The USA: basket case or no?
James Greenhalgh spent a few weeks in the USA recently. His observations helped bust a few myths about the economies of two of its largest cities.
Being the value seeker I am, I recently took advantage of the strong Australian dollar to spend my holidays in the USA. Or perhaps I should narrow that down; I visited New York and San Francisco, hardly a representative sample of life in that vast country. There was little evidence of a poor economy in either city, let alone the heartbreaking stories referred to in the recent Director's Cut, The sense in the never-ending.
I was on leave, so I was deliberately trying not to think about work. But it's impossible not to notice some of the differences—or the similarities—between Australia and the USA. Here are some of my observations.
Prices for basic clothing, such as jeans, t-shirts, polo shirts and sneakers are 40-60% cheaper than in Australia. There is clearly something wrong with the cost structures of Australian retailers. You can now visit the USA with an empty suitcase and completely offset the cost of your airfare with much cheaper clothing. Even better, nothing needs alteration; department stores in the USA have every size combination imaginable, something that has always irritated me about shopping locally.
I rarely buy designer labels or anything costing much more than $100, but friends tell me these are much cheaper in the USA as well. It suggests apparel prices locally must come down—eventually.
I love visiting Westfield shopping centres in other countries, as they have a strange sense of familiarity and dissimilarity all at the same time. Westfield San Francisco was my destination this trip.
There was more evidence of vacancy than in Australia, which is consistent with what we know from Westfield's accounts. But there were surprisingly few 'Sale' signs anywhere, unlike in Australia where retailers know that, without them, they won't get foot traffic.
Westfield was clearly dependent on the department store retailers in this centre. The two anchor chains—Bloomingdales and Nordstrom—together account for almost 50% of the centre's floor space. There's something of a symbiotic relationship here.
Big box retailing
I only left the cosseted environment of San Francisco once—on a day trip to visit the stunning Yosemite National Park. These observations come from on board the tour bus—I hate driving on the wrong side of the road—so I'm not entirely sure of their reliability.
But I was surprised by the number of big box retailers such as Target, Wal-Mart and other lesser known retail brands seemingly in the middle of nowhere. Presumably they establish stores in rural locations because land is cheaper, there are fewer development restrictions, and Americans are more willing to drive (cheaper petrol helps).
It highlighted again that Australia is a much more urbanised country than the USA, which presumably explains why local retailers are always complaining about their inability to find decent sites in our cities.
Apart from apparel, other prices in these two cities—again, not representative of the USA—didn't seem much cheaper to me. Supermarket food, alcohol in bars, and bottled water were cheaper, but restaurant prices generally weren't after adding sales tax and tip (frustratingly, the price you see on a menu or in a shop isn't the final price you pay in the USA).
Don't believe it when you read that Sydneysiders are moving to New York for the cheaper rents. If you want a one bedroom apartment in Manhattan, expect to pay US$600 a week for something run-down, or US$800 a week for something a bit more modern. Brooklyn and the other non-Manhattan boroughs of New York City are obviously more reasonable.
In San Francisco, locals were complaining that the beautiful old Victorian houses the city is famous for were selling for US$1.3m upwards. Thanks to the newly minted 'Facebook millionaires', and others like them, the city's property market is booming. This reinforced to me that property markets are local phenomena; what's happening in your city or neighbourhood shouldn't be considered representative of what's happening elsewhere in the country.
These are just a few of my observations from my recent visit to the USA. Have you travelled overseas recently? Did you have any insights that might be relevant to Australia or local companies? What did you find most surprising? Please leave your thoughts below.
Disclosure: Staff members including the author, James Greenhalgh, own shares in Westfield.
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