Retail, with nearly 15.7 million employees in
America alone (about one out of 10 people in the workforce), is one of the
largest industries in the world.
Retail sales in the U.S.
totaled an estimated
$6.26 trillion (on a broad basis) during 2019, according to Plunkett Research,
up about 4% for the year, and up dramatically from only $4.0 trillion during
2009.
Total sales were $6.02 trillion in
2018 according to the U.S Census Bureau.
(Sales at stores selling general merchandise, apparel, furniture and
specialty items, referred to as “GAFO,” totaled $1.30 trillion in 2018.
GAFO is an important distinction.
In contrast, retail sales of all types are
considered to include automobiles, gasoline and restaurants.)
Factors that will
impact the retail sector in the U.S., Europe and most Developed Nations:
· In the U.S., a very low
unemployment rate and a strong economy, as of late 2019, point to a reasonably
good retail environment in 2020.
Nonetheless, rising interest rates may make consumers cautious when
purchasing big-ticket items.
· Consumers are less
interested than in the past in buying clothing and more interested spending on
travel, experiences, automobiles and home remodeling or repairs.
“I want great experiences and memories, not
more things,” has become a popular line of thought among younger consumers.
· Consumers are benefitting
greatly from reduced gasoline prices worldwide.
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Retail, with nearly 15.7 million employees in
America alone (about one out of 10 people in the workforce), is one of the
largest industries in the world. Retail sales in the U.S. totaled an estimated
$6.26 trillion (on a broad basis) during 2019, according to Plunkett Research,
up about 4% for the year, and up dramatically from only $4.0 trillion during
2009. Total sales were $6.02 trillion in
2018 according to the U.S Census Bureau.
(Sales at stores selling general merchandise, apparel, furniture and
specialty items, referred to as “GAFO,” totaled $1.30 trillion in 2018. GAFO is an important distinction. In contrast, retail sales of all types are
considered to include automobiles, gasoline and restaurants.)
Factors that will
impact the retail sector in the U.S., Europe and most Developed Nations:
· In the U.S., a very low
unemployment rate and a strong economy, as of late 2019, point to a reasonably
good retail environment in 2020.
Nonetheless, rising interest rates may make consumers cautious when
purchasing big-ticket items.
· Consumers are less
interested than in the past in buying clothing and more interested spending on
travel, experiences, automobiles and home remodeling or repairs. “I want great experiences and memories, not
more things,” has become a popular line of thought among younger consumers.
· Consumers are benefitting
greatly from reduced gasoline prices worldwide.
For example, U.S. households that drive their cars substantial distances
could enjoy reduced gasoline expenses of $500 to $1,500 or more yearly. At the same time, consumers in nations that
rely greatly on oil exports will be hurt (e.g., Russia).
· High stock market
values and recovering house prices have created a “wealth effect,” as of late 2019,
which improved consumer confidence.
· Price-sensitive
consumers will continue to be more conservative. When they do spend, they want to feel like
they are buying merchandise that is fairly priced, if not a significant
bargain.
· Retail purchases via e-commerce
are growing at a very strong rate worldwide, as more consumers have access to
fast internet connections, and e-commerce firms enhance their product offerings
and delivery options. Store-based selling
will face ever-greater competition from online sites, while traffic at retail
malls will be disappointing.
· The most successful
retailers will offer strong web sites and encourage shoppers to move easily
between stores and online offerings.
Source:
Plunkett Research, Ltd.
Competition among retailers has never been
tougher. A retailer without a
significant competitive advantage doesn’t stand a chance. Superstores are battling each other on every
major corner, while internet marketers are consistently taking market share
away from stores. Some consumers are using
stores as showrooms where they can touch and feel the merchandise, and then
making their purchases at lower costs online at sites like Amazon.com. Online selling at deep discounts is even
making inroads into major consumer purchases such as jewelry. An online shopping event in China known as
“Singles Day,” garnered $38 billion during one day in November 2019.
Growth in online shopping has been driven by
two factors. First, very fast internet,
both fixed and mobile, is now widespread among consumers in all nations that
enjoy reasonably well-developed economies, which makes buying online faster,
portable and more satisfactory than in the past. Next, there’s the savvy marketing of online
giants like Amazon.com (with more than $232 billion in 2018 revenues, up from
only $34 billion in 2010), as well as the e-commerce efforts of traditional
retailers such as Home Depot and Wal-Mart.
These fast internet connections are extremely important, even at the
office, since a large number of workers take time out to shop online from their
desktops.
Analysts at eMarketer reported growth in
American e-commerce sales from $515 billion in 2018 to $587 billion in 2019. (These figures do not include online travel
sales or sales of tickets to events.) By
2023 sales are expected to be as high as $970 billion.
Today, both retailers and their customers are
much more conservative than they were during the last, long-term economic boom
that ended in late 2007. Retailers of
all types have been seeking creative ways to cut operating expenses. Methods range from reducing the size of
stores, to lowering the employee count, to reducing inventory exposure.
Middle class U.S. and European consumers are
focused on seeking the best possible prices.
This means that revenues have been strong at so-called “dollar stores”
in America, and at other outlets that are known for exceptionally low
prices. Elsewhere, many retailers, including
department stores, are forced to offer special prices on a frequent basis.
Private-label items are generally popular,
providing retailers with higher profit margins than they see on branded
merchandise. Consumers are enthusiastic
buyers of private-label (sometimes called store-label) merchandise, recognizing
good quality and good prices.
Over the very long-term, the most exciting
markets for retail industry growth may be emerging nations such as South Africa,
India and Brazil. However, the development
of a robust retail sector, and a related supply chain, can require many
decades. Meanwhile, ecommerce is growing so rapidly in many emerging markets,
that the importance of store-front retailing will be diminished. In China, many of the world’s leading retail
chains have opened large numbers of stores, and new malls have been developed
at a rapid clip, even in remote cities.
This retail trend in China includes middle-of-the-road chains such as
Nike and Starbucks, automotive centers including car dealers and tire and
accessory stores such as Goodyear, as well as the world’s top luxury retailers,
including Chanel, Louis Vuitton and Fendi.
Elsewhere, the government in India is taking small steps to open its
market to foreign retail chains, but it remains a difficult environment due to
regulatory issues and supply chain problems.
Worldwide, many retail businesses outside the
luxury field have repositioned themselves as providers of high-value,
reasonably-priced merchandise. The
retail apparel industry has been extremely challenged by changing tastes and
online competition. (As with most
merchandise categories, Amazon.com is expanding rapidly in online apparel
merchandising.) Many fashion-conscious women have become more conservative
about the amount they are willing to spend on clothing.
Personal spending has shifted toward goods and
services offering quality, durability, affordability and lasting value, with
less focus on the purchase of trendy items for fashion’s sake. Going forward, consumers will spend their
money more wisely while using debt more carefully. Successful manufacturers, home builders,
services providers and retailers will embrace this trend.
Meanwhile, a recent surge in house values and
stock market indexes created a wealth effect throughout most of America, along
with Canada and many other developed nations.
This has encouraged consumers to spend a bit more, including the
purchase of automobiles, home remodeling and appliances. When consumers spend, they want to do so with
the confidence that they are using their money in a smart way, and they often want
to pay cash instead of using credit cards.
Plunkett’s Four Keys to Successful Consumer Products:
·
High Perceived Value: A product must convincingly offer a high
level of value and durability for its price, while giving consumers confidence
that their money is well and wisely spent.
·
Quality and Utility as
well as Fashion: Fashion will remain important, but quality
will come first in the minds of many consumers.
Products that offer quality, utility and
fashion will have tremendous competitive advantage.
·
High Brand Reputation
above Style: A
brand must stand for a company that clearly puts customer satisfaction and high
value above all else. If the brand also
stands for a firm with great styling, high social values, such as
eco-consciousness, or other ancillary attributes, that’s even better.
· Cheap Chic Still Has a Place: If a company wants to win the hearts of
fashion-conscious, as well as budget-conscious, consumers it must provide
exciting style at a moderate price. If an entire business model is
based on trendy merchandise with a short useful life, then the company must
strive to offer very high value—for example, the affordable fashions of such
retailers as Sweden’s H&M, Spain’s Inditex and Japan’s Uniqlo.
Next, let’s look at how
these values can be applied successfully to retail stores.
Plunkett’s Four Keys to Successful Retailing:
·
A High Value-High
Quality Product Selection: Depth of selection is
less important than a reasonably-sized offering of products that the
merchandiser has chosen because they consistently offer high value and quality.
·
Very Competitive Prices: For most retail chains, the goal is to give
the consumer confidence that the store faithfully delivers everyday low
prices—meanwhile, managing the firm in a manner that provides a viable profit
margin. (At the other end of the
spectrum, true luxury stores often operate on a combination of unique styles
and fashion, but nonetheless rely on frequent sale events to boost traffic.)
·
Superior Service: In-store help, follow-up service,
problem-solving, installation and repairs offered easily and quickly, along
with the ability to make returns and exchanges must be part of the package,
with an absolute minimum of inconvenience to the consumer.
·
Seamless Integration of
Bricks and Clicks: Successful firms integrate their online
endeavors with their physical presence in a manner that provides the highest
possible level of convenience to customers.
Great example: Costco
ü Reasonable product
selection, including quality store brands as well as name brands that have good
reputations. Costco succeeds by carrying
a vastly smaller, carefully selected and priced merchandise selection than its
competitor Wal-Mart.
ü Consistent, everyday
low prices.
ü An easy-to-find,
always-staffed customer service desk.
Also, rules about returns are generous and clear-cut.
ü An easy-to-use web site
with in-depth customer service information.
When desired, customers may order merchandise online but return it to a
store. Large items, upon request, can be
picked up at the customer’s home for return.
Internet Research Tips:
· The National Retail
Federation (www.nrf.com )
offers a wealth of information regarding the U.S. retail industry.
· The International
Council of Shopping Centers (www.icsc.org ) offers the latest information on shopping
centers, malls and retail trends.