Buoyed by the recovery, consumers will resume spending on high-end items at stores
Los Angeles, CA (PRWEB) July 14, 2012
The Department Stores industry has fought tough conditions over the five years to 2012, with revenue expected to decline at an average annual rate of 3.1% to $193.7 billion. Weak consumer confidence and low disposable income deterred households from making discretionary purchases during the recession, causing demand and sales to fall substantially for traditional department stores. Furthermore, says IBISWorld industry analyst Eben Jose, “In recent years, online retailers have emerged as a threat to industry players, stealing customers by offering convenience and low prices.” These poor conditions have caused profit to plummet. However, these same conditions have allowed discount department stores to thrive because their low prices catered to customers shopping on a budget. Recent improvements in economic conditions are expected to relieve some of the overall industry's struggles; revenue is estimated to grow a slight 1.2% in 2012.
Over the past five years, the conversion of discount department stores into big-box retailers (i.e. warehouse clubs and supercenters) has caused much of the industry's decline. Discount giants, such as Walmart and Target, have begun retrofitting stores with fresh grocery sections in order to expand their markets and attract more customers. This expansion, however, takes them into the Warehouse Clubs and Supercenters industry (IBISWorld industry report 45291), effectively reducing their market share in the Department Stores industry. “In addition to this change,” says Jose, “many operators have been forced out of the industry or have consolidated and merged with larger players.” As a result, over the five years to 2012, the number of companies is expected to decrease at an annualized rate of 31.8% to an estimated 65 operators. The recession is largely to blame for this sharp drop: According the US Census Bureau, the number of firms dropped from 138 in 2008 to 57 in 2009. The Department Stores industry currently has a very high level of concentration, with the major players – Walmart Stores Inc., Sears Holding Corporation, Macy’s Inc., Target Corporation and JCPenney Company Inc. – accounting for almost all of the industry’s revenue.
Continued economic recovery is forecast to aid the industry's growth in the five years to 2017. Armed with deeper pockets, consumers will likely increase spending on high-end discretionary items, such as those sold by traditional department stores. Additionally, discount department stores are expected to thrive because customers will continue to shop well within their budgets out of caution. IBISWorld expects that despite heavy online competition, industry revenue will increase over the five-year period. For more information, visit IBISWorld’s Department Stores in the US industry report page.
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IBISWorld industry Report Key Topics
Department stores retail a broad range of general merchandise, such as apparel, jewelry, cosmetics, home furnishings, general household products, toys, appliances and sporting goods. Discount department stores, which are also included in the industry, retail similar lines of goods at low prices. Big-box retailers and supercenters that offer fresh groceries in their stores and warehouse clubs that operate under membership programs are not included in this industry.
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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