Retail Franchise Industry Report
The space was humming with activity. Music was blasting from speakers strategically set up around the area. People were standing around mingling with a drink in their hands talking about various subjects – especially the latest fashions, which happened to be on display around them.
But this event wasn't being held at a bar or a lounge, it was at a retail store. The competitive nature of the retail industry has many franchises and non-franchises alike pulling out the stops to hopefully gain an edge in getting consumers in the door and buying from them.
Although clothing comes to mind quickly when people think of retail, retail franchises are in virtually every industry and make an impact on people daily.
Many potential business owners are finding franchises as a more attractive path in starting a retail business than going at it independently. With the franchisor providing an established brand, better economies of scale, marketing help and ongoing support and advice, a franchisee has an increased chance at success – so long as the franchise system is utilized properly. This report gives background on the retail franchise industry as well as some the main trends impacting it. Also contained in this report is a look at some example retail franchises.
The United States Bureau of Labor Statistics (BLS) classifies retail as a “supersector” within the broader trade, transportation, and utilities category. According to the BLS:
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 non-store retailers.
- 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. 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.
- Non-store 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.
Vast only begins to describe the very broad umbrella of the retail category, under which several businesses are categorized. The unifying aspect of all these franchises is that they all are involved in the sale of a product. Some also provide services that correspond and/or complement the product(s) being sold. In fact, the North American Industry Classification System (NAICS) specifies 75 retail store types. Below is a chart demonstrating the diversity of the retail industry by way of the NAICS:
New Car Dealers
Men's Clothing Stores
Source: NAICS Association
The outlook of the retail franchise industry coincides with the strength of the economy. The more disposable income consumers have the better. Another factor retail franchises will have to keep an eye on for the future is the changing demographic landscape. Within 30 years, Census data indicates that today’s minorities (any race other than non-Hispanic, single-race whites) will become the majority in the United States. Current minority children are expected to reach the majority even sooner (by 2023). As the demographics of the U.S. shift, it is likely retailers will have to adapt their merchandising and promotional efforts to maintain success.