The massive US bubble that no one talks about

Author: Adam Button | Category: News

The US has a massive oversupply of retail floor space.

The US has 23 sq feet per capita of retail space (but as much as 46.6 sq feet). It’s difficult to come by reliable numbers, but that compares to 14 sq feet in Canada, 6.5 sq feet in Australia, 2.3 sq feet in France and 1.1 sq feet in Italy.

It’s no coincidence that the spike in retail floor space coincided with the rise of cheap imports. The US has embraced globalization more than anywhere else.

The retail pharmacy business perfectly illustrates the change.

A pharmacy used to be a little shop that dispensed prescriptions. They have grown to 20,000 sq foot (1900 sq m) stores where you can get anything.

Conventional wisdom says get people into the store and you can sell them anything but there is more to it. It’s about margins. Cheap Chinese goods have made retail margins incredibly attractive.

Goods that once cost $4 to manufacture and sold for $10 now cost $0.50 to manufacture and still selling for $10. The rise in retail square footage has been all about ripping off consumers who have been slow to adjust.

This is part one of a series. In part two I will talk about how the coming years will be payback time and the enormous ramifications for the economy.