Why U.S. Retail Sales May Not Recover the Way China Has

April 24, 2020

Retail sales in the U.S. fell 8.7% in March, the largest decline since the government started tracking data in 1992. China saw similarly massive declines in sales, but analysts have noted how quickly demand returned there. CNBC has examined the situation and outlined four major reasons that American retail faces more hurdles than China.

The biggest issue is widespread unemployment. More than 25 million workers have filed for unemployment in recent weeks, while China saw just 5 million workers lose their jobs.

Another key concern is that store closures have already lasted longer in the U.S. than in China. Some parts of China saw closures for just about 4 weeks, while most American retail has been closed or reduced for 6 weeks already, with some states just now looking toward reopening. The prolonged shutdown could result in more permanent closures and more buyers transitioning to online shopping.

High-end and luxury stores, when they do reopen, will have to deal with a lack of tourism. Tourism, particularly from China, make up a significant portion of demand for many retailers, especially in locations like New York and Los Angelos. The flagship Tiffany’s store in NYC estimates that foreign tourists account for a double-digit percentage of sales.

Finally, China was poised to rebound because of the timing of the shutdown. The lockdown began right around the time of Chinese Lunar New Year’s celebrations, which frequently involve cash gifts. Chinese shoppers had large amounts of cash burning a hole in their pockets, and so were eager to go shopping as soon as stores opened.

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