Harvard Business Review

The Future of Retail


Posted on Harvard Business Review: December 20, 2011 10:38 AM

This post is part of the HBR Forum, The Future of Retail.

In order to assess the future of retail, we need to understand the sector’s current impact on our entire economy, and the direction that Washington is taking the retail industry with policies that are being shaped today.

Three months after we launched The National Retail Federation’s (NRF’s) “Retail Means Jobs” campaign, the importance of the retail industry to the nation’s economy could not be clearer. Retail is a barometer of the nation’s economy — the point where the efforts of many other industries get turned into cash. Increases in retail translate into the creation of new jobs all along the huge supply chain that brings products to store shelves. In fact, a PricewaterhouseCoopers study commissioned by NRF found that the retail industry supports 42 million American jobs — individuals employed directly in retail, plus the suppliers and vendors who keep retail running. That’s one in four jobs, making retail the largest private sector employer, dwarfing the numbers seen in major fields such as manufacturing and health care. Retail contributes $2.5 trillion to the GDP, or about one-fifth of the nation’s total gross domestic product.

The future of retail is going to impact our future economic well being, and much of it depends on what’s happening in Washington today.

We launched our “Retail Means Jobs” campaign to ensure that members of Congress realize how many of their constituents owe their livelihood to the retail industry, and to encourage them to support a pro-retail, pro-jobs agenda that will put the people who elected them back to work. To that end, we have developed a detailed Jobs, Innovation and Consumer Value Agenda, which covers issues such as corporate tax reform, sales tax fairness, transportation infrastructure, international trade, consumer privacy, health care reform, improving the visa process for foreign travelers who want to come here to shop, and many other issues. It’s critical that the policy agendas being shaped today — which will in large part shape the future of retail, at least in the near term — be viewed through the lens of whether they support or hinder job creation in the retail sector. Our agenda focuses on:

1. Spurring Job Creation:

The policies being enacted today need to:

Encourage global trade: Smart trade policy that eliminates trade barriers at home and abroad and facilitates international commerce will help American companies grow and be more competitive.
Reform the corporate tax system: Simplifying the tax code by eliminating special tax deductions and credits in return for lower rates will allow retailers to grow and create jobs.
Promote sales tax fairness: Congress needs to establish a level playing field where all retailers collect sales tax regardless of whether they sell their products in stores, online or through the mail.
Eliminate visa delays, making it easier for more overseas travelers to visit the United States: Overseas travelers spend an average of $4,000 each time they visit the US. By removing visa barriers without weakening security, we can generate billions in new economic output and create more than a million US jobs.
Modernize our nation’s aging infrastructure: It is critical that the US transportation infrastructure — including our ports, airports, rail lines and roads — can meet future demands. We need a national freight policy that will support US competitiveness, economic growth and job creation.
Implement smart health care reforms: The retail industry is highly sensitive to rising labor costs and federal health coverage mandates will force many retailers to downsize their workforce. NRF is working to fix or repeal the provisions in the 2010 health care reform law that are hostile to the future of the retail industry.
Support labor and workplace flexibility: Efforts to implement “card-check” union-organizing legislation or other onerous policies intrude on business operations, restrict an employer’s workplace flexibility, undermine employees’ privacy rights, and often lead to unnecessary costs for retailers.

2. Advancing Innovation:

Today’s policies need to:

Protect consumer privacy while promoting innovation: NRF supports industry-led self-regulation. Overly broad privacy legislation and regulation will stifle innovation and hamper the growth of online retail. Public policy must protect consumer privacy without hindering technological innovation.
Promote advances in mobile payments: Before lawmakers and regulators intervene in the development of this nascent technology, they must first consider its tremendous benefits and fully weigh the potential costs of any proposed regulation.

3. Driving Consumer Value:

Retailers must be able to give consumers ever more convenient and cost-effective ways to make informed buying decisions. To do that, we need policies that will:

Maximize supply chain efficiency: We support efforts to streamline the transportation of goods from manufacturer to retailer to customer, and oppose regulatory proposals that lengthen the supply chain, raise transportation costs, or undermine the rapid delivery of affordable products.
Combat organized retail crime: We need comprehensive federal organized retail crime legislation that stiffens the penalties for criminals and gives law enforcement the tools they need to go after organized retail crime.
Reducing Swipe Fees: Reforming credit card swipe fees could save retailers and consumers billions.

As an industry that supports one in four American jobs, retail is essential to our nation’s economic recovery. With their direct daily contact with US consumers in every city, state and congressional district, retailers have an untapped grassroots potential larger than any other industry, and an opportunity to send a strong message on what needs to be done to put our nation on the right track for the future. That’s why our “Retail Means Jobs” message is critical to the future of retail, and critical to the future growth and competitiveness of the American economy.

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Matthew Shay is President and CEO of the National Retail Federation.

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