In developed countries, like the U.S. and the U.K., more than 60% of the country’s GDP comes from retail consumption. That’s why analysts can usually tell whether the GDP will grow, shrink or remain the same even before the quarterly GDP numbers come out.
For most of 2022, retail sales have been declining in the U.S., the U.K., and most of the developed world. This is expected given that the world economy has been dealing with many issues year-to-date. From rising interest rates to the war in Ukraine, these and many other factors have increased prices and reduced consumer purchasing power. Analysts expect most developed economies to enter a recession going into 2023.
That said, consumption-driven countries, such as the U.K., are still faring relatively better than the rest of the world. Most of the developing world is in a worse condition, and consumer-driven economies are likely to recover faster and kickstart global GDP growth again. It indicates that sustainable retail sales can drive GDP growth regardless of inflation and other economic hiccups.
So, how are sustainable retail sales done, and how can this approach help keep the economy growing despite rising inflation and other macroeconomic issues?
There are multiple steps that both governments and the private sector take for sustainable retail sales, even in tough times. Below are some of the techniques working well so far.
One of the best ways to ensure retail sales are sustainable despite inflation is to protect consumers through targeted government interventions. A good example is the U. S. Inflation Reduction Act, which aims to cushion consumers from rising energy costs. The U.K. has also made a similar move by capping how much families can spend on electricity. The result is that families have enough to spend on different consumer goods and services even as inflation rages on and interest rates continue to rise.
Besides government interventions, corporations are also active players in a sustainable consumer economy. One of the ways that corporations are doing this is through automation. Since 2020, automation has been rising and has accelerated in 2022. With rising costs, many more retail companies are automating their processes and can keep consumer prices at affordable levels. This is one of the factors helping keep retail prices within sustainable rates, even as inflation keeps pushing the cost of living higher.
One trend that is increasingly taking shape is that conditions in previously cheap manufacturing hubs are no longer the same. For decades, most goods consumed in the western world have come from China. However, prices have increased as China restructures its economy to focus more on domestic consumption.
To handle this issue, many companies are moving production back home or to other countries with low production costs. By doing this, corporations that are a critical wheel in the consumer economy, can keep prices manageable and, by extension, maintain high retail sales.
There is a growing consensus that consumerism, as all of us know it, may not be sustainable, mainly due to the reality of climate change. However, in recent years, companies have adopted recycling and reuse as a way to keep products moving while at the same time reducing the amount of junk littering the environment. This is working to drive sustainable retail sales as it keeps costs low while ensuring that world resources are used to protect the environment for future generations.
Retail sales are a critical factor in consumer-driven economies such as the U.S. and the U.K. While inflation has slowed down retail sales, governments and the private sector have implemented measures to ensure that retail sales grow sustainably. The measures they have put in place include laws to help safeguard consumer buying power, innovative ways of corporate operations, a change in supply chains, and recycling.