Home> Media Center> News

Europe, US had tough Christmas seasons but growing e-commerce: an opportunity for China

(www.ecf.com)        Updated: 2019-01-14

The annual Christmas season in European and American countries has come and gone, bringing business opportunities and prosperity to the consumer market. But meanwhile, the season reflects the real situation of the global consumer market. So to speak, Christmas is a grand parade of the global economy. Let's have a look at the parade in the European and American markets.

US: high growth may not occur next year

The month-long period from Thanksgiving to Christmas and the New Year is a traditional annual shopping season in the United States, during which sales of many shops account for one third of their yearly total and 40 percent and even 50 percent of their profit. Therefore, the shopping season is an important source of evidence for economists and industry analysts looking at economic trends in the US.

Consumer confidence in the US peaked over the last two decades. The US economy showed strong momentum in the second and third quarters this year, with the GDP increasing 4.2 percent and 3.5 percent respectively. The good economic growth momentum has improved consumer confidence. The overall wage of employees started increasing in recent months, and the unemployment rate fell to the lowest in the past five decades. Moreover, a tax reduction policy has benefited both consumers and retailers.

According to statistics provided by market research firm eMarketer, the value of retail sales in the US during the Christmas holiday is expected to exceed 1 trillion dollars, the highest growth since 2011, thanks to a series of favorable policies. The turnover of physical stores is expected to increase 4.4 percent year on year. And the revenue of the e-commerce sector headed by Amazon and eBay is expected to increase 16.6 percent.

According to Gallup's public opinion poll, during the shopping season, the average amount spent by Americans on gifts was about 885 dollars, a little lower than the 906 dollars in 2017, but still higher than Callup's prediction about the shopping season since the economic recession.

However, although the market was positive about sales before Christmas, retailer stocks ran counter to this optimism during the shopping season.

UK's Financial Times reported that American retailers' shares suffered the biggest quarterly sell-off since the financial crisis of 2008. The report said that the market was cautious and prudent about the retailing industry's capacity to deal with the e-commerce revolution before, but now its attitude has suddenly changed. The S&P Retail Index ETF-SPDR, which includes 95 listed retailers, fell by 17 percent this quarter. Some investment analysts thought that the large-scale sell-off shows the market's concern about a bad business environment for retailers next year.

Some analysts stated that the profit rate of the American retailing industry was seriously affected by the rising import cost of raw materials and the increasing wage costs brought by a labor shortage, and it will be difficult to achieve growth in sales revenue for the industry. Many institutions predict that when the driving force of the tax reduction policy fades, the US economy will not achieve as high a growth in 2019 as it did this year.

Europe: weak demand causes price war

Nick Beighton, CEO of UK's fashion brand ASOS, said on Dec 17 that an unprecedented number of discount events has occurred in fashion circles. Clothing retailers noticed decreases in their profit rates before Christmas and were trying to attract consumers by large-scale discounts.

British consulting firm Deloitte said that British consumers enjoyed record-high discounts before Christmas, with the average discount rate being 43.6 percent. The company predicted that British retailers will launch up to 38 days of promotion, six days more than in 2012. Maureen Hinton, head of global retailing research at British research and consulting firm GlobalData, said, "People will buy things at places that have discounts, which will reduce profit rates in an all-round way."

However, because of the severe weather and prevailing online shopping, the discounts on Christmas Eve did not attract a large number of consumers in the UK. Experts said that apart from decreased revenue caused by fewer consumers, British retailers also suffered from the negative effects of increased business tax, the increase of the national minimum salary, the decrease of pound exchange rate, and Brexit.

The British Chambers of Commerce predicted that commercial investment will only increase 0.1 percent in 2019, lower than the previously-predicted 1.2 percent.

In France, political unrest led to a terrible situation in the retail industry. The French economy, in particular the retail and tourism industries has been seriously affected by continuous protest activities especially the yellow vests movement. A spokesperson of the French Retail Industry Association told the media that the French retail industry has suffered a minimum loss of 1.1 billion dollars since the outburst of protest activities.

Germany's situation is not good either. The country's economic think tank, Ifo, recently said that the Ifo business sentiment index decreased four months consecutively to 101.0, the lowest in the past two years.

Rolf Bürkl, an expert at the German Consumption Research Association, thought that the high inflation rate affected the current consumption climate. The consumer price index increased 2.5 percent, the highest in the last 10 years, which restricted purchasing power. In addition, the US-China and US-EU trade friction, receding growth of emerging markets, and Brexit intensified the sense of uncertainty of German consumers and weakened the nine-year growth momentum of the German economy.

It is worth mentioning that whether in the US or European countries such as UK and France, an important factor that caused the weakness of local retail industry is the maturing of the e-commerce market. The Polish newspaper Rzeczpospolita reported on Nov 22 that nearly half of Polish people planned to buy Christmas presents online. Undoubtedly, this is an opportunity for Chinese enterprises. Hong Kong-based Ta Kung Pao reported on Dec 17 that China's cross-border e-commerce has occupied many overseas markets during the Christmas shopping season due to the good quality of China-made products.