The Effects of Globalization in the U.S. Retail Industry
When you visit a local store you find many goods made in lesser-developed countries. Trade agreements with these countries have removed many restrictions to trade, such as tariffs and quotas, making it easier for those countries to manufacture goods to sell in markets in developed countries. It has also made inexpensive manufacturing and inventory purchases available to U.S. small business.
Benefits for Small Retail Businesses
Opening of trade with developing nations created a new era of inexpensive manufacturing based on the low wages paid in those countries. It also introduced many Asian and Hispanic products to the U.S. consumer and helped small retail businesses easily import these international foods and products for retail in small grocery stores, where they can offer niche products not found in chain supermarkets. Gift and clothing shops have also benefited from the availability and low price of goods made offshore. This manufacturing has encouraged the growth of the independent apparel, furniture and giftware designer industry in the U.S. because relaxed trade allows these small companies to outsource their manufacturing offshore, resulting in lower costs of production, greater profits, and lower costs of goods to U.S. retail consumers and other small businesses.
Retail Benefits Offshore
The tremendous growth in offshore manufacturing helped raise the standard of living in developing nations, creating a new consumer market for U.S. brand-name retailers and emerging companies alike. Retail opportunity abounds for Western brand-name stores in China, India, and throughout many developing countries, but there is also opportunity for small U.S. used car dealers and other dealers in American cultural-icon products like jeans, decorative and entertainment products, to export in bulk or through online sales to newly monied offshore consumers eager to buy into the American mystique.
Downside of Globalization
For the small U.S. retail store owner, the low prices of goods available via chains such as Walmart, which imports much of its inventory, have the effect of squeezing the profit margins of small stores trying to compete. Inexpensive labor offshore has also had a dampening effect on wages in the U.S., giving consumers less money to spend on retail items, which drives them to the retail chains that can offer lower prices than can small independent stores.
The Grocery Exception
One area of retailing that remains primarily local is grocery stores. As the U.S. consumer has become increasingly health-conscious and aware of ethnic foods and herbal medicines, there is increasing opportunity for the small U.S. retailer to supply the growing immigrant population, as well as interested American citizens, with these imported products. A recent Harvard study of major chain supermarkets found their forays into serving the global marketplace have not been met with the same success they enjoy in their home countries.
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