The Race for Retail Market Share in the Southeast; Winning the Business of the Retail Consumer Is Not a Game for the Fainthearted, Especially during a Period of Economic Hesitation. despite Retailers' Friendly Claims of Customer Service and Good Value at Low Prices, Retail Competition Is as Fierce and Unforgiving as a Stock Car Race at Daytona International Speedway. (Cover Story)

EconSouth, Summer 2002 | Go to article overview

The Race for Retail Market Share in the Southeast; Winning the Business of the Retail Consumer Is Not a Game for the Fainthearted, Especially during a Period of Economic Hesitation. despite Retailers' Friendly Claims of Customer Service and Good Value at Low Prices, Retail Competition Is as Fierce and Unforgiving as a Stock Car Race at Daytona International Speedway. (Cover Story)


In today's retail race Wal-Mart decidedly leads the pack by several laps in volume of sales, posting revenues of $191.3 billion and earnings of just under $6.3 billion in 2000. The lesser giants like Kroger, Home Depot, Sears, Target and JCPenney, each with sales in the $15 billion to $50 billion range, jostle for position to stay among the front-runner. Occasionally a contender like Kmart, which ranked as the fifth-largest retailer last year, is unexpectedly thrown from the race altogether in some markets.

Specialty chain stores like Best Buy, Gap, Circuit City, Office Depot and Toys"R"Us--not exactly small fry in the world of sales, each with receipts in the $10 billion to $15 billion range--must be especially nimble to keep pace with the pack, scooting amid the behemoths that dominate the retail contest. Lagging competitors are consumed, front-runners are constantly angling for the edge and leaders watch their backs for unexpected challenges from behind.

According to trade industry data and Atlanta Fed research, wholesale and retail trade provide roughly 23 percent of nonfarm jobs in the Sixth Federal Reserve District, which encompasses much of the Southeast. Retail trade alone accounts for about 17 percent of the Sixth District's total employment. Nationally, retail trade is the second-largest industry, accounting for 19.5 percent of all establishments and 18 percent of all employees. Reflecting the same ailing flatness that afflicted the U.S. economy as a whole during the first three months of 2002, wholesale and retail trade employment in Tennessee, Florida and Louisiana saw slight drops of under 1 percent from the previous year. Mississippi, Alabama and Georgia posted somewhat larger dips in the number of retail trade jobs, averaging 1.2 percent, 1.6 percent and 2.8 percent respectively. This contraction in retail trade jobs is consistent with losses of total jobs in each state, suggesting that the retail economy is not experiencing a disproportionate downturn.

But the distribution of sales across the various types of retailers has been changing, according to John Robertson, assistant vice president of the regional research group of the Federal Reserve Bank of Atlanta, who observes that discount retailers fared much better than department stores and upscale retailers in 2001.

"The fact that discount retailers still performed reasonably well in 2001 suggests that a solid level of consumer demand remains, but shoppers are increasingly price conscious," he says. In a time of halting recovery, the lure of low prices continues to be a big factor in consumer preferences, and, as competitive pressures intensify, it's changing the way retailers do business.

The Wal-Mart effect

Wal-Mart's supremacy in merchandising for the last decade has, according to many analysts, reinvented the retail game, and the composition of the industry is changing in keeping with the new rules. So-called big box stores like Wal-Mart have apparently won the hearts--or at least the pocketbooks--of American consumers. Online businesses, while not yet very profitable, have carved out a chunk of traditional retail sales as well. As a result, department stores, specialty stores and locally owned businesses have had to move fast to stay in the race (see the "Surviving in the Retail Arena" on page 5). While they cannot afford to ignore the "Wal-Mart effect" and what it says about the needs and preferences of consumers, these more traditional retailers are adopting strategies to maintain unique retail identities apart from and coexisting with the likes of Wal-Mart and the online purveyors in hopes of winning new customers and keeping old ones coming back.

Analysts across the board agree that the American consumer is, above all, extremely busy. Gone are the days of regular recreational excursions to the mall or all-day family shopping trips. "Customers want to get in and get out fast," says Susan Reda, a senior editor with the National Retail Foundation. …

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The Race for Retail Market Share in the Southeast; Winning the Business of the Retail Consumer Is Not a Game for the Fainthearted, Especially during a Period of Economic Hesitation. despite Retailers' Friendly Claims of Customer Service and Good Value at Low Prices, Retail Competition Is as Fierce and Unforgiving as a Stock Car Race at Daytona International Speedway. (Cover Story)
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