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.

Comments

yeah, sure, but walmart is evil, you know? you're not praising evil are you?

Posted by dj superflat | December 18, 2007 6:52 PM

Lost manufacturing jobs obsess trade foes because lost manufacturing jobs are lost union jobs. What happens in the other 70-80% of the economy is irrelevant or, as in the case of Wal-Mart, hated since they aren't unionized.

Posted by Curly Smith | December 19, 2007 8:20 AM

Hay superflat!

Come on walmart isn't nearly as evil as the iPod or that other spawn from hell the iPhone :)

Seriously, I remember growing up in Montreal in the 70/80's's when all retail was closed on weekends. By Law. And then moving to the Florida where retails wasn't treated as an interruption to church attendance.

Posted by superduckz | December 19, 2007 9:16 AM

How much of the recent increase in retailing efficiency comes from just-in-time delivery, hyper-accurate market and inventory knowledge, and other information related causes. Perhaps thanking Intel and Microsoft isn't wrong, except that we should be thanking Cisco more.

Posted by Njorl | December 19, 2007 10:11 AM

I think Tom Lehrer said it best:
God rest ye merry merchants may you make the Yuletide pay.

Posted by Rob | December 19, 2007 10:52 AM

Wal-Mart has done more to increase the standard of living of the poor in America than any other company in history. Of course, liberals hate them.

Posted by stan | December 19, 2007 11:05 AM

It's funny how easily this is recognized a century later. That is, we have no trouble realizing that the Montgomery Ward and Sears-Roebuck catalogs marked a revolution in American distribution that dramatically changed the American economy, and that the Gilded Age creation of the department store (from Macy's and Marshall Field to Woolworth) was a huge deal as well. I think these are part of the standard lay-history of the creation of the modern American economy. But we're more skeptical when we live through the internet and Wal-Mart transformations.

Posted by Jacob T. Levy | December 19, 2007 11:21 AM

I did 2/3 of my Christmas shopping online and the rest at Target. I prefer Target to Wal-Mart as they tend to be a little nicer. I will go to Wal-Mart for some things, though, as Wal-Mart will often have more choices for basic necessities while Target will have fewer choices, but they will often be better quality.

eBay is pretty cool... we managed to find a Wii through eBay when we couldn't find one in any store. We bought almost all of our games on eBay, too, often for $10-$15 less than retail. In one case, we got a game for $10 less than retail from someone in Hong Kong.

Stores are good if you want a specific item RIGHT NOW or you need to see/touch/measure it.

The "evil" of Wal-Mart reminds of how Germans all hate McDonalds. They mock them and anyone who would eat there. When one was being built near where I was working (on a two-month project), they teased me about going as soon as it opened. Well, I did go as soon as it opened. And stood in a line (of Germans) that went out the door. Every McDonald's that I visited in Europe was busy. Likewise, small towns hate it when Wal-Mart moves in... but you can hardly get in the door for all the people shopping there.

EI

Posted by Earnest Iconoclast | December 19, 2007 11:51 AM

When we had major flooding in Washington State earlier this month the big Walmart flooded all the way up to the Wal*Mart sign. This is a rural area and the Wal*Mart is HUGE there. For jobs and shopping.

People lost wages and the opportunity to get Christmas gifts. Not to mention all the merchandise lost. It was a very big deal. I'm sure the libs in Seattle thought it was great - Wal*Mart is hurt! Yay! *gag me* It was the poor people of the flooded out county who were hurt.

I personally love the Wal*Mart near our house. I don't go there often but they are handy to have around.

Oh...and I always wonder how many of the economical studies take into account small independent business people selling handcrafted items. Etsy (www.etsy.com) is huge and the sales this season have been outstanding for a lot of shops. My own sales on my own website were ridiculous compared to last year (in a good way). But are those kind of stories and stats counted? I prefer to buy handmade and not mass produced when possible.

Posted by Megan | December 19, 2007 12:25 PM

Wal-Mart, like any large corporation would do in its position, has not behaved like a saint in the course of becoming large and successful. But this is true broadly among most large businesses. If making money is the goal, then regulators and litigators will periodically need to step in and check abuses. Wal-Mart is just an easy target because it is the largest and most successful.

But broadly, my sense is that the real reason why certain people hate Wal-Mart is this: they have taken something beneficial and fine-tuned it within an inch of its life, become the largest and most profitable entity by doing so, and remain extraordinarily popular among lower-income segments as a destination for both commerce and employment.

That, and that alone, uttlerly baffles the sensibilities of elitists who know that retail ought to be comprised of union shops paying living wages and offering tenured employment while charging the prices necessary to sustain these ideas, and that both potential employees and potential customers ought to accept these things "in their best interest" and support them accordingly.

The elitist perspective, of course, utterly ignores the fact that throughout retail history, the retail sector has never been a land of milk and honey. Traditional retail and grocery either lived on the backs of the entire family's labor, or catered to an elite, high-paying clientelle. The landscape really hasn't changed much now: a company like Wal-Mart hires employees at low wages and achieves the equivalent of the former, while a company like Whole Foods appeals to the sensibilities of the wealthy and prices accordingly.

Posted by anony-mouse | December 19, 2007 2:26 PM

My father, born in 1909 and barely graduated high school, told us every chance he got that what made this country great was its ability to distribute goods -- the rail system, the trucking industry, the roads and highways, the airlines. He would marvel at the internet now if was still alive. How nice to see his teachings vindicated.

Posted by Gretchen | December 19, 2007 3:22 PM

My father, born in 1909 and barely graduating high school in 1926, told us every chance he got that what made this country great was its ability to distribute goods -- the rail system, the trucking industry, the roads and highways, the airlines. He would marvel at the internet now if were still alive. How nice to see his teachings supported.

Posted by Gretchen | December 19, 2007 3:25 PM

knee jerk animosity towards walmart is absurd, considering what it's done to make things cheaper for the poorest americans. i've also never understood how creating millions of jobs is bad, even if they're not unionized, no benefits, etc.

this is like parfit's repugnant conclusion -- adding that many jobs, even if not so good as preexisting jobs (which is debatable), is obviously a net good, because the newly created jobs obviously are better than the previously non-existing jobs.

Posted by dj superflat | December 19, 2007 4:36 PM

Sam Walton did more to improve the lives of lower- and middle-income people than all the politicians who have ever lived put together.

Posted by Chester White | December 19, 2007 10:54 PM

Another great topic from Megan...

Two more shout-outs:

Amazon.com, the online equivalent of Wally's. I still can't get my head completely around what their warehouse(s) must look like, and how they get the throughput and turnaround time numbers they do.

UPS. None of the online stuff, including Ebay, happens if you don't get your stuff in a timely manner. No other country at any point in the history of the planet is shipping, with speed and overall efficiency, the quantity of product the good ol' U S of A is today. AND they make a profit! It just boggles my mind how good we have it...

Well done, Americans...well well done.

Posted by zregime | December 20, 2007 5:47 AM