US Retail Sector

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 1,067,005 retail establishments in the US purchase goods from manufacturers and distributors and sell a mix of those goods to consumers and businesses. Specialty retailers sell a particular type of merchandise, such as furniture or jewelry, broad line retailers sell a wide variety of merchandise and include department stores, sporting goods stores and gift and souvenir stores. Big box stores (Walmart, Target) and wholesale clubs (Costco, Sam’s) are competition for a wide range of retailers.

Competition from Online Retailers

The coronavirus pandemic shut down brick-and-mortar stores and accelerated the adoption of online shopping by consumers.

Battling Against Inventory Obsolescence

The retail sector is in a constant state of change, driven by trends, fads, seasonality and perishability.

Industry size & Structure

The retail sector is comprised of 1,067,005 establishments that employ 15.8 million workers and generate $6.5 trillion in annual revenue, according to government sources.

    • The retail sector represents 5.8% of the nation's Gross Domestic Product (GDP) and employs 10.1% of the country's workers.
    • The sector is concentrated at the top with the 20 largest retail firms representing 30% of revenue, but it is fragmented at the bottom.
    • In addition to employer establishments, the retail sector has 2.1 million owner-operated establishments with no employees. Subsectors with the highest numbers of nonemployer establishments are direct selling establishments, which include door-to-door sales, home parties, fuel (heating oil and propane) delivery, and meat and meal plans (39%); ecommerce (8%); grocery products (8%); clothing stores (6%) and automobile dealers (5%). The owners of nonemployer establishments typically perform the work and may outsource support functions like marketing and accounting.
    • The retail sector shed about 67,000 establishments in 2021, which equals about 6.3% of existing establishments, according to the Bureau of Labor Statistics. However, the sector added 81,000 new establishments. As a result, the retail sector had a growth rate of 1.3%.
    • The retail sector is forecast to grow its employment base by 2.9% overall in 2021-2031, which is lower than the national average of 5.3% for all jobs, according to the Bureau of Labor Statistics.
                            Industry Forecast
                            US Retail Sector Industry Growth
                            Source: Vertical IQ and Inforum

                            Recent Developments

                            May 6, 2024 - Estimated 45,000 Store Closures Expected by 2028
                            • A new UBS report in Retail Dive projects that 45,000 retail stores may close in upcoming years as online sales gain share. Online retail penetration is expected to rise to 26% from 21%, with retail sales growth of 4% by 2028, as the industry focuses more on fulfillment and distribution centers. If the closures occur, USB said the total number of stores in the US will fall from 958,533 to 913,500. Other factors driving store closures include a tighter lending environment, higher operational costs, and consumers spending more on services than goods. The report stated that sporting goods, clothing, consumer electronics, home furnishings, hobby, book, and music stores have closed the most locations since the first quarter of 2019. Still, retailers can incorporate existing stores as an important piece of their omnichannel capabilities. Per the report, “Our analysis assumes that stores remain an important part of the overall retail ecosystem for retailers and consumers. In the simplest terms, stores serve as hubs of fulfillment and support distribution logistics. This is increasingly more important as consumers are becoming more demanding for convenience or immediate deliveries.”
                            • Consumer confidence levels fell in April 2024 from March 2024, marking a third consecutive month of weakness, according to data from The Conference Board. The Conference Board’s consumer confidence index was 97 in April 2024 from 103.1 in March 2024. According to Dana Peterson, Chief Economist at The Conference Board, “Confidence retreated further in April, reaching its lowest level since July 2022 as consumers became less positive about the current labor market situation, and more concerned about future business conditions, job availability, and income.” Peterson added that confidence declined among consumers of all age groups and for all income groups except those in the $25,000 to $49,999 range. Plans for vacations, home purchases, and large appliances decreased on a six-month basis.
                            • The US retail industry is projected to grow at a nearly 4% CAGR from 2024 to 2028, comparable to the overall economy's growth, according to a forecast from Inforum and the Interindustry Economic Research Fund, Inc. The forecast noted that consumer confidence levels have improved, which bodes well for the retail and wholesale industries. Consumer sentiment has also seen a degree of improvement following sustained lower levels. Factors that continue to limit spending are higher price levels and interest rates, though both are expected to improve in 2024. Post-pandemic, consumer spending has shown slower gains of 2.5% in 2022 and 2.2% in 2023, supported in part by savings amassed by households from federal pandemic relief programs. According to the forecast, "2024 may bring further deceleration, but improving consumer sentiment may support moderately strong gains in household spending, together with rising wage rates and lower inflation."
                            • The National Retail Federation (NRF) released its 2024 retail sales forecast, projecting an increase of approximately between 2.5% and 3.5%, reaching sales of between $5.23 trillion and $5.28 trillion. The projected growth aligns with the 10-year pre-pandemic average annual sales growth of 3.6% and compares with the 2023 annual sales growth of 3.6%, which reached $5.1 trillion. Non-store and online sales (included in the total figure) are expected to grow at a higher rate of 7% to 9% year over year, to a range of $1.47 to $1.5 trillion, compared to $1.38 trillion in 2023. A tight labor market is expected to cool in 2024, with about 100,000 fewer jobs on average per month projected in 2024 compared to 2023. The NRF forecast excludes automobile dealers, gas stations, and restaurants to focus on core retail.
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