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Introduction to the Retail Industry, Business and Industry Trends Analysis

Retail, with nearly 15.7 million employees in America alone at the beginning of 2022 (about one out of 10 people in the workforce), is one of the largest industries in the world.  Retail sales of all types in the U.S. totaled an estimated $8.070.9 trillion (on a broad basis) during 2022, according to the U.S. Census Bureau.  (Sales at stores selling general merchandise, apparel, furniture and specialty items, referred to as “GAFO,” totaled $1.53 trillion in 2022.  GAFO is an important distinction.  In contrast, retail sales of all types are considered to include automobiles, gasoline and restaurants.)
The Coronavirus caused many firms to go under.  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  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 about $156 billion during a single day in November 2023, up from $74 billion during one day in November 2020.
In addition to intense competition among physical retail stores, retailers also must compete with ecommerce.  Analysts at eMarketer estimated worldwide ecommerce sales of $5.90 trillion in 2022, up from $4.921 trillion in 2021 and $4.213 trillion in 2020.  (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 2023 at $1.3 trillion, up from $1.1 trillion during 2022.  (These numbers exclude travel and event tickets.)
Throughout most of the 2000’s, 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.  
Retailers, including Gap and Target are using dedicated space within stores as fulfillment centers.  Gap reported that it used its stores to fulfill more than 90% of its ecommerce sales during a recent quarter.  In 2022, Walmart announced plans to build small, automated fulfillment centers attached to about 100 existing stores over the midterm.  The intent is to fill online orders more quickly without blocking store aisles with employees filling online orders.  This concept is referred to as “micro fulfillment” by logistics experts.  Walmart acquired Alert Innovation in 2022, a robotics company that specializes in merchandise handling automation for such centers.
Some employees are shifting from waiting on customers to fulfilling online orders and running items outside for curbside pickup.  Elsewhere, chains are retraining their store personnel to have split duties—taking care of store walk-ins when needed, but otherwise spending their time chatting with, and making purchase suggestions to, customers who are browsing the chains’ websites.
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 increasingly 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 by online purchases. 
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:
=         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.

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