The retail market in the U.S. remains healthy, but in the rest of the world things look less rosy. According to the Economist Intelligence Unit, retail volumes globally will grow 2.8 percent in 2017 and are projected to grow 2.5 percent in 2018. In 2018, retail sales in the U.S. will pass $4 trillion for the first time, with volumes growing 2.4 percent. Though below the global average, The U.S. remains the largest retail market. The Economist expects China to take at least another five years before catching up.
The good news for retail is that all regions are expected to see growth in 2018. Certain areas are facing more drastic slowdowns than others, though. Asia’s retail volume growth, for example, will be its slowest in five years. Growth in Western Europe is stagnant.
In spite of Asia’s lower growth, some markets there continue to shine. China is projected to have the highest growth in the region with 7.3 percent (only being beat out globally by Algeria’s 8.1 percent), and Vietnam will grow 6.5 percent.
China’s biggest advantage in growing retail has been e-commerce. Local companies Alibaba and Tencent have managed to build up the perfect combination of mobile payment platforms and e-commerce. The sales generated on the discount shopping day 11/11 (aka Singles’ Day) makes Black Friday look tame by comparison.
Unfortunately, China remains inhospitable for foreign companies. However, Hardware companies may have less of an uphill battle than companies like Google and Amazon, which have been forced out and relegated to an insignificant role respectively.
International hardware startups should consider the China market, but it shouldn’t be one of the first countries to which a country looks to expand. The challenges are too great and there is other low-hanging fruit.
VentureFace CEO Peter Xie has recommended to the Startup Launchpad audience before that startups consider other parts of the Asia Pacific region where terms and conditions are more favorable for young companies without a lot of resources.
Considering Vietnam’s booming retail sector, that makes it an ideal candidate. The conditions in Vietnam are easily translatable to other nearby markets, as well, such as Thailand, Indonesia and other Southeast Asian countries.
The U.S. will still be the world’s largest retail market in 2018, though. As in similar markets, U.S. retailers are not known for the most congenial consignment terms for startups. For U.S. startups, though, it can be beneficial to use their home market as a testing ground through e-commerce. Then maybe some Southeast Asia brick-and-mortar distribution is a more realistic option before trying to break into Walmart.
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