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RETAIL – Apparel

The apparel sector of the overall U.S. retail industry generated total revenues of approximately $295 billion in 2006. During the past five years, value growth in this mature market has remained relatively modest. The increase in volume sales has been the primary driver of growth in this sector, countering the effect of pricing pressures. The most lucrative segment of this particular retail sector is womenswear; sales of womenswear are currently responsible for almost 60 percent of total sales generated by the retail apparel sector. Despite these facts, the retail apparel sector remains affected by the high costs of raw materials and transportation. These costs degrade margins for companies in both retail and apparel manufacturing.

RETAIL – Drugs

Retail sales of drugs in the United States generated approximately $210 billion in 2006. Cardiovascular and CNS drugs are the most lucrative segments of the overall retail drug market and currently account for about 19 percent of the retail drug market’s total value. Though low-margin generic drugs are presently enjoying steady sales growth, volume sales will be increased by the larger number of patients covered by Medicare since more patients will now have access to affordable prescription drugs. Consumers in the United States are faced with high pharmaceutical product prices. However, recent proposed legislation could intensify price competition in the United States as drug imports may possibly be permitted from Canada and other parts of the world.

RETAIL – Home Improvement

The home improvement sector of the overall U.S. retail market was responsible for approximately $340 billion in sales in 2006. The current state of the U.S. housing market is negatively impacting the retail home improvement sector. Although, this negative impact is somewhat offset by an increase in the home improvement trend. Sales of do-it-yourself (DIY) products currently account for about 30 percent of the home improvement sector’s total value, with the remainder of this sector accounted for by sales of building products. The continued effort to rebuild following the devastation caused by Hurricane Katrina, and other U.S. disasters, is helping to support sales of building products in affected areas like the Gulf Coast, for example.

RETAIL – Technology

Rapid innovation in the consumer entertainment sector of the technology retail segment has driven market growth in recent years. The consumer entertainment sector includes products such as PCs, home cinema merchandise and mobile technology devices. Sales of audio and video equipment alone have recently risen by six and one-half percent to approach $50 billion in sales. The digital camera segment has shown strong growth in recent years and many retailers are noting that this segment is approaching maturity. Further growth in sales of digital cameras will be driven by improvements such as higher pixel counts, for example. Additionally, digital entertainment devices, such as MP3 players and TVs, continue to remain popular with consumers. However, as new technology becomes mainstream, manufacturers’ costs tend to fall, and an increased amount of low-cost imports from other countries continues to promote this trend.

RETAIL – Specialty

The specialty retail sector of the overall U.S. retail industry includes sales of computer software, music, jewelry, books and sporting goods. The specialty sector of the overall retail industry reached a total value of approximately $155 billion in 2006. This sector has been growing steadily in recent years, with a compound annual growth rate of about five percent. The future prospects for this sector are positive, as consumer confidence remains strong despite the dampening effect of rising interest rates.

Each of the segments within the overall retail industry face challenges; however, the following is a list of topics both you and your IPA consultant can discuss in order to enhance sales and improve your retail business overall.

• Online Retailing. While a significant amount of revenue is generated via in-store sales, companies should work to implement and maintain online ordering systems as they are becoming increasingly popular due to rising Internet penetration rates. For example, many apparel retailers are diversifying and selling their products online in an effort to exploit growing consumer confidence in this medium, thereby generating revenue growth. Additionally, the relatively weak status of the U.S. dollar has also attracted many international consumers to purchase goods on U.S. Web sites.
• Store Environment. Focus on improving your shoppers’ experiences by providing more comfortable and ergonomic store environments. This is important especially for small retail shops as these companies can use improved store environments to differentiate from larger and less personal retail operations.
• Fuel Costs. Increased fuel costs are reflected by high costs to transport and distribute products. Though many of these costs are passed on to consumers, the intense competition within retail markets restricts the extent to which retailers can increase prices. Companies need to work to balance reductions in profit margins in comparison to the maintenance of customer loyalty and market share.
• Consumer Intelligence. Companies should work to maintain a certain degree of intelligence regarding their consumers. The analysis of consumer trends and purchasing patterns has become vital in the management of retail operations. Retailers can use intelligence gained to drive marketing strategies, design store layouts and build product inventories, for example.
• Personnel. Retailers should invest in hiring and retaining highly skilled personnel. For example, skilled designers and merchandisers can place the companies in which they work for in the best position to anticipate and respond effectively to fluctuating consumer demand.

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