A complete analysis of the Retail Industry, including trends, statistics and profiles of the 500 most successful Retail firms, is available in the Retail Industry Almanac.

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1. Introduction to the Retail Industry
   
   
2. Wal-Mart Dominates as the World’s Biggest Retailer, Heating Up Competition and Driving Retail Prices Down
   
   
3. Department Stores have Evolved into Giant Apparel, Cosmetics and Accessories Stores
   
   
4. Name Changes, Buyouts and Consolidation Alter the Department Store Landscape
   
   
5. Discounting and Discount Stores Evolve

6. Category-Killers Struggle to Keep Up With Discounters
   
   
7. Sophistication and Success for Direct Marketers
   
   
8. Rise of Showcase Stores and Super-Merchandisers
   
   
9. Bricks, Clicks and Catalogs Create Synergies While Online Sales Boom
   
   
10. Retail Technologies Leap Ahead
    
    
11. Retailers Find New Markets in China While India’s Retail Industry is Poised for Enormous Growth
    
    
12. Yahoo!, eBay and Amazon Create New Ways of Retailing
    
    
13. Entertainment-Based Retailing
    
    
14. Shopping Centers Continue to Develop and Expand
    
    
15. Malls Morph to Stay Afloat
    
    
16. Kids’ Items Spark New Store Concepts
    
    
17. Luxury Items Move for Big Bucks
    
    
18. How to Interpret Reports of Retail Sales
    

1) Introduction to the Retail Industry
Retail is the second-largest industry in the U.S. by number of businesses and number of employees. Retail sales in the U.S. (using the government’s broad measure of retail sales, which includes food service as well as sales of gasoline and automobiles) were up about 6.6% in 2005, to $4.16 trillion (Plunkett Research estimate), following a 3.8% increase in 2004. The 2005 growth was strong, driven partly by higher gasoline costs as well as by deep price discounting during the Christmas season by mass merchandisers and year-long discounting by automobile dealers. Sales at home centers, such as Home Depot, were also exceptionally strong during 2005, partly due to hurricanes Katrina and Rita.

Sales growth in 2005 was affected by several primary factors:

1)Fueled by relatively low interest rates (with long-term mortgages available in the 5.5% to 6.5% range), home sales have rocketed along at exceptionally high levels. While homes themselves are not counted in retail sales figures, buyers of these homes have been a positive force at retail stores, where they purchased significant quantities of furniture, appliances, linens, consumer electronics and garden supplies to fill up their new residences. Brisk growth in home remodeling and redecorating has also fueled retail sales.

2)Another growth factor can also be attributed to low interest rates: From 1998 through mid 2005, Americans were refinancing their existing home mortgages in record-setting numbers. In doing so, they have taken advantage of very low mortgage interest rates. Many homeowners have also increased the balance of their mortgages, taking advantage of rapidly rising home values that increase their borrowing power. Borrowing against home equity lines of credit was also high during 2005, and much of that money may have gone to retail purchases. Homeowners have been spending this cash windfall freely, driving up retail sales in many categories.

3)The sale of gasoline at the pump is included in retail sales figures. Extremely high prices per gallon for gasoline have likewise shown up in the growth of total retail sales in America.

4)Another matter to consider when evaluating retail sales growth is the relatively low rate of inflation that the U.S. has enjoyed in recent years (due to factors that include impressive growth in business productivity and low prices for imported goods—especially those made in China). Inflation had been more or less 2% per year (running from slightly below 2% to slightly above 3%) from 1990 through 2005. To get the actual rate of retail sales growth before inflation, subtract the rate of inflation from the yearly change in retail sales.

(For historical data, see “Annual Growth in U.S. Retail Sales” in Chapter 2, “Retail Industry Statistics.” In addition, for thoughts on how to find and use retail sales statistics, see “How to Interpret Reports of Retail Sales” at the end of this chapter.)

Positive forces at work in the retail market today include:

• Relatively low interest rates
• Easy availability of consumer credit
• A very strong job market coupled with relatively low unemployment rates
• Moderate inflation
• A relatively low personal savings rate (indicating a willingness to spend rather than save)
• Higher stock market and personal investment values

Negative factors include:

• Consumers have high debt levels
• Global terrorism, tension and uncertainty
• Consumers burdened with much higher energy costs including gasoline, home heating fuel, natural gas rates and electricity rates
• A slowdown in housing market

Meanwhile, 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 direct marketers (including catalogs and online sites) are stealing customers from stores. Online selling at deep discounts is even making immense inroads into consumer purchases of automobiles and travel. For example, discount airlines JetBlue and Southwest each sell over 50% of their tickets via their web sites.

Direct selling through online retailers, catalog companies and home-shopping television channels continues to increase. Sales via the Internet rose dramatically in 2005, up an estimated 25% to $89 billion thanks to savvy marketing by online giants like Amazon.com, as well as the e-commerce efforts of traditional retailers such as J.C. Penney and Wal-Mart. Likewise, the sale of merchandise via television home-shopping channels racks up several billion dollars in annual sales. Companies engaged in this activity include the Home Shopping Network and QVC, Inc.

For a complete analysis and further discussion of statistics, trends and more:
Purchase Plunkett's Retail Industry Almanac or the eBook (PDF) Version by download.