January 24, 2005


In Europe, the consumer is hardly king (Elisabetta Povoledo, January 24, 2005, International Herald Tribune)

[A]cross most of Italy, and in Europe's other major economies, retail commerce is still a highly regulated sector with deep roots in nationalist, protectionist policies passed during the early decades of the 20th century.

The seasonal sales now taking place from Paris to Palermo are restricted in duration by government regulation.

Retail store sales are effectively made legal twice a year, for a period that can vary from three weeks to two months. Apart from the occasional promotional sale, also regulated, shopkeepers cannot reduce prices on items outside that period and call it a sale.

But many are finding increasingly creative ways to promote discounted items throughout the year in ways that do not violate the law and result in fines.

That is in sharp contrast to Britain, and especially to the United States, where consumers crowd into stores to snap up Christmas gifts that are discounted as early as late October.

To some retail analysts and consumer groups, the restrictions in Continental Europe play a role in consumer spending, a key driver of economic growth.

That is evident in countries where the retail market is less regulated, said Lorenzo Codogno, an economist at Bank of America in London, because in these countries, "consumer spending has grown more, on average."

Codogno said that greater deregulation would be beneficial for competition. "An increase in competition in the retail market would no doubt lower inflation," he said.

Richard Hyman, chairman of Verdict Research, a London-based retail research company, said: "A freer, less regulated enterprise culture would promote stronger economic growth and healthier spending in the shops. History shows that competition works in retailing."

Statistics published by Eurostat, the European Union's statistical agency, this month show that retail sales in the euro zone were sluggish in November, virtually unchanged from a month earlier and up only 0.4 percent from November 2003. In Germany, Portugal and Luxembourg, sales fell 2.5 percent in November, and in many other European countries, retailers complained of dismal pre-Christmas sales.

Spending figures tend to jump in January and again at midyear in France, Germany and Italy, when the retail discount period is permitted.

But some shopkeepers warn that an improvement during the sales season is not necessarily positive for spending.

"When sales go well, it means we're in a period of crisis," said Roberto Vergelio, the owner of a chain of shoe stores in Lombardy. The discount season, he said, "has become the only time when the consumer libido can let loose."

Remind us again why anyone thinks it good that our friends the Poles and the Turks entrap themselves in this morass?

Posted by Orrin Judd at January 24, 2005 7:15 AM
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