Los Angeles, CA (PRWEB) September 02, 2013
The Department Stores industry has fought tough conditions over the five years to 2013, with revenue expected to decline at an annualized 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. In recent years, online retailers have emerged as a threat to industry players, stealing customers by offering convenience and low prices, says IBISWorld industry analyst Natalie Everett. However, these poor conditions did not translate into lower profit. 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. 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 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 from 71 in 2008 to 68 in 2009, fluctuating slightly over the last few years but ending up back at 68 in 2013.
Most operators in the Department Stores industry are national chains that have numerous locations in the United States. In addition, stores tend to be on the larger side, with almost 89.0% of all stores employing more than 50 employees. According to IBISWorld estimates, the top industry operators are Walmart Stores Inc., Target Corporation, Sears Holdings Corporation, Macy’s Inc. and JCPenney Company Inc. In the five years to 2013, the number of enterprises is expected to fall at an annualized rate of 13.2%, which indicates that concentration has increased as a result of merger and acquisition activity and industry departures due to poor sales. Consolidation is expected to continue as competition mounts between operators for consumer dollars. In response, IBISWorld anticipates that operators will continue to review and diversify their product range and quality in a bid to meet consumer demand, continues Everett. Additionally, industry operators will also be affected by increasing competition from warehouse clubs and superstores and a rising number of conversions of department stores to superstores. Finally, developments in mobile phone technology will draw more consumers away from brick-and-mortar stores towards online retail platforms.
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 as customers continue to shop well within their budgets out of caution. 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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