Future of Retailing in the USA

• Recession and unemployment: The retail industry in the US witnessed one of the most difficult times in 2008 post the Great Depression of 1930. The financial crisis that started as a result of sub- prime debacle negatively impacted the consumer sentiment in the US. Declining disposable income coupled with an increasing unemployment rate led the retail industry to a negative growth zone in 2008. In spite of the government initiatives to lower the interest rates and infuse liquidity in the financial sector through government funding, the economy did not respond positively. Rising inflation and unemployment along with declining credit lines have dampened the consumer spirit, which has been a major factor for the lacklustre performance of the retail industry in 2008.
• Decline in consumer spending: In a back drop of a recessionary economy, consumers are left with lower disposable incomes and are deferring their discretionary spending. In addition to this, increasing job losses and debt burden is adding to the financial problems of the US consumer. With liquidity drying up, the retail companies are have been forced to abandon their expansion plans and are also finding it difficult to meet their working capital requirements.

• Discount stores gain momentum in recession: In 2008, the discount stores have managed well in a price-sensitive economy, while medium level retailers continue to struggle. The customers with less money for discretionary spending are flocking discounters that offer a wide range of products, including furniture, electronics, clothing and food, for prices considerably lower than up-market competition.
• Home improvement & gardening supplies retailers and food & drinks specialist dominance: The US retail market is dominated by specialist retailers - a group which is itself dominated by Home improvement & gardening supplies retailers and food & drinks specialists. Despite of recession, food & groceries items have performed well because of its essentiality in daily life.
• Growth of online retailing: The US online retailing has witnessed strong growth during 2004-09 and has grown with a CAGR of 19.6%. Although global economic downturn has slowed down the growth of US online retailing to 3.6% in 2008, strong growth is expected once the economy comes out of the recessionary phase. Initially online retailing was confined to categories such as books and recorded music, with generic products that do not require a tangible experience prior to purchase; but improvements in technology has allowed it to extend into broader categories with more complex purchasing patterns.

• Dominance of food & grocery items: Food & drinks retailing dominates the retail sales in any country due to their vital importance in everyday life. Despite of recession, the food & drinks products have been in demand and performed well as compared to other categories. Packaged food was the largest food & drink category with the sales of US$322.1bn in 2008.
• Lackluster performance by home & garden products and furniture & floor coverings: These two segments are the two poorest-performing category groups in the US retail market. The slowdown in the housing market has had a direct negative impact on new house purchases and house renovation activities, and consequently decline in the demand for these two products categories

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