Retailing & Chain Stores Market Research

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Retailing & Chain Stores OVERVIEW

S.
    totaled an estimated $6.22 trillion (on a broad basis) during 2020, according to the U.S.
    Census Bureau.
     (Sales at stores selling general merchandise, apparel, furniture and specialty items, referred to as “GAFO,” totaled $1.24 trillion in 2020.
     GAFO is an important distinction.
     In contrast, retail sales of all types are considered to include automobiles, gasoline and restaurants.) Unfortunately, retailing was one of the industries hardest hit by the global Coronavirus pandemic.
     Customer traffic plummeted at most categories of retail stores that sell non-essential items such as fashion and jewelry.
     Nonetheless, a few categories saw soaring sales increases.
     In the U.S., for example, sales boomed at supermarkets, discount department stores such as Walmart and home improvement centers such as Home Depot.
     Consumer interests, needs and shopping habits changed dramatically.
     Consumers with internet access shifted much of their shopping to online methods.
     Households where people were lucky enough to keep their jobs and had money to spend were investing in goods that made working from home easier and sheltering at home more entertaining. Meanwhile ecommerce sales soared.
     Much of this market share that has moved to ecommerce is a permanent shift.
     For further discussion, see “The Coronavirus' Effect on the Retail Industry.” Competition among retailers has been fierce in recent years, and it will only grow more intense in the near future.
     A massive shakeout of retail stores is underway as part of a retail restructuring—slower traffic at malls

Retail, with nearly 15.5 million employees in America alone at the beginning of 2021 (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 $6.22 trillion (on a broad basis) during 2020, according to the U.S. Census Bureau. (Sales at stores selling general merchandise, apparel, furniture and specialty items, referred to as “GAFO,” totaled $1.24 trillion in 2020. GAFO is an important distinction. In contrast, retail sales of all types are considered to include automobiles, gasoline and restaurants.)

Unfortunately, retailing was one of the industries hardest hit by the global Coronavirus pandemic. Customer traffic plummeted at most categories of retail stores that sell non-essential items such as fashion and jewelry. Nonetheless, a few categories saw soaring sales increases. In the U.S., for example, sales boomed at supermarkets, discount department stores such as Walmart and home improvement centers such as Home Depot. Consumer interests, needs and shopping habits changed dramatically. Consumers with internet access shifted much of their shopping to online methods. Households where people were lucky enough to keep their jobs and had money to spend were investing in goods that made working from home easier and sheltering at home more entertaining.

Meanwhile ecommerce sales soared. Much of this market share that has moved to ecommerce is a permanent shift. For further discussion, see “The Coronavirus’ Effect on the Retail Industry.”

Competition among retailers has been fierce in recent years, and it will only grow more intense in the near future. A massive shakeout of retail stores is underway as part of a retail restructuring—slower traffic at malls and shopping centers and more reliance on ecommerce. While roughly 17 major U.S. retailers took bankruptcy during 2019, including Payless and Charming Charlie, 2020’s total was 32 major chains, including long-term department store giants JC Penney, Neiman Marcus, Stein Mart, Stage Stores and Lord & Taylor, as well as leading apparel sellers J. Crew and Brooks Brothers, plus home goods sellers Pier 1 and Sur La Table. Bankruptcies among retailers slowed to about 14 in 2021, including L’Occitane and Belk department stores. While many bankrupt firms gained new investors and resumed business under lower overhead and less debt, some liquidated and closed shop entirely.

A retailer without a significant competitive advantage doesn’t stand a chance. 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 $139 billion during one day in November 2021, up from $74 billion during one day in November 2020.

The Coronavirus gave an immense growth spurt to ecommerce on a worldwide basis. Analysts at eMarketer estimated worldwide ecommerce sales of $4,921 trillion in 2021, up from $4,213 trillion in 2020 and $3,351 trillion in 2019. (These revenues include products or services ordered using the internet, regardless of the method of payment or fulfillment, but exclude travel, event tickets, money transfers food services and gambling.)

On a U.S. basis, eMarketer estimates ecommerce for 2021 at $933.3 billion, up from $792.0 billion during 2020. (These numbers exclude travel and event tickets.)

Today, both retailers and their customers are much more conservative than they were in the recent past. 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. Reduced inventory leads to fewer sales events and enables retailers to achieve better sell-through at full prices. Consequently, in many cases, profit margins are improved over pre-Coronavirus practices.

Consumers worldwide are focused on seeking the best possible prices. This means that revenues have been strong at other outlets that are known for exceptionally low prices—provided that they also offer convenience and great service, such as easy returns.

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.

In emerging nations, the development of a robust retail sector (and related, vital supply chains) can require many years. However, 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.

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 Walmart.

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.