempting - with limited success - to create the first international rules creating fair play in the cross-border trade of services.

But of all these international developments, the recently negotiated North American Free Trade Agreement (NAFTA) stands quite literally alone in its comprehensive treatment of services and investment. NAFTA provides complete access for U.S. retailers to invest in Mexico and Canada. It will liberalize investment in transportation and the cross-border provision of rail and trucking for international cargo. It will lead to a North American data telecommunications system that will support quick response technology and create new export opportunities for U. S. -made products. In short, it provides the pattern for a new international agreement protecting the rights of service industries like retailing to have fair access to international markets. It represents a truly remarkable step forward in recognizing the importance of service industries in the international context. For retailers, it also represents a sea of change in the attitudes of U.S. government officials who now understand the role we play in creating demand for products which, in turn, create new jobs in U. S. manufacturing.

The time is long gone when U.S. retailers could be content with their own home markets. Competition - from domestic as well as international retailers - is now the norm. The successful mass retailers of the next century will have an expansive view of markets and market opportunities. The global village has finally hit our industry and there will be no turning back the clock. For all these reasons, IMRA will be spending an increasing amount of time focusing on international business issues affecting our members' abilities to create new opportunities in overseas markets. Look for international sessions as part of our conferences, and a new international focus in many of our publications. And of course, IMRA will continue to follow all international trade and investment issues as part of our goverment affairs activities.