ABSTRACT

Retail is the second-largest industry in the United States both in number of

establishments and number of employees. The U.S. retail industry generates $3.8 trillion
in retail sales annually ($4.2 trillion if food service sales are included), approximately
$11,993 per capita. The retail sector is also one of the largest worldwide. Retail trade
accounts for about 12.4 percent of all business establishments in the United States. In
USA, Single-store businesses account for over 95 percent of all U.S. retailers, but
generate less than 50 percent of all retail store sales. Retail sales in the U.S. (total retail
sales include the categories of gasoline, automobiles, and food service, as well as
merchandise) will show a slight decrease in 2008, totaling about $4.400 trillion according
to Plunkett Research estimates. Sales were $4.482 trillion in 2007, up from $4.307 in
2006. Whereas in UK,11% of all VAT-registered businesses are retailers, with the total
number currently at 180,875.UK retail sales were £265 billion in 2007, the Retail sales of
the country account for 1/5 of its total economy. The retail sector generates almost 8% of
the Gross Domestic Product of the UK. More than a third of consumer spending goes
through shops. The Sales over the internet account for less than 4% of total retail sales.

aepc.fibre2fashion.com

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 Retail- A promising market

Retailers that can identify the most promising markets will become fierce global
competitors—able to saturate the obvious markets and gain first-mover advantage in new
ones. Retailers understand these new realities. Modern retail has been expanding to new
markets for a few years now. The trouble is, it is difficult to determine which new market
is the most promising one. As one market becomes saturated, is it enough simply to
follow the crowd into the next one?

On a regional level, Asia reclaimed the lead position from the maturing markets of
Eastern Europe. As part of Asia, the Middle East posted the highest retail sales growth
globally, led by United Arab Emirates and Saudi Arabia. The Mediterranean held steady
with mixed results, while Latin America recovered from its economic crises and enjoyed
a strong return on the Index. Finally, Africa remains outside the game, but that is not
stopping retailers from entering this populous region. Figure 2 maps out the relative
market attractiveness of all countries on the Index. A closer look at each region follows:

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Eastern Europe: A Maturing Market
As a region, Eastern Europe falls behind Asia in the 2006 GRDI top 30. All countries—
except Macedonia, which went up one spot—either kept or lost their place compared to
last year. This doesn’t mean the region is losing its allure; rather, it indicates that the
“boom” following the end of the Cold War is starting to fade. Figure 4 shows fewer
retailers are entering and exiting Eastern Europe.

The leading Asia markets are also getting hotter: India topped the 2006 Index and
Vietnam moved up five places to reach 3rd place. Three other Asian tigers—Thailand,
South Korea and Malaysia—also made it to the top 15. The following snapshots provide
insight into key markets:

Windows of Opportunity Last 5 to 10 Years

Market attractiveness usually follows the same consistent pattern. Markets progress
through four stages as they evolve from an emerging to a mature market, usually over the
course of 5 to 10 years (see figure 7). This model is particularly useful as executives plan
their market-specific strategies, giving them insight into timing and allowing for better
strategic decision-making. The four stages are:

Opening. An opening market is one that is just entering the GRDI or is just outside the
top 30 markets. At this stage, retailers should be monitoring the market and performing
high-level assessments. They should also begin planning their entry strategies and send
task-force teams in, if necessary. Patience is key, as entering too early can lead to failure.

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India in the late 1990s is a good example of a country in the opening stage, while in
2006, Kazakhstan is the country to watch.

Peaking. A peaking market is developing quickly and is ready for modern retail. At this
stage, retailers should enter the market through sourcing offices, local representation and
new stores. Current peaking markets include Ukraine, India and Vietnam. Retailers that
enter during this stage have the best chance for long-term success. Wal-Mart and
Carrefour’s success in China in the late 1990s and early 2000s illustrates the importance
of committing to a promising high-growth market at the right time. Today, Wal-Mart
and Tesco are adopting the same strategy in India—testing the market conditions before
diving in. Looking ahead to 2011, don’t be surprised if Wal-Mart and Tesco are among
the top three international retailers in India.

Declining. The declining stage is when the market is still big and growing, but the space
for new entrants is becoming tighter—and retailers must act quickly. China is a good
example. Wal-Mart, Tesco and Carrefour have established their presence in the primary
hubs, and are now focusing on tier-two cities. Retailers entering a declining market have
limited time to explore, and their margin for error is thin. In general, they must play by
established rules and be prepared to deal with more competition from other international
retailers.

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Closing. The window of opportunity is closing fast. The share of modern retail is very
high, reaching 40 to 60 percent. Most Eastern European markets, including the Czech
Republic and Poland, are in this phase. Though the opportunity is closing, retailers can
enter with new formats such as discount models, or non-food formats such as consumer
electronics and apparel.

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Negative factors that will impact the retail sector in 2009:

 Extremely high consumer debt levels

 Higher health care costs for consumers
 Global terrorism, tension and uncertainty
 Consumers burdened with high energy costs for such items as gasoline, home
heating fuel, natural gas and electricity
 A continuation of depressed conditions in the housing market
 Rising home mortgage foreclosures (including large numbers of adjustable rate
mortgages, “ARMS,” scheduled to reset to higher rates in 2009)
 Layoffs and falling profits in a wide variety of business sectors
 Rising unemployment levels
 Tightened lending standards that will make it more difficult for consumers to
obtain credit, including a pull back in lines of credit available on credit cards and
home equity loans
 Extremely low consumer confidence
 Consumer tastes and expenditures influenced to a growing extent by LOHAS, a
trend toward purchases that support “Lifestyles of Health and Sustainability.”
Consumers will be more conservative going forward, saving more while spending
less. When they do spend, they will be focusing to a growing extent on high-value
items with long life, low impact on the environment and low energy consumption.
Items that promote a healthy lifestyle will receive a growing focus.

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 UNITED KINGDOM

Menswear underperforming the rest of the clothing sector in 2008, with growth of 1.5%,
down from 3.3% in 2007. However menswear sales may be more resilient than expected
in the current downturn. Womenswear has been driven by large increases in clothing
volumes bought, this phenomenon has been much less pronounced in menswear.

Smaller, niche clothing specialists are gaining share from market leaders, collectively
increasing their share by 1.1 percentage points to 34.2% of the market. They include a
wide range of different players, from budget young fashion retailers like Blue Inc and
H&M to lifestyle brands like Fat Face and Ted Baker.

Menswear retailers are heading for a profits squeeze. Deflation is lessening significantly.
The depreciation of the pound against the US Dollar is increasing domestic cost inflation
in key sourcing destinations such as China. Therefore upward pressure on product buying
and increases in operating costs will squeeze profits further.

Supermarkets move to dominate retailing

Grocery retailers fared well in 2007, particularly the large supermarket chains. Expansion
of non-food boosted their position and further encroached on the territory of more
specialized retailers. While Asda sold a £9.00 DVD player, beating Argos and Home base
in the cheapest DVD player stakes, Tesco Plc acquired Dobbies Garden Centres in its
first major move outside the grocery retailing environment. As the Big Four reached new
records of market share and more independent retailers closed down on the high street,
political attention refocused on grocery retailing.

Legislation to curb dominance of Big Four

The Big Four’s dominance came under intense scrutiny over the review period,
culminating in 2007 with the Sustainable Communities Act, and a preliminary report by
the OFT. These, together with the early 2008 Competition Commission’s provisional
recommendations aim to spell the end of the imbalance between the Big Four and the rest
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of the retail grocery environment. Between them these give local government the right to
veto planning permission on any edge-of-town site, suggest that supermarkets sell land in
areas where there is no competition to allow rivals to set up, and call for an ombudsman
to protect suppliers from being passed unexpected costs.

Discounters pick up the pace

Discounters used the less favourable economic environment to improve their rather
meagre presence in the UK by expanding the number of outlets and moving their offer
upmarket. This was helped by the fact that consumers increasingly combined bargains
with purchases of indulgent products or luxuries, in what has also been described as
“schizophrenic” shopping behaviour. The result is that the traditional shopping structure
is diminishing in this traditionally class-conscious society.

Retailers cater to ethically-conscious consumers

Ethical or environmental shopping really took hold in 2007 as the media onslaught over
the environment and fair trade issues continued. Retailers responded with equal gusto.
Marks & Spencer launched a clothes recycling scheme in conjunction with Oxfam, fair
trade cotton went on sale in Debenhams and Tesco, and all the major supermarkets
beefed up their fair trade and organic selections. As consumers become more concerned
regarding green and ethical issues, retailers are provided with an additional dimension in
which to distinguish themselves.

Internet retailing most dynamic

Non-store retailing increased its foothold in UK retailing in 2007. UK consumers are

becoming more comfortable shopping online and increased household access to
broadband, in conjunction with improved website design, has fuelled growth. While the
UK is already among the leaders in terms of Internet retailing in Europe, there is still a
long way to go. In part, older consumers still need to be won over, but retailers
themselves have not fully exploited the channel. While the likes of Tesco Online and
Ocado entered a pricing war in 2007, Asda finally announced its plan to cover the
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majority of the UK with its online service by the end of 2008. When such major players
are still underrepresented in the online market, the number of potential consumers
remains high.

Company Headquarters Sales in billion No. of stores Countries of

operation
Wal-Mart US $312.40 6,380 Argentina,
Stores Brazil, Canada ,
USA, UK
Tesco UK $69.6 2,365 UK, China

Kroger US $60.6 3,726 United States

Sainsbury UK $29.2 808 United

Kingdom

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UNITED STATES

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The world watched as the U.S. retail industry reported the dreaded December 2008 same
store sales figures this week. While the decline of many top U.S. retailers fell in line with
analyst predictions, the notable rise in sales of some major retail chains was surprising,
yet largely ignored.
The Buckle Inc. tops the list of December retail gains so far, with an impressive 13.5%
increase in same store sales, compared to December 2007. This is the 17th month in a
row that Buckle has posted double-digit same store sales.
While headlines have been focused on Wal-Mart's discount strategies, it's Buckle's
customer loyalty and service culture that really deserve the spotlight. Most U.S. retailers
were focused on out pricing each other in 2008, but Buckle remained focused on its
mission "to create the most enjoyable shopping experience possible for our guests."
Buckle is proving that a truly strong customer-centric operation can transcend the forces
of external economic conditions.
Another notable economic trend buster has been regional appliance and consumer
electronics chain, Conn's Inc. While the overall consumer electronics category posted an
8.7% comparable store sales decline for December, 2008, Conn's posted a 5% increase.
Unable to compete on price with national competitors like Best Buy, Sears, and Costco,
Conn's competes with customer services like in-house financing, same-day delivery,
optional product pickup at its distribution centers, and 48-hour complaint resolution.
While failing competitor Circuit City has been busy blaming the poor economy,
weakened consumer confidence, and a rough retail environment for its plummeting sales,
Conn's CFO, Mike Poppe said, “It’s a great opportunity to gain market share.”
Apparently at Circuit City the cash register is half empty and at Conn's the cash register
is half full.
A look at the complete list of December 2008 same store sales figures shows that the
majority of positive results were posted by retail chains which operate fewer than 1,000
stores in the U.S. These results seem to debunk the theory that the retail giants will
decimate all of their smaller competitors in the recession, creating a homogenized
American retail landscape that lacks imagination and variety.

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December's same store sales successes indicate that size doesn't matter when it comes to
surviving the first great recession of this millennium. For just about every U.S. retailer
except Wal-Mart, that is the positive aspect of this week's U.S. retail news.

retailindustry.about.com

Retail Industry Trends:

Cutbacks, layoffs, closings and bankruptcy are the hottest retail trends in 2008.

Green products and services, green facilities, and green activism are being heavily
publicized by U.S. retailers, and strongly supported by U.S. consumers.

Integrating internet resources with brick and mortar retailing is a necessary trend for
retailers who want to be competitive with younger demographics.

Since 2008 is a U.S. presidential election year, active political involvement was also a hot
trend in retailing.

Retail Industry Outlook:

As was precited in the Deloitte report, “2008 Industry Outlook: A look around the
corner,” U.S. retailing is challenging due to fears about the housing market, tightening
credit, not to mention high gas prices and cost of living increases.

The report recommends that retailers focus on these strategies in order to survive (and
possibly thrive) in 2008:

• Lean inventories and strong cash flow

• Lower payroll
• Increase share of wallet with existing customers
• Improve the customer experience and customer loyalty
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 • Use multichannel shopping (in-store, kiosk, online)
• Reintroduce coupons
• Create private label brands

U.S. Retail Industry Recession:

Although currently under debate, undoubtedly, history will point to 2008 as the official
beginning of a massive global retail recession. Record-breaking declines in sales,
inventories, and consumer confidence are causing record revenue losses, and stock price
declines. Experts are estimating the recessionary conditions will last from 18 months to
11 years. 87% of American consumers believe that the U.S. is in a recession or
depression. As a result, 64% of those surveyed are planning on spending less in the
nation's retail stores to prepare for the hard economic times that 46% of them think will
last three years.

retailindustry.about.com

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 U.S. Retail Industry Overview
Amount Unit Year Source
Bil.
Total Retail Sales in 2008 4,400 2008 PRE
US$
Bil.
Total Retail Sales in 2007 4,483 2007 Census
US$
Bil.
Total e-Commerce Retail Sales in 2008 145.6 2008 PRE
US$
Bil.
Total e-Commerce Retail Sales in 2007 124.6 2007 Census
US$
Bil.
Motor Vehicle & Parts Dealers 919.3 2007 Census
US$
Bil.
Furniture & Home Furnishings 118.7 2007 Census
US$
Bil.
Electronics & Appliance Stores 111.4 2007 Census
US$
Bldg. Materials & Garden Equip. & Supplies Bil.
337.2 2007 Census
Dealers US$
Bil.
Food & Beverage Stores 560.6 2007 Census
US$
Bil.
Health & Personal Care Stores 237.4 2007 Census
US$
Bil.
Gasoline Stations 445.2 2007 Census
US$
Bil.
Clothing & Accessories 224.7 2007 Census
US$
Bil.
Sporting Goods, Hobby, Book & Music Stores 87.3 2007 Census
US$
Bil.
General Merchandise Stores 576.4 2007 Census
US$
Bil.
Miscellaneous Store Retailers 118.8 2007 Census
US$
Bil.
Nonstore Retailers 303.4 2007 Census
US$
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 Bil.
Food Services & Drinking Places 442.3 2007 Census
US$
Annual Disposable Personal Income per Capita, Curren
33,667 2007 BEA
2007 t US$
Annual Disposable Personal Income per Capita, Curren 2008
35,152 2
BEA
2008 t US$
Bil.
Total Exports of Goods 1,162.7 2007 ITA
US$
Bil.
Total Imports of Goods 1,953.7 2007 ITA
US$
Number of U.S. Shopping Centers 90,786 2006 ICSC

www.plunkettresearch.com/

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 major consumer purchases such as jewelry. Many
retailers have been driven into bankruptcy recently, including Sharper Image, Linens ‘n
Things, Bombay Co., and mail order firm Lillian Vernon, and more will follow.

Direct selling through online retailers, catalog companies and home-shopping television
channels continues to be popular. However, the 2008 slowdown in consumer spending
has put the brakes on online retail sales growth. Analysts at eMarketer project 2008
online sales to be $136.8 billion, up only 7.2% over the previous year (not including
travel sales). This is a letdown from the 19.8% growth rate of 2007. They further predict
a very low 4.1% growth rate in 2009, to $142.4 billion.

Growth in online shopping has been driven by two factors. First, the number of fast
Internet connections in U.S. homes and businesses leapt to about 100 million by early
2008. These connections make buying online faster and more interactive. Next, there’s
the savvy marketing of online giants like Amazon.com (with more than $14.8 billion in
2007 revenues, up dramatically from $10.7 billion in the previous year), as well as the e-
commerce efforts of traditional retailers such as Home Depot and Wal-Mart. These fast
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Internet connections are extremely important, even at the office, since a large number of
U.S. workers take time out to shop online from their desktops.

The two most closely-watched retail days of the year are the Friday after Thanksgiving
(referred to as “Black Friday”) and the Monday after Thanksgiving (known as “Cyber
Monday”). This particular Monday is now important since online retail sites show very
strong holiday sales on this day, much of it by people shopping from their desks at work.
Cyber Monday 2008 enjoyed 84.6 million consumers shopping online from home or the
office, according to a Shop.org survey, up from 72.0 million in 2006 and 60.7 million in
2005. Black Friday 2008 was relatively strong compared to 2007, but only because
retailers pulled out all the stops, spending vast sums on advertising to lure shoppers into
buying at huge price reductions. The strategy worked, but it likely had the effect of
leaving consumers with fewer dollars to spend on shopping during December.

All current trends point to a tough time for retailing. Profits at retailers for 2008-2009 are
going to be low. Sales in October 2008 dropped a record 2.8% over the previous month.
Sales of cars and luxury items are dismal. Many firms will post losses, and an unusually
high number will take bankruptcy. Among the rare bright spots are Wal-Mart and Costco,
where consumers know they can find everyday low prices on high quality merchandise.

www.plunkettresearch.com

CONCLUSION

Retails sales in 2007-2008 were driven partly by higher gasoline costs as well as by deep
price discounting during the holiday seasons by mass merchandisers. Meanwhile,
automobile sales saw a disastrous drop off in 2008, with total sales of cars and light

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trucks for the year at about 13.2 million, down from about 16.5 million in 2007 and 17.5
million at the peak in 2005. Car sales in 2009 could decline further.

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RECOMMENDATIONS

1. Retailing needs to be accorded a higher status within government departments in

recognition of its significance. Government should seek to grant retail similar
status to other sectors of the economy.
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 2. There is conflicting evidence about accessibility to retail outlets and research
should be brought forward by ESRC/DLTR to investigate fully the dimensions of
accessibility;

3. Competitiveness in British retailing will not be promoted by restrictions on

merger and development. A looser regime on amalgamation may provide a more
appropriate competitive sector, provided it is balanced with consumer interest
issues;

4. Issues of accessibility should be considered before any major de-regulation of

planning is contemplated. A full study of the negative externalities of de-
regulation is a vital pre-requisite to such a policy;

5. Government should investigate how best to enhance the skill set of smaller
retailers in terms of supply chains and other practices;

6. Government should examine and argue for the opening of markets to British
companies, attempting to reduce barriers to entry and takeover;

7. The retail sector should together, in an equal partnership with education at all
levels, seek to provide a true seamless retail skills ladder and be prepared to fund
staff and programmes;

8. A full review of the costs of compliance with legislation by large and small
retailers should be undertaken;

9. Retail organizations would benefit from being more inclusive and from closer
collaboration or even amalgamation;

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 10. Local authorities and other support agencies need to investigate how best to help
smaller retailers at both the local level and nationally;

11. ONS should undertake an urgent review of the quality and quantity of retail data
produced officially, whilst the retail sector should identify issue based data needs
which would enhance the understanding of the sector.

REFERRENCE

http://aepc.fibre2fashion.com/vol1issue50/special-focus.asp pg 1

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www.atkearney.com/main.taf?p=5,3,1,141 pg 2 - 5

www.bharatbook.com/detail.asp?id=84408 pg 6

www.bharatbook.com/detail.asp?id=84408 pg 7 - 9

retailindustry.about.com/ pg 10 - 11

retailindustry.about.com/od/statisticsresearch/p/retailindustry.htm pg 11 - 12

www.plunkettresearch.com/Industries/Retailing/RetailingStatistics/tabid/268 pg 13 -14

www.plunkettresearch.com/Industries/Retailing/RetailingTrends/tabid/269 pg 14 - 15

www.atkearney.com pg 16

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