HAWAII’S August 1998 ECA Report from the Department Nof Business, EconomicO DevelopmentMY & Tourism In This Issue Retailing and Hawaii’s Retailing and economy page 1 Retailing and tourism page 4 Hawaii’s Economy Hawaii’s retailing timeline page 10 Retail evolution in Hawaii his issue of Hawaii’s Economy gling with weak sales and sometimes page 12 focuses on the retailing sector going out of business. The answer to Hawaii’s retailing revolution and its important relationship to this paradox lies in the current dynam- page 13 T Hawaii’s economy. Retailing has been in ics of the retailing industry. Hawaii re- Emerging trends in U.S. the news frequently over the last couple tailing is currently in the process of retailing of years, often in regards to stores going revolutionary change in which new page 20 out of business or poor sales volume in forms of retailing are replacing old The language of retailing the industry. ones, with most players working hard page 21 On the other hand, there have also to stay competitive in a tough retail been stories about impressive new re- environment. The way successful stores State of the economy page 22 tail development plans and renovations. stay competitive in such an environment For instance, the Ala Moana Center re- is to continually change and update Selected statistics cently announced a new round of ex- themselves and their product lines to page 23 pansion for the keep and ex- Hawaii’s Economy State’s largest Hawaii retailing is currently in pand their par- is published by the Department of Business, shopping center ticular markets. Economic Development & Tourism; Research including a new the process of revolutionary The effort the & Economic Analysis Division hotel, entertain- change in which new forms of industry is put- BENJAMIN J. CAYETANO ment facilities ting into reno- Governor and additional retailing are replacing old ones. vations and retail space. The expansions is SEIJI F. NAYA Director announcement of this new 12-acre ad- actually a vote of confidence in the fu- dition comes as work is continuing on ture of retailing in Hawaii. It suggests BRADLEY J. MOSSMAN Deputy Director the most recent expansion of the Center that retailers expect things to get better which will add new stores, an additional and want to be prepared to earn their PEARL IMADA IBOSHI floor of shops and expanded parking. share of an expanding market. Division Head Other shopping facilities around the state ROBERT SHORE are upgrading and expanding, including The Retailing Revolution Editor the Windward Mall and Ward Ware- It is difficult to miss the changes that Direct Inquiries to: house. Numerous other projects are in have been taking place in Hawaii’s stores Hawaii’s Economy DBEDT the planning stages particularly for the and shopping centers in recent years. For P.O. Box 2359 Waikiki and nearby areas. most residents, retailing is the most vis- Honolulu, Hawaii 96804 It would seem a contradiction that ible industry in Hawaii’s economy. More- Fax: (808) 586-8449 the industry could be renovating and over, the industry provides 20 percent expanding while many stores are strug- of all jobs in the state (about 112,000 Hawaii’s Economy /August 1998 1 in the first half of 1998) and is instrumen- a huge number of specialty catalogs. mainland-based retailers into Hawaii over tal in funneling $16 billion worth of In tourism-oriented retailing, the most the past decade has probably reduced the goods per year to Hawaii consumers. significant factor recently has been the need for local wholesaling services. In During the last ten years, the makeup of contraction in the number of Asian visitors fact, wholesaling wage and salary jobs the retailing industry in Hawaii has been to Hawaii and reduced spending by those have declined by about 8 percent since transformed by what many observers who do come. This is forcing adjustment 1991. Thus, even though increased re- have called a “retailing revolution.” by both the specialty retailers in upscale tail competition has been good for con- Hawaii has actually experienced two goods and even the more diversified stores sumers, some retail and wholesale jobs parallel retailing revolutions—one in the that have become heavily dependent on that would have been created in Hawaii local consumer market and another in the Asian market. were probably filled elsewhere instead. retailing geared toward serving the visitor market. In the local consumer market, Retailing and the Economy Retailing and Tourism the revolution appears to have begun with As these changes are taking place in Another reason that retailing is earn- the opening of Costco in 1988, the first retailing, there is developing an increased ing more respect is the growing realiza- membership store in the islands and a vig- appreciation for the industry’s role and tion that the industry may be an important orous price discounter. Since then, many value to the economy. Retailing has his- factor in the growth of tourism. About more discount retailers have entered the torically had the image of a secondary, 40 percent of all visitor expenditures are Hawaii market, while a number of long- “housekeeping” type of industry. It has made in the retail sector. Moreover, fac- time Hawaii retailers like Gem Department been viewed as an activity that moves tory outlet centers such as Dole Cannery Stores and Arakawa’s General Store have goods along from producers to consumers Square and Waikele Outlet Mall in lee- closed. A greater amount of island retail- but not one that helps “drive” the economy ward Oahu have become particularly pop- ing is now focused on the large mainland like visitor attractions, export products or ular among Japanese visitors. The Waikele chain retailers such as Wal-Mart and K- even locally produced goods. Mall is even the focal point of some Mart, and giant This view of Hawaii tour packages sold in Japan. category retailers Hawaii has actually experienced retailing as a Even merchandise chain stores such as like Toys R Us, beneficiary of K-Mart, Sports Authority and Eagle Hard- Sports Authority, two parallel retailing revolutions economic devel- ware may find themselves as tourist at- Eagle Hardware opment rather tractions for foreign visitors who are and Borders - one in the local consumer than as a con- unfamiliar with such facilities. Books. market and another in the tributor is, how- The retailing ever, beginning Rethinking Retailing’s Role revolution in the tourism sector. to change for a Thus, as retailing enters a new phase visitor market couple of rea- of expansion, renovation, and competi- also began in the late 1980s as Japanese sons. First, even though it does not ex- tion, it is an appropriate time to review visitor arrivals and spending surged port a product, local retailing has a major and possibly rethink the way we view thanks to the strengthening yen. This impact on how long dollars stay in retailing in the economy and its contribu- new affluence generated strong demand Hawaii to create jobs and income. The tion to jobs and economic development. for high-quality, designer fashions and more stages of retailing that are con- In particular, we need to better under- attracted a host of upscale merchants to ducted in the state, the greater will be the stand the relationship between retailing Waikiki and the Ala Moana Center. number of jobs created and the eco- and our number one industry, tourism. Other factors besides the influx of new nomic impact of the retailing activity. Hopefully, this report will provide the ba- retailers have helped shape the retailing We are beginning to realize, however, sis for accelerated cooperation between revolution in Hawaii. One factor has been that the 112,000 jobs and $1.8 billion retailing, the visitor industry and the the flat economy the state has experienced payroll in Hawaii’s retail sector are not nec- public sector to bring about the full po- over the last several years. This has forced essarily guaranteed to Hawaii, and can- tential of this sector’s contribution to eco- retailers to compete head-to-head for a not be taken for granted in the future. This nomic development. nearly fixed level of total consumer dollars is because new, more direct ways of sell- Unfortunately, in order to focus on the after inflation is accounted for. Another ing to the consumer require few if any em- major issues involved in the transforma- factor has been the growing sophistication ployees on site and little or no investment tion of retailing, some areas of retailing, of consumers who are more aware of the in physical facilities. These new shopping such as the restaurant segment, could many shopping choices that are available alternatives include specialty catalogs, TV not be addressed in detail at this time. to them today. Still another factor has been shopping channels and increasingly the Also, details of the Neighbor Island retail- competition from the new world of “vir- internet, which absorb sales that would ing environments could not be fully ad- tual shopping.” This includes the expand- have otherwise gone to a local retailer. dressed in this report. DBEDT intends to ing opportunities for consumers to make Even among retailers with local fa- develop a follow-up report focusing spe- direct purchases from their homes through cilities, the need for labor may not be as cifically on Neighbor Island retailing. the internet, TV shopping channels, and high as previously. The influx of large, 2 Hawaii’s Economy /August 1998 Selected Statistics of Hawaii Retailing Table 1. Labor Indicators, Sales and Contribution to GSP Retailing Gross State Jobs Ave. work Ave.