Despite rising demand, increasing competition will hamper specialty stores' revenue growth
New York, NY (PRWEB) April 02, 2014
Operators in the Small Specialty Retail Stores industry sell a diverse range of products, from premium cigars to sketch pads. Due to its fragmented nature, the industry is not driven by product-specific trends but by broad changes in consumer sentiment and household disposable income. The recession negatively affected these drivers, causing consumers to cut back on industry goods. However, revenue was bolstered during the recession by increased spending in 2009 on the industry's largest product segment, tobacco products. Overall, IBISWorld estimates that Small Specialty Retail Stores industry revenue will rise at an average annual rate of 1.5% in the five years to 2014 to total $40.8 billion. The greatest growth during this period was achieved in 2010, when revenue spiked 4.0%; however, revenue fell 1.7% in 2011 due to higher e-commerce sales and limited disposable income growth. As consumers began spending again, revenue remained positive and has risen since 2012. This upward momentum is expected to carry into 2014, with an expected revenue rise of 0.5% that year.
According to IBISWorld Industry Analyst Sally Lerman, “In addition to unfavorable spending conditions, increased external competition has further weakened industry demand.” In the five years to 2014, warehouse clubs, discount department stores and online retailers have taken away market share from industry operators by providing one-stop shopping and lower prices for similar products. These factors have turned many consumers away from small specialty stores. Bleak performance due to heightened competition has also caused underperforming retailers to exit the industry. The number of enterprises has declined from 127,902 in 2009 to an estimated 126,293 in 2014, which represents an annualized decline of 0.3%. Despite this factor, profitability has slightly increased over the period, from 2.2% of revenue in 2009 to 3.0% in 2014, as a slow economic recovery has taken hold.
“A rise in disposable income will likely encourage consumers to increase spending on quality products sold by small specialty retail store operators,” says Lerman. However, growth will be temporary, as competition from external industries, such as department stores and e-commerce websites, continues to erode demand. In addition, permanent price declines will keep profitability low in the five years to 2019.
The Small Specialty Retail Stores industry exhibits low market share concentration. The industry is highly fragmented, characterized by a large number of small players that are privately owned and operated. In recent years, industry concentration has been on the rise primarily due to increased external competition. External competitors, such as mass merchandisers, warehouse clubs, department stores and e-tailers, have increasingly provided convenient shopping experiences and low prices to consumers that traditionally shopped at specialty stores. As a result, many industry operators have lost businesses to these competitors. This trend has caused under-performing operators to consolidate or exit the industry completely.
For more information, visit IBISWorld’s Small Specialty Retail Stores in the US industry report page.
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IBISWorld industry Report Key Topics
Small Specialty Retail Stores 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 (except electronic auctions), but it excludes mass merchandisers, department stores, grocery 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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