The Sector as a Whole
The Retail Trade sector comprises establishments engaged in retailing merchandise, generally without transformation, and rendering services incidental to the sale of merchandise.
The retailing process is the final step in the distribution of merchandise; retailers are, therefore, organized to sell merchandise in small quantities to the general public. This sector comprises two main types of retailers: store and nonstore retailers.
1. Store retailers operate fixed point-of-sale locations, located and designed to attract a high volume of walk-in customers. In general, retail stores have extensive displays of merchandise and use mass-media advertising to attract customers. They typically sell merchandise to the general public for personal or household consumption, but some also serve business and institutional clients. These include establishments, such as office supply stores, computer and software stores, building materials dealers, plumbing supply stores, and electrical supply stores. Catalog showrooms, gasoline services stations, automotive dealers, and mobile home dealers are treated as store retailers.
In addition to retailing merchandise, some types of store retailers are also engaged in the provision of after-sales services, such as repair and installation. For example, new automobile dealers, electronic and appliance stores, and musical instrument and supply stores often provide repair services. As a general rule, establishments engaged in retailing merchandise and providing after-sales services are classified in this sector.
The first eleven subsectors of retail trade are store retailers. The establishments are grouped into industries and industry groups typically based on one or more of the following criteria:
(a) The merchandise line or lines carried by the store; for example, specialty stores are distinguished from general-line stores.
(b) The usual trade designation of the establishments. This criterion applies in cases where a store type is well recognized by the industry and the public, but difficult to define strictly in terms of commodity lines carried; for example, pharmacies, hardware stores, and department stores.
(c) Capital requirements in terms of display equipment; for example, food stores have equipment requirements not found in other retail industries.
(d) Human resource requirements in terms of expertise; for example, the staff of an automobile dealer requires knowledge in financing, registering, and licensing issues that are not necessary in other retail industries.
2. Nonstore retailers, like store retailers, are organized to serve the general public, but their retailing methods differ. The establishments of this subsector reach customers and market merchandise with methods, such as the broadcasting of "infomercials," the broadcasting and publishing of direct-response advertising, the publishing of paper and electronic catalogs, door-to-door solicitation, in-home demonstration, selling from portable stalls (street vendors, except food), and distribution through vending machines. Establishments engaged in the direct sale (nonstore) of products, such as home heating oil dealers and home delivery newspaper routes are included here.
The buying of goods for resale is a characteristic of retail trade establishments that particularly distinguishes them from establishments in the agriculture, manufacturing, and construction industries. For example, farms that sell their products at or from the point of production are not classified in retail, but rather in agriculture. Similarly, establishments that both manufacture and sell their products to the general public are not classified in retail, but rather in manufacturing. However, establishments that engage in processing activities incidental to retailing are classified in retail. This includes establishments, such as optical goods stores that do in-store grinding of lenses, and meat and seafood markets.
Wholesalers also engage in the buying of goods for resale, but they are not usually organized to serve the general public. They typically operate from a warehouse or office and neither the design nor the location of these premises is intended to solicit a high volume of walk-in traffic. Wholesalers supply institutional, industrial, wholesale, and retail clients; their operations are, therefore, generally organized to purchase, sell, and deliver merchandise in larger quantities. However, dealers of durable nonconsumer goods, such as farm machinery and heavy duty trucks, are included in wholesale trade even if they often sell these products in single units.
In the retail trade sector (NAICS 44-45), several qualitative trends are shaping the industry landscape. One notable trend is the increasing integration of technology and digital transformation. Retailers are leveraging artificial intelligence and machine learning to enhance the customer experience, optimize inventory management, and personalize marketing efforts. The use of data analytics is becoming crucial for understanding consumer behavior and preferences, allowing businesses to tailor their offerings more precisely.
Another trend is the growing emphasis on sustainability and ethical practices. Consumers are increasingly concerned about the environmental and social impact of their purchases, pushing retailers to adopt more sustainable practices in their operations and supply chains. This includes reducing waste, using eco-friendly materials, and ensuring fair labor practices.
Moreover, omnichannel retailing continues to gain momentum as consumers seek seamless shopping experiences across online and offline platforms. Retailers are investing in improving their e-commerce capabilities while also enhancing in-store experiences to attract and retain customers.
Looking ahead, forecasts suggest that the retail sector will see a continued shift towards digital platforms, with online sales expected to grow significantly. Additionally, advancements in technology such as augmented reality and virtual reality are anticipated to play a larger role in transforming the shopping experience. Retailers that can effectively integrate these technologies and adapt to changing consumer expectations will likely thrive in this evolving landscape.
A review and comparison of financial performance of privately-help companies in specified SIC/NAICS industry segment, using industry standard benchmarks.
Answers come easily with iCFO. Review ROI, sales per employee, profit margins of the top 10%, top 25% and more, to identify areas of concern and opportunity. Examine what if scenarios and P&L impact of reducing costs or adding revenue.
It takes only five minutes to enter your data and produce a concise profile of your company’s fiscal state, including critical business ratios focusing on liquidity, profitability, asset efficiency, and growth.