Driving the Recovery

Lost among the headlines that have typically framed discussions of the now years-long “recovery” — the continuing high rates of unemployment and under-employment, a stagnant housing market and ongoing public sector austerity measures — is a bona fide economic success story: The retail industry has delivered 17 consecutive months of sales increases.

To be sure, there were some months where the lift was barely perceptible, but against the current economic backdrop, sustained growth — however modest — stands out.

Consumers’ willingness to spend appears to be tiptoeing ahead. While no one expects shoppers to return to pre-2008 spending levels any time soon, the fact that they’ve begun to loosen their purse strings is an encouraging and welcome sign. Retail, after all, encompasses more than 3.6 million businesses, supports 42 million jobs and generates 18 percent of domestic GDP. Put another way, retail is the single-largest contributor to the nation’s economy, and industry leaders are convinced it will continue to play a vital role in fueling broader economic growth — especially if they can convince legislators to address issues that would free companies to invest, grow and, most importantly, create jobs.

Retail Means Jobs, a $10 million advocacy campaign launched last fall by the National Retail Federation, includes lobbying, grassroots efforts, social media and traditional media outreach. The intent: hammer home the message that retail can be a powerful engine for economic growth and job creation.

“Retail is essentially at the beginning and at the end of the supply chain, and it drives activity throughout,” says NRF president and CEO Matthew Shay. “Any policy objectives that support the retail industry are also going to very effectively support growth and jobs all along that continuum. We want to change outcomes on policy issues that are central and critical to the health of our nation’s economy.”

David French, NRF senior vice president for government relations, insists that the recent uptick in consumer demand needs to be leveraged as the nation pursues economic recovery. “How successful we are at delivering consumer value, bringing customers into our stores and encouraging purchases is going to be the difference between an economy that grows at 2 percent and an economy that grows at a half percent.”

The domino effect
Those sentiments are echoed in corner offices across the nation. Galvanized by the major political win in the years-long fight to curb debit card interchange (or “swipe”) fees, retail CEOs are more intent than ever on making themselves heard by legislators.

“Retailers have the capacity to influence public policy and spark positive outcomes,” says Steve Sadove, chairman and CEO of Saks Inc. “People don’t realize that they can make a difference and that the legislators really do want to hear from business leaders. It’s a part of the lawmaking process, and retailers need to get more involved.”

Sadove is among the cadre of retail CEOs working to educate legislators about the vital role the retail industry can play in job creation if political leaders are willing to meet them halfway on a handful of key issues. He points out that it’s not just about customer-facing jobs inside stores; it’s also support positions like marketing and IT and the pricing and warehouse jobs in retail distribution centers.

“There’s a domino effect that is tied to incremental revenue growth,” Sadove says, “and by convincing Congress to loosen visa restrictions, eliminate trade barriers and reform corporate tax we can get there.”

Among the issues most important to retailers are corporate tax reform and sales tax fairness — leveling the playing field between traditional bricks-and-mortar businesses and pure-play e-retailers.

With rates reaching as high as 35 percent, retailers are among the most heavily taxed industries in the United States. Jim Wright, chairman and CEO of Tractor Supply Company, calls such rates “an unfair burden on the industry. We compete for capital against a wide array of industries that, because of tax loopholes and exemptions, provide a higher after-tax return than retail. To date we have not secured a lot of loopholes, and thus it’s had a negative impact on our industry’s ability to secure capital.”

Likewise, Sadove believes that a comprehensive effort to simplify and standardize tax codes will afford retailers the opportunity to invest in new equipment and technologies, open more stores and create more jobs.

Unlike industries in which global manufacturing and/or subsidiaries allow companies to keep profits offshore and pay lower tax rates, U.S. retailers “generally don’t operate large overseas businesses,” Sadove says. “It’s become a question of redistribution: Do we want a system where very different tax rates are paid by some of the largest companies in America, or is it time to do away with myriad loopholes and tax breaks and shift the conversation to sales tax fairness? I’m in favor of the latter, as are most retail executives.”

NRF will push Congress to lower the corporate tax rate to 25 percent from 35 percent and urge legislators to close the loopholes that allow some companies to pay significantly less. “There’s no question it will be a robust discussion,” French admits, “but if we can achieve meaningful reform on corporate taxes we can unlock capital and put that capital to work creating jobs and driving consumer demand. It’s going to require some heavy lifting to get this done, but I think the stars are aligned.”