The transformation of retailing

21st-century consumers will change capitalism for the better

New shopping behaviours should be welcomed, not feared


At the dawn of the 20th century the notion emerged that people were consumers, as well as being workers, neighbours and voters. 

These bag-carrying, stuff-accumulating shopaholics went on to transform the way the world works. 

Today you may tut at their hamster-on-a-wheel mindlessness and its environmental impact. 

Or you may celebrate their freedom to choose goods, experiences and ways of life. 

But you cannot dispute their economic and political clout. 

As we explain this week in our special report, a new species of shopper is emerging: less centred on America, more intent on ensuring that what they buy reflects what they believe, and technologically dexterous. 

This latest incarnation of the global consumer looks likely to change how capitalism works—for the better.

Today’s shoppers are no longer epitomised by Westerners stuffing mountains of groceries into the boots of their cars and loading up on monolithic, all-American brands. 

For one thing, they are increasingly Asian. 

Last year China and America were almost neck-and-neck as the world’s biggest retail markets. 

China’s two biggest online marketplaces, Alibaba’s Taobao and tmall, both do more third-party business than Amazon, the American juggernaut. 

Just as American consumers once popularised the shopping catalogue and the mall, now Asia’s shoppers are at the frontier of retail innovations, whether that is live-streaming, a store that sells a single book in Tokyo, or browsing by WhatsApp in India.

Another change is that all around the world the new shoppers are not just value-conscious, but also increasingly project their ethical and political values onto their decisions about what to buy. 

So, for example, they select firms on the basis of their environmental credentials and supply-chain standards. Shoppers are using their power to support trends from veganism to Xinjiang-free cotton. 

Fashion is increasingly conscious of its carbon footprint. 

Even Kraft Heinz, the hardest-nosed of Western food giants, is trying to rebrand itself as a force for environmental clean-up, as well as ketchup. 

It is a mistake to view these trends as mere virtue-signalling, or a fad. 

One way that capitalism adapts to society’s changing preferences is through government regulation and laws, which voters influence, at least in democracies. 

But the dynamic response of companies to the signals that consumers send is a force for change, too.


The final big change is digital—but not in the way you might think. 

Many people worry that dominant retail platforms like Amazon and Alibaba, reinforced by giant logistics networks, will snuff the life out of commerce, leaving shopping centres barren and destroying jobs. In fact the implications of technology, for producers and consumers, are more exciting and benign. 

More accurate and voluminous data about shopping patterns are breaking down the decades-long relationship between mass consumption and mass production. In its place is a more varied world in which the shopper can decide whether to buy online or in store, whether to shop via platforms or from individual brands, and whether to accept targeted ads or not. 

The store will not die, but producers and consumers will have a more direct relationship with each other. 

Increasingly, middlemen will be squeezed out of the supply chain. 

The boundaries between entertainment, communication and shopping will blur.

One result is a surge in creativity. 

Shopify, a Canadian-owned tech platform that gives brands the chance to bypass Amazon, sold $120bn of merchants’ goods last year, double the level of 2019. 

It hosts the first-ever sale by a first-time retailer every 28 seconds. 

In China Pinduoduo, an e-commerce firm started in 2015, may overtake Alibaba in its number of users this year, partly by enabling Chinese villagers to club together and buy groceries online. 

Companies like Nike are cutting their dependency on wholesalers and selling trainers via their websites and even vending machines. 

Giant retailers like Walmart are going “omni”—online and offline—and diversifying into new services for their digital customers. 

Even Amazon has opened its first cashierless grocery store outside America, in Ealing, in London.

The pandemic has boosted online retail, but make no mistake, the new generation of shoppers have yet to hit their stride. 

Worldwide e-commerce sales last year were $4.2trn. 

Consumer spending is above $65trn. 

The consumer was crowned king over a century ago but endless new aisles remain unexplored. 

US stimulus package leaves Europe standing in the dust

This will hasten Europe’s and the UK’s relative economic decline, especially compared with China

Martin Sandbu 

US president Joe Biden signs off his $1.9tn fiscal stimulus. According to the OECD, the rescue package will, by the end of next year, push US output to one per cent above its projected pre-Covid path © Mandal Ngan/AFP/Getty


In the future, Europe and the US will loom less large in the global economy as emerging countries outperform their growth. 

That is inevitable. 

What we do not know is how fast that US and European dominance will be whittled away, as that depends in part on policy choices made today.

On that score, US president Joe Biden has delayed his country’s relative decline. EU leaders, however, look set to accelerate theirs.

Biden’s $1.9tn fiscal stimulus package, passed last week, may not be literally visible from space, but it is certainly of planetary scale. 

In the OECD’s March update to its forecasts, the organisation estimated that the US stimulus will add one whole percentage point to projected global growth. 

It more than doubled its 2021 growth forecast for the US itself, from 3.3 to 6.5 per cent. 

Biden’s own administration foresees US output returning to its potential three to four years faster because of the stimulus.

According to the OECD, the policy response is so forceful that by the end of next year, US output will be one per cent above its projected pre-Covid path.

The eurozone, in contrast, will by then still trail more than 2 per cent behind what was expected before the pandemic, the OECD thinks. 

The UK’s shortfall will be twice as large.

This is good for US citizens and bad for Europeans. 

But it also has geopolitical implications. 

It means the US’s relative decline is a little postponed, while Europe’s economic marginalisation is accelerated.

Is it not the first time an inadequate crisis response at home has hastened western countries’ global economic demise. 

In 2008, just before the global financial crisis, China’s gross domestic product was one-third that of the US’s or the EU’s (including the UK), measured at market exchange rates.

Just four years later, however, that ratio had reached one-half for the EU, due to its double-dip recession, and only a little less for the US, which mustered a somewhat stronger recovery. 

Compared with the early years of the millennium, China managed to double its speed of convergence during the crisis.

Furthermore, that snapshot only tells a part of the story. 

Well after their economies recovered from the 2008 financial crisis, rich countries still produced nearly 10 per cent less on average than they would have been predicted to do given their pre-crisis performance. 

Without this shortfall, China’s economic size, relative to the big western economies, would have been smaller.

Lockdowns on both sides of the Atlantic over the past year have now created a repeat opportunity for emerging economies to accelerate their catch-up — at least for those, such as China, that managed to contain the virus quickly and so avoided the need to shut down much of their economic activity. 

If rich countries again let a downturn push their economies permanently below their previous output trend, it will further accelerate their decline relative to China.

That looks likely for both the eurozone and the UK, which the OECD projects being some two and four per cent poorer, respectively, by the end of next year than they looked to be before Covid. 

Meanwhile, the OECD forecasts put China a mere one per cent off its pre-pandemic trajectory.

Contrast that with the US outperforming its previous projection. 

The Biden stimulus will actually have delayed China’s economic catch-up with America. 

If a promised infrastructure investment package also materialises, US growth may be boosted further.

This vindicates the geostrategic assumption that underpins the Biden administration’s approach: recovering US leadership in the world depends in part on rebuilding its domestic economic strength.

What silver linings may there be for the old world? 

One is that China’s turbocharged catch-up is not shared by everyone else. 

Several big emerging economies, including Mexico, India and Indonesia, look set to fall even deeper below their earlier paths than Europe, according to the OECD.

But that is a poor consolation so long as China is the rival whose growing economic might is what makes everyone else most worried.

A better place to look for hope is in the lesson that Biden’s stimulus package in the US teaches. 

Unless Europe becomes much more ambitious, its recovery stimulus and public investment boost both look set to be dwarfed by what Washington is seeking to achieve.

But what’s sauce for the goose is sauce for the gander. 

If the US can quickly repair the economic damage from the pandemic — and then some — by unleashing the full force of government spending, then so too, surely, can Europe.

COVID-19 Expedites Demographic Change

The pandemic adds urgency to the rebalancing of education and work.

By: Antonia Colibasanu


In geopolitical analysis, we focus on the behavior of societies organized into complex, geographically defined systems – otherwise known as nation-states. 

The list of factors that shape a nation-state’s behavior is extensive and, as the coronavirus pandemic demonstrates, not always static. 

In trying to understand how the pandemic will affect geopolitics, we need to understand what COVID-19 means for demographics.

A country’s demographics dictate its socio-economic model, and through that affect its relationship to other countries in the global system. 

An older population translates into more retirees and fewer workers. When people retire, they typically consume less. 

As a larger share of the population transitions from work to retirement, the burden on society grows – there are relatively fewer workers contributing to pension systems, and labor is diverted to care for the elderly.

On a national scale, the shift in favor of retirees over workers means private consumption no longer drives economic growth, which means consumption-led economic growth must give way to either investment-led or export-led models of growth. 

Increases in private investment translate to higher national output, but if domestic consumption is declining – as it is in an aging society – then that added output must be exported.


Germany is the perfect example. 

More than a quarter (28.6 percent) of the German population is over the age of 60. 

The less Germans consume, the more they must export, and the more money is available for investment. 

At the same time, a shrinking labor pool compels Germany to invest in the development of a European supply chain to support its industry. 

This model works as long as there are no major economic crises hitting its buyers (export markets) and as long as the demographics remain fairly stable. 

In other words, as long as the system remains balanced.

Preserving this balance has been a German obsession since the financial crisis hit in 2008. 

Defending its primary export market and production network – the European continent, united under the flag of the European Union – is an existential concern. 

With the U.S. market aging and thus shrinking, Germany sought alternatives in Asia, which meant improving its trade relations with Asia’s biggest market: China. 

Moreover, Berlin’s immigration policy has been friendly to those who are interested in working in the manufacturing sector, thereby supporting the country’s export power. 

When the refugee crisis hit in 2014-16, Germany’s view was that refugees could stay as long as they integrated into the country’s socio-economic model. 

Berlin designed educational programs intended to get them assimilated into society in an effort to solve its demographic problem.

Other countries, including China and Russia, face similar challenges. 

Though their economic problems are different in nature, they too have export-dependent economies and low birth rates.

Data on how the pandemic is affecting national demographics are still limited. 

Figures from the U.S. and some European countries, however, suggest life expectancy and birth rates have dropped. 

In the United States, life expectancy dropped by more than a year, while in France it fell by six months. 

Some of this is obviously caused by the disease itself, but other factors, like increased uncertainty and stress, are also at play. 

It’s unclear how long these effects will persist, just as it’s unclear how long the pandemic will last or how COVID-19 will affect survivors later in life. 

It seems likely, though, that national demographics will change. 


The world started to change rapidly after the crisis of 2008. 

Consumption decreased, and large markets like the United States became smaller. 

For a variety of reasons, protectionism slowly returned, posing another obstacle to export-led growth. 

The crisis highlighted the global imbalance between demand and supply, and a slow rebalancing began. 

Part of this manifested in the U.S.-China trade conflict. 

Another manifestation was social strife within countries, between social classes and between urban and rural communities. 

A prominent example is Brexit, where the division between the British urban and rural realities essentially caused the United Kingdom’s departure from the EU. 

But there are others, including Russia, where the realities of urban life differ dramatically from life in rural areas. 

An important feature of the rebalancing is that governments generally had fewer and fewer resources available for the less developed, usually non-urban parts of their countries.

Restructuring is a slow process, but something governments can do rather quickly is adjust educational models to support shifts to new economic models. 

For instance, in the United Kingdom, the need to reform the university system was apparent as talks around Brexit began. 

The problem was accessibility: It had become increasingly difficult for Brits to access British education. 

Discussions on reforming the U.S. higher education system to increase affordability have also increased since 2008.

The COVID-19 pandemic amplified these problems, increasing the urgency of the rebalancing. 

As the coronavirus spread, working and studying from home became the new normal for much of society. 

Not everyone could work from home, of course, but remote studying was simpler, at least from a technical perspective.

Last month, Gallup released a report on the learning experiences of high school students in Massachusetts during 2020. 

One of its findings was that technological barriers (connectivity and hardware-related problems) prevented lower-income students – who are among the most likely to be learning exclusively from home – from fully accessing learning at a high rate. 

Studies in Europe have found similar results. 

In France and Germany, technological access is dependent on household income. 

According to an April 2020 report by the European Commission, more than a fifth of children lack at least two of the basic resources for studying at home: their own room, reading opportunities, internet access and parental involvement (for children under 10 years old). 

The same is true of other countries.

Some issues with education existed before the pandemic and will still exist after it – namely, the apparent disconnect between the educational market and the needs of the labor market. 

Learning experiences and satisfaction depend on the teacher’s engagement and pedagogical method. 

But traditional teaching methods were criticized, both in the U.S. and Europe, even before the pandemic.

The disconnect between traditional pedagogical methods and the modern world is not surprising – changes in society have outpaced changes in teaching, and some divergence is natural given the generational disconnect between the young (students) and the old (teachers). 

But in light of the pandemic and its accelerating effect on all matters, this tension is greater now than it would have been under normal circumstances. 

We’re living through a time of unprecedented social change, including a high-speed restructuring of the educational models at national levels, triggered by changing economic models. 

We don’t know how China or Germany will change as the U.S. shifts away from its role as the global consumer. 

We don’t know how Russia will reshape its economy, or how the European Union will evolve. 

But all these changes will be triggered by demographic changes that are happening faster than ever before. 

The urgent reset that all societies are going through will likely mean an increase in inequalities, something that might raise the potential for conflict at both local and international levels.

China Becomes First Major Economy to Start Withdrawing Pandemic Stimulus Efforts

As its economy rebounds, Beijing begins a delicate process that will influence the domestic and global recoveries

By Stella Yifan Xie

China’s central bank is expected to tame the pace of new credit issuance rather than raise key interest rates./ PHOTO: QILAI SHEN/BLOOMBERG NEWS


HONG KONG—As the first major economy to beat back Covid-19, China is now taking the global lead in moving to unwind its pandemic-driven economic stimulus efforts.

Unlike the U.S. and Europe, which are still flooding their economies with liquidity and spending, China has started reining in credit in some corners.

The shift puts China at the vanguard in confronting a challenge other economies will face in coming years as their economies recover: how to withdraw stimulus without snuffing out growth or causing broader market instability.

China’s policy makers have expressed concern about an overheating housing market and want to prevent bigger imbalances. They are also eager to resume a multiyear campaign to curb debt that started building during the previous global recession.

If mishandled, China’s tightening could impair its recovery, which would crimp the global economy. 

China’s plans could also create wider problems if they trigger more debt defaults or a bigger correction in China’s stock markets, at a time when global investors are already jittery.

For those reasons, economists say, China is likely to move slowly, gradually tightening credit in certain parts of the economy while avoiding more blunt-force moves like raising interest rates.

“It is very clear that China’s policy makers intend to unwind stimulus and tighten policies,” said Ding Shuang, chief economist for Greater China at Standard Chartered Bank, “but they’ve been treading ahead carefully without making a sudden U-turn.”

China signaled its intentions during annual parliamentary meetings held earlier this month. 

It set its target for 2021 gross domestic product growth at “above 6%,” a relatively low rate given the economy’s momentum and a sign that Beijing wants flexibility to withdraw stimulus in the coming months, economists said. 

The International Monetary Fund projects China’s economy will expand by around 8% this year.



China lowered its fiscal deficit target—the gap between government spending and revenue—to 3.2% of GDP this year, from 3.6% in 2020. 

A smaller deficit suggests a more restrictive fiscal policy. The government also cut the quota for local government special bonds, a type of off-budget financing to fund local investments like infrastructure, to approximately $560 billion, down from $576 billion last year.

Beijing didn’t announce further issuance of special central government bonds this year, after selling approximately $154 billion of such bonds in 2020.

“As the economy resumes growth, we will make proper adjustments in policy but in a moderate way,” China’s premier, Li Keqiang, said at a news conference March 11. 

“Some temporary policies will be phased out, but we will introduce new structural policies like tax and fee cuts to offset the impact.”

Those moves followed earlier steps and were interpreted by investors as signaling tighter credit. 

In January, the central bank mopped up more liquidity than expected through daily open-market operations, a tool used to control the money supply available to commercial banks. 

That briefly sent a key short-term money rate to its highest level in five years, making it costlier for banks to borrow funds.

To tame rising property prices, China’s financial regulators recently imposed new rules making it more difficult for property developers, who are typically highly leveraged, to obtain new bank loans.

Broad credit growth picked up some in February, after declining for four consecutive months. Still, analysts expect lending will slow again given Beijing’s recent signals.

In contrast, last week the U.S. enacted a fresh $1.9 trillion economic aid package and the European Central Bank said it would boost its purchases of eurozone debt.

The different approaches reflect how Beijing views the pandemic as a temporary disruption, while Western policy makers are still trying to revive their economies and prevent long-term damage from the pandemic’s effects.

Beijing’s emergency measures last year included cutting taxes to help small businesses and ordering banks to extend more loans. 

Still, China’s fiscal measures amounted to far less as a share of GDP than those of the U.S. and many developed economies.

At the end of 2020, China’s total fiscal spending on pandemic stimulus was about 6% of its GDP, versus 19% for the U.S., according to IMF calculations.

China’s economy had recovered its pre-pandemic momentum in the last quarter of 2020, largely because of its success in containing Covid-19 and strong exports.

Now its leaders worry more about controlling debt and other long-term economic issues, analysts say. 

Last year China’s overall leverage ratio, which measures the ratio of total debt to GDP, rose 24%—the fastest pace since 2009—to 270%, according to official data.

Many economists expect China’s central bank, the People’s Bank of China, to tame the pace of new credit issuance rather than raise key interest rates, which would risk attracting speculative money inflows that can fuel dangerous asset bubbles. 

The central bank has pledged to keep its monetary policy prudent and flexible, while avoiding flood-like stimulus.

“The market widely interprets PBOC’s tone as more hawkish” than before, said Mr. Ding of Standard Chartered. 

That could lead to risks, he said, if inadequate communication leads to market overreactions.

Another possible land mine is the potential for tighter credit to cause more defaults among state-owned enterprises. Many are heavily indebted, and local governments, which have their own debt problems, are increasingly wary of bailing them out.

“As China exits supportive measures, some of the problems that got glossed over last year may show up this year,” said Wang Tao, China economist at UBS. “We expect to see more corporate bond defaults and a higher bad loan ratio.”