Retail Sector
Overview
While large companies such as Home Depot and Barnes & Noble dominate some retail sectors (such as building supplies and books), the majority of sectors are serviced by a large number of retailers. Witness the Internet, which over the last ten years has seen catalog retailers, such as Amazon, gain tremendous acceptance in the public’s mind and as a result have made the online business model a viable vehicle for the entire retail sector.
Competitive Landscape
A retailer’s success is strongly driven by:
- household income
- consumer confidence, and
- interest rates
The cyclicality (rises and falls with the health of the economy) of retailing means that most retailers must compete by:
- selling unique merchandise
- providing superior service
- offering a distinct experience, or
- servicing a local market
Operations
For retailers with a physical presence (store, kiosk, or stand) location is the key to driving customer traffic. When selecting a location(s) one needs to consider:
- local demographics (population growth/decline and income)
- traffic patterns
- proximity to complementary or similar stores, and
- lifestyle
This information can be used to justify or help determine the correct retail format. The most common physical retail formats are:
- Superstore – massive physical space
- Storefront – a space that has frontage on a street or thoroughfare
- Kiosk – scaled down version of a retail operation that can fit in a small space
Successful retail businesses put into place an inventory management process that helps them identity:
- Slow- and fast-moving items
- Shrinkage (damage, spoilage, and theft)
- Day-part differences
This information, along with understanding their profitability per item, allows managers to develop effective store layouts. When planning the layout retailers want to allocate space (location and amount) to basic merchandise, specials, checkout, and storage.
