Buoyed by the recovery, consumers will resume spending on high-end items at stores.
Los Angeles, CA (PRWEB) May 26, 2013
The Department Stores industry has fought tough conditions over the five years to 2013, with revenue expected to decline at an average annual rate of 1.2% to $198.0 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,” IBISWorld industry analyst Natalie Everett says. Furthermore, in recent years, online retailers have emerged as a threat to industry players, stealing customers by offering convenience and low prices. However, these poor conditions did not translate into lower profit. Industry profit rose to 4.8% of revenue in 2013, from a low of 2.9% in 2008. This is due to a higher sales mix of high margin items and expense management. Recent improvements in economic conditions are expected to relieve some of the overall industry's struggles; revenue is estimated to grow 2.2% in 2013.
The majority of stores in the Department Stores industry are part of a national chain and have numerous locations in the United States. Industry concentration measures the extent to which the top four players dominate an industry. “Currently, the top four industry players are Walmart Stores Inc., Sears Holdings Corporation, Macy’s Inc. and Target Corporation,” Everett says. According to IBISWorld estimates, the top four largest industry operators are expected to account for more than 70.0% of industry revenue in 2013. In the five years to 2013, the number of enterprises is expected to fall, which indicates that concentration has increased as a result of merger and acquisition activity and industry departures due to poor sales.
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 Department Stores industry's decline. Discount giants, such as Walmart and Target, have begun retrofitting stores with fresh grocery sections 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, many operators have been forced out of the industry or have consolidated and merged with larger players. The recession is largely to blame for the sharp drop. According to the US Census Bureau, the number of firms plummeted in 2009, rising back up in 2013.
Continued economic recovery is forecast to aid the industry's growth in the five years to 2018. 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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