Despite rising demand, increasing competition will hamper specialty stores' revenue growth.
Los Angeles, CA (PRWEB) February 19, 2012
Operators in the Small Specialty Retail Stores industry sell very diverse products, from premium cigars to sketch pads. IBISWorld industry analyst Eben Jose says that “Due to its fragmented nature, the industry is driven not by product-specific trends but rather by broad changes in consumer sentiment and household disposable income.” Since the recession, these macroeconomic drivers have taken a negative turn, causing US consumers to cut back on purchasing industry products. As a result, IBISWorld estimates that revenue will decrease at an average annual rate of 3.6% over the five years to 2012 to total $24.7 billion. In line with the recession, the steepest declines occurred in 2008 and 2009, when revenue fell 9.7% and 7.5%, respectively. However, as the economy began its recovery and consumers began spending again, the revenue contraction decelerated, falling 2.5% in 2010 and increasing 0.8% in 2011. IBISWorld expects this upward momentum to carry into 2012.
In addition to poor spending conditions, increased external competition has further weakened industry demand. In the five years to 2012, mass merchandisers, warehouse clubs, discount department stores and online retailers have taken market share away from industry operators by providing convenient one-stop shopping and low prices for similar industry products. These factors have turned many consumers away from small specialty stores, leading to reduced profitability. This poor performance has also caused underperforming retailers to exit the industry; the number of enterprises has declined from 136,896 in 2007 to an estimated 116,613 in 2012. The Small Specialty Retail Stores industry generally exhibits low market share concentration. Jose estimates that none of the four largest players in the industry will account for a significant share of revenue in 2012. “The industry is highly fragmented,” he says, “and is characterized by a large number of small players that are privately owned and operated.” However, concentration has been on the rise in recent years due to heightened external competition from mass merchandisers and e-tailers, which offer customers convenience and low prices.
As the economy gains traction in its recovery, industry revenue is projected to increase from 2012 to 2013. A rise in disposable income will likely encourage consumers to increase spending on quality products sold by industry operators. However, such growth will be temporary, as the competition from external industries like department stores and e-commerce websites will likely continue to erode demand. In addition, permanent price declines will likely keep profitability low in the five years to 2017. For more information, visit IBISWorld’s Small Specialty Retail Stores report in the US industry page.
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IBISWorld industry Report Key Topics
Industry operators retail specialized lines of goods, such as art supplies, cigarettes and cigars, paper goods, collectors’ items, fireworks, religious merchandise and trophies. This industry also includes general merchandise auction houses, but it excludes mass merchandisers, department stores, warehouse clubs and superstores.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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