Despite rising demand, increasing competition will hamper specialty stores' revenue growth
Los Angeles, CA (PRWEB) November 27, 2012
Operators in the Small Specialty Retail Stores industry sell very diverse products, from premium cigars to sketch pads. 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,” says IBISWorld industry analyst Eben Jose. 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, but as the economy began its recovery and consumers began spending again, the revenue contraction decelerated. IBISWorld expects this upward momentum to carry into 2012.
In addition to poor spending conditions, increased external competition has further weakened Small Specialty Retail Stores 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,” says Jose. “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 external competitors are able to maximize cost savings by purchasing large volumes of inventory at once, allowing them to offer heavily discounted products to consumers. As a result, specialty stores have experienced increased pressures to lower their product markups and absorb the associated losses in the attempt to match the lower prices of mass merchandisers. Still, small specialty retail stores can differentiate themselves through quality and range of products offered because external competitors typically only carry lower-quality goods, and often in a very limited range. So, industry operators can appeal to consumers by featuring a wide selection of high-quality products.
As the economy gains traction in its recovery, a rise in disposable income will likely encourage consumers to increase spending on quality products sold by industry operators. Such growth will be temporary, though, as the competition from external industries like department stores and e-commerce websites continues 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 in the US industry report 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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Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.