On the sidelines of the recently concluded Retail Association of India’s two-day Retail Leadership Summit in Mumbai, David French, senior vice president of government relations at the United States (U.S.) -based National Retail Federation (NRF), spoke exclusively to Fortune India on the current state of business in the north American country. The NRF is the world’s largest retail trade association overseeing the interests of the retailers in the U.S. The retail industry is also the second largest employer in the U.S.
French has over 30 years experience in lobbying in Capitol Hill and has been with NRF since 2011. Edited excerpts:
What’s the mood for the retail business in America?
French: To say the least, it is very healthy at the moment. People are still shopping. Retail sales grew faster than the GDP last year.
Is it a surprise event or is there a reason for the new momentum?
French: Under the current administration, corporate tax reform has rationalised the tax on business. It was one of the highest taxed businesses but due to the reforms retails brands saved nearly $ 17 billion last year. That has invigorated these companies to increase investments.
What have been the other fallouts of the tax break?
French: Many smaller businesses are learning to fight back. The traditional retailers are embracing e-commerce in a big way, with even the biggest retailer Walmart putting money in expanding its presence there. We are seeing a lot of convergence in channel with retailers in high street adapting newer techniques to keep its clientele. Businesses are getting more customised and hyper local. So, there is a push to efficiency as technology disrupts the business.
What were the biggest concerns for retailers in 2018?
French: The retailers have been anxious about tariffs as this is something that they can’t easily work around. But so far it is more anxiety than reality as nothing has changed on the ground. But, any standoff with China is immediately a big concern that will definitely hurt at a time when most companies are investing in change and expansion.
The retail business in the U.S. stands accused of being environmentally unfriendly, shipping millions of packages every day. Are businesses and government responding to the charges?
French: Ethical consumerism is on the rise but there has not been a policy debate at the government level.
What other factors could be disruptive for retailers in the U.S.?
French: If you want to talk of far reaching consequences, it is the ongoing debate on privacy and data utilisation by retailers. Data is so important for retailers and if the government over reaches, they will make retail less effective. Data regulation should be a balancing act.
For example, take the California Consumer Protection Act, which is common for many sectors. This law was written in 72 hours and there are many errors in it. For example, customers can request data back and as it is interpreted now, a customer can ask back data of his entire family, even social media interaction data. Surely, that was not the way it was meant to be.
Sponsors to the law said it was like the EU’s General Data Protection Regulation (GDPR) but that was made in consultation with the industry over years while the California Act was put together rather too quickly. This is currently a hot issue.
What is the stand of U.S. retailers on the payment business?
French: Many U.S. retailers have got out of the payment business as it is heavily regulated and also cumbersome. Of course, payments in the U.S. is tightly controlled by the duopoly of Visa and Mastercard and retailers pay up to 3% for credit card transactions, which is a lot. This is also a cost they can’t leverage for a lower price as there are few other options. In 2010, there was a law passed to cap the interchange on debt cards and that has saved retailers $50 billion since then. Retailers may issue their branded credit cards but they are less focused on payments business.