Industry Overview: Retail

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Posted by The Editors on December 3, 2012
Overview

Retail is an industry we all have a part in-after all, it is the sale of products to individual consumers (as opposed to businesses). Aside from all the consumers, though, more than 15 million people in the United States are employed by retailers-that's 12 percent of the workforce. With U.S. annual retail revenues close to $4 trillion in 2006 and more than a million retail businesses in operation, there's no question that this is a huge industry-and one in which its success is directly connected to industries beyond its control.

Mega retailers Wal-Mart, Macy's, Home Depot, and J.C. Penney all lowered their estimates for fourth quarter sales in 2007 due to the struggling housing market, rising gas prices, and credit woes expected to have not only a negative impact on holiday sales, but the sales environment throughout 2008. Shoppers were thought to have proved their resilience by spending $10.3 billion on holiday purchases on Black Friday, an 8.3-percent increase over 2006. But, alas, The New York Times reported spending between Thanksgiving and Christmas increased only 3.6 percent over 2006, compared to 6.6-percent sales growth in 2006 and 8 percent in 2005 at least four years (according to Mastercard Advisors).

Retail goods are traditionally divided into durable goods, such as furniture and large appliances, which are expected to last at least 5 years, and nondurable goods, which include food, clothing, and other categories far too numerous to mention but which eventually form the bulk of the stuff you see on makeshift tables at garage sales.

The retail landscape has seen drastic changes in the last decade or two. In the old days, retail was dominated by small, local mom-and-pop stores (like the tiny neighborhood record store and the corner market), shopping malls, and traditional department stores (e.g., Mervyn's and Macy's) that acted as those malls' "anchors." There are still plenty of mom-and-pop stores, malls, and department stores around today, but they're dominated in the retail landscape by mass merchandisers (e.g., Wal-Mart and Target), discount clubs (e.g., Costco and Sam's Club), "category killers" (e.g., Home Depot, Barnes & Noble, and Staples), and specialty and online retailers (e.g., Coach, Amazon.com, and J. Crew).

If you don't think past sales clerk when thinking about the career opportunities offered by the retail industry, you'll miss a lot of the opportunities that are out there-including jobs for people with more of a head for business than for fashion, or electronics, or sporting goods, or whatever else the company you go to work for might do. While it's true that most of the industry's employees are salespeople and clerks, retail also offers opportunities for those interested in determining what goods will be sold, getting these goods to the right place at the right time, and managing the operations, finances, and administration of retail companies. Retail executive-training programs are crammed with energetic twenty-somethings, all hoping to perform those functions as sales and merchandise managers, buyers, and marketers at major retail organizations, such as Ann Taylor, Macy's, J.C. Penney, and the Gap.


Wal-Mart
The rich get richer. Wal-Mart continues to grow and grow. It's the biggest retailer around, by far, and leads the market in category after category. Because of its immense size, Wal-Mart has economies of scale that other retailers can't match. Also because of its size, Wal-Mart has bargaining power that other retailers can't match-meaning it can get the products that line its stores' shelves more cheaply than competitors can. These factors allow Wal-Mart to offer prices too low for competitors to match.

Wal-Mart has single-handedly altered the face of the retail industry. It's created a growing gap between higher-end retailers, which charge higher prices for fancier goods with the understanding that they'll reach only a limited market, and mass-market retailers, which have had to slash prices and in many cases completely change the way they do business in an effort to keep up with Wal-Mart.

Wal-Mart's business model is incredibly effective. The company reported revenue of nearly $350 billion in 2007, seven times the amount of revenue the second most profitable discount retail store, Target, reported the same year.

Lapping up Luxury
While a certain amount of mass-market retailers' success can be attributed to consumers' desire to keep spending down as other expenses rise, they continue to take cues from a portion of the industry that remained strong as they floundered a couple of years ago: luxury retailers. With Target offering goods on the cheap from celebrity designers such as Isaac Mizrahi, Wal-Mart selling flat screens and iPods, and Costco pushing a $259,999 diamond ring on their website, these retailers are clearly courting shoppers from higher tax brackets.

Retailers that sell luxury goods, meanwhile, may not have target markets as large as the Wal-Marts and Kmarts of the world, but they do have target markets that are less price-sensitive. Because they don't face the same downward price pressures as their mass-market peers, high-end retailers typically enjoy higher profit margins. Whether the Costcos and Targets will be able to carve out a chunk of this success for themselves remains to be seen.

Better Retailing Through Data Collection and Analysis
One big technology trend in retail is the increasing collection and use of customer information to better predict consumer demand patterns, market to consumers more effectively, take a "scientific approach" to product pricing, and optimize supply chain efficiencies. IT departments at retailers are dealing with an increasing variety of technologies designed to help their employers better collect information from customers and better understand what the collected information means in terms of actions those retailers should take to increase profits.

For example, consider product pricing software. This relatively new type of software analyzes retailers' information about their customers to determine how products should best be priced so that they will move off the shelves while making retailers the most possible money.

RFID Technology
Other trends affecting the retail industry come from an increased use of newer technologies that make marketing and customer service faster and more accurate: IT departments at retailers are dealing with an increasing variety of technologies designed to help their employers better collect information from customers and better understand what the information means in terms of profits; radio frequency identification (RFID) technology allows retailers to track inventory with a precision never before possible, and eventually, to do things such as transmit product information for consumers to view as they walk around a store and change the prices of products already on the shelves instantaneously.

Wal-Mart has already made a big investment in RFID technology and has forced vendors on its supply chain, including big consumer products manufacturers, to use the technology on shipments to the giant retailer. It's just a matter of time before everybody else in retail is using it, too. If you're an IT type, or a supply chain management or logistics professional, it might be a good idea to get up to speed on this technology to improve your career prospects.

Self-Service
Bigger retailers are also starting to include self-serve checkout lanes in their stores, which typically have shorter lines that appeal to consumers. Register clerks may think they like self-serve lanes, too, because they mean fewer customers to deal with, but they're probably going to change their minds when self-serve lanes start resulting in fewer full-serve lanes-and fewer jobs for register clerks. If you don't think past sales clerk when thinking about the career opportunities offered by the retail industry, you'll miss many of the opportunities that are out there-including jobs for people with more of a head for business than for fashion, or electronics, or sporting goods, or whatever else the company you go to work for might do.

Retailing encompasses a lot of consumer goods; we focus here on three areas: general merchandise, apparel, and furniture. These categories include computers, clothes, sports equipment, beauty products, jewelry, and home furnishings, but leave out food, autos, and building materials.

Department Stores
Years ago, names like Sears, J.C. Penney, Macy's, and Montgomery Ward dominated malls and downtown shopping districts all over America. Over the last decade or so, however, department stores have suffered. The 2005 merger of Federated Department Stores and the May Company means fewer stores and opportunities in markets where the two competed. While the resulting company may be stronger in the long run, the newly restructured May cut up to 6,200 jobs as a result, including 1,700 at May's corporate office in St. Louis.

Discount Stores
These include giants such as Wal-Mart, Target, and Kmart, as well as membership warehouses such as Costco. These discount stores, along with the category killers, have changed both the retail industry and the American landscape. Where once mom-and-pop and department stores dominated retail, the discount retailers and category killers are now at the top of the heap. And where shopping malls, anchored by at least one major department store, used to be the dominant retail presence lining the nation's roads, now it's the behemoth Wal-Marts and Home Depots.

Category Killers
Category killers are the giant retailers that dominate one area of merchandise (e.g., Office Depot, Virgin Records, and The Sports Authority). They are able to buy bathroom tiles, file cabinets, electronic goods, or pet food in such huge volumes that they can then sell them at prices even fairly large competitors can't match. The outlook for this category is better than for many of the more general discounters, but the same employment caveats apply. For most job seekers, these companies offer earn-and-learn experiences with vendors and distributors before you move onward and upward.

Specialty Stores
These include Crate & Barrel, the Body Shop, and Victoria's Secret. These stores concentrate on one type of merchandise and offer it in some manner that makes it special. Some are very high-end (think Louis Vuitton); others cater to the price-conscious masses (think Old Navy). Many are so successful that department stores have started to emulate their buying, marketing, and merchandising strategies. Industry experts predict growth in this segment, particularly for home furnishings and home improvement, and it seems to attract many of the best and brightest in retail. Promotion and responsibility come quickly to those willing to work hard, and in many of these stores the hand of bureaucracy is not heavy.

E-tailers
While most retailers have online storefronts, strictly online purveyors with no brick-and-mortar counterparts are hoping to snare a percentage of the retail profit. And major players, such as Amazon.com, have generated enough business to cause top brick-and-mortar competitors to follow up with their own Internet sites. During an otherwise disappointing holiday season for the retail industry, Amazon.com, Inc. reported the 2007 holiday season finished as its best ever. On the busiest day of the season, Dec. 10, customers received more than 5.4 million items from Amazon.com, which is 62.5 items per second.

Traditional retailers such as Wal-Mart and Starbucks, hugely successful in their own right, have also set up online stores so as not to miss out on the revenue opportunities that the Internet offers.


The U.S. Bureau of Labor Statistics projects that the number of retail jobs will grow at about the same rate as the average for all jobs through 2012. But the picture's brighter than that for people interested in retail, especially in retail sales, where turnover is almost always high, meaning there'll always be retail sales opportunities (though there will be less demand for salespeople when the economy, and thus retail sales, are soft).

In the clothing, accessories, and general merchandise segment, the number of jobs is expected to grow by 8 percent between 2002 and 2012, compared to 16 percent growth for all jobs in the U.S. economy. The number of jobs in management, business, and financial occupations is supposed to grow by more than 13 percent, and the number of jobs for marketing and sales managers, food prep and serving workers, and counter and rental clerks by nearly 22 percent. Sales jobs are expected to grow by around 9 percent, but again, high turnover means retail sales jobs will always be open somewhere.

Jobs at automobile dealers are expected to grow at just below the rate of jobs overall, and jobs in the retail grocery segment are expected to grow by just 5 percent between 2002 and 2012.

First on the Block
In retailing and wholesaling, you get to see what's coming before the consumer does. There's something exciting about being the first to know what's new. For anyone interested in music or software, this is an even stronger draw than it is for clothes mavens. Depending on where you work, this can also mean access to designer showrooms, fashion shows, and gala parties where designers are the guests of honor.

Such a Deal
Employee discounts with retailers range anywhere from 10 percent to a whopping 40 percent. This intoxicating fact of life is often the basis for employee loyalty, particularly in high-end apparel and home furnishings. One insider who works in jewelry hastens to mention that she uses these discounts mostly for Christmas and birthdays, not for herself. "I actually don't wear much [jewelry] at all," she says, "but I have friends who think this job is wonderful!"

Fly by Night
In the middle employment ranks of this industry, travel to the major markets is a given: New York, Los Angeles, and Hong Kong, to name a few. Even if you're not in haute couture, many buyers also go to Paris and Milan at least once a year, if not more often, just to keep abreast of international trends in clothes and accessories. Where you go will depend on what you buy or sell, but rest assured that you'll be traveling somewhere.

Up the Down Escalator
Something about this business attracts zany personalities: actors, writers, students, musicians, and other interesting types who need steady part-time work. If you like order, predictability, and decorum, you probably won't be happy in retailing. A rather twisted sense of humor thrives in this environment.

Oh, You Wanted Money, Too?
In retail sales, especially in apparel, expect to work 10- and 12-hour days and expect inadequate compensation for it-as in $9 to $12 an hour. To add insult to injury, you'll most likely work weekends and all the holidays everyone else in the world gets off. Wholesale jobs tend to pay a bit more at the entry level because of the commission structure. Decent salaries don't begin on the retail side until you become a buyer, and even then, they aren't great.

Quickly, Now! Quickly!
It just looks glamorous. If you're a retailer, you spend a good portion of your day haranguing vendors about missed shipping dates. Expect to do a lot of schlepping as well, through airports, through the stores, even through those so-called gala parties. Buyers and managers also have to be able to process information quickly and then act. If you can't handle a fair amount of pressure, if you don't like people screaming at you ("For no apparent reason, they just seem to scream a lot," says one insider), then this is not a career path to pursue.

Chapter 11: In Which You Lose Your Job
There's not much job security in this business right now. Due to overexpansion and poor performance in recent years in most segments of the industry, mergers and bankruptcies are on the rise. The famous ones include Woolworth and Montgomery Ward; Kmart, one of the original discount stores, filed for bankruptcy protection in 2002 before being acquired by Sears in 2005; and innumerable smaller stores have closed their doors in the past decade.

Inventory Shrinkage
This is the polite way to refer to shoplifting, vendor fraud, and employee theft. This is a multibillion-dollar problem-and guess who accounts for most of it. That's right-employees, not lawless shoppers. If inventory is missing, you are indeed the first and most logical suspect. Many of these places have less bureaucracy and fewer rules than corporate environments, but trust is earned and even then, not automatic. Too often, one insider notes, "You're guilty till you're proven innocent, and usually it's impossible to prove you're innocent."

Many jobs in retail and wholesale don't require a college degree, particularly if you did well in one of the many high school work-study programs available around the country. Those with college degrees are eligible for the executive-track management-training programs that most large chain and department stores offer. (Increasingly, the successful specialty stores offer management-training programs as well.) More people find entry-level jobs in retailing than in any other industry, according to the U.S. Department of Labor.

Assistant Buyer
If buying is your goal, this is where you begin. Assistant buyers typically help in merchandise selection, deal with vendors, write orders, and learn how to operate within a budget. You'll need a good head for numbers and the ability to juggle too little time and too much information in stressful situations. Be advised that some retailers are eliminating this position, relying instead on automated processes for some of the more mundane order-taking, delivery, and follow-up aspects of this job. Most assistant buyers have a college degree, and many major in retail management or business. Salary range: $30,000 to $50,000.

Buyer
This is the person who is involved with and responsible for planning sales, monitoring inventory, selecting the merchandise, and writing and pricing orders to vendors. Being a buyer is the ultimate exercise in living on a budget. You'll be told what you have to spend for a season, and your job will be to get the most and best for your buck. Buyers get their positions after spending two to fives years as an assistant or by completing a management-training program sponsored by the store. A lot of people want this job, despite its increased emphasis on sales and inventory management and the relatively low pay. Be prepared for some fairly stiff competition. Salary range: $45,000 to $85,000.

Sales Associate
Retail sales can be lucrative at certain high-end retailers or in electronics because of the generous commissions, but to qualify, you'll need to be well acquainted with the products you're selling. This is less true for most noncommissioned sales positions. If you like pleasing people and don't mind standing most of the day, this job offers flexibility and an entrance into retailing. Students and others in need of part-time or seasonal work make up a full third of these sales teams. A college degree is rarely required for these positions, and those who work hard and do well can usually advance within a few years to sales or department manager or, in larger organizations, a management-training program. Salary range: $12,500 to $50,000, not including commission.

Retail Management Trainee
If you're accepted into a store's management training program, this is your title for the four to nine months you're learning merchandising, finance, marketing, operations, and personnel management. Typically, sales associates and others who excel in various departments get first crack at these programs, though company recruiters hire college grads and other experienced talent as well for the openings that remain. Salary range: $18,000 to $46,000.

Department or Sales Manager
For management training program graduates and very successful sales associates, this is typically the first rung in the retail ladder. This is one of the lowest levels of management, but a useful one for those who want a long-term career in the industry. Department managers supervise the sales staff, control the sales floor inventory, and often work closely with buyers. A college degree is rarely required for this position; candidates need only to prove they can sell, work well with people, and keep careful track of inventory. As technology becomes increasingly a part of sales and customer analysis, a facility with data and systems is also a big plus. Salary range: $30,000 to $60,000.

Merchandise Manager
Often known as a divisional merchandise manager (DMM), this job oversees several merchandise departments and their respective buyers. Buyers typically move into this position after six to ten years. They help to ensure consistent quality, the proper amount of merchandise, and value and price points to customers. They also manage vendor relations, market visits, and the ongoing education and development of their buying teams. This is a senior slot, and if you do well, your next step is the upper ranks of executive retail management. Salary range: $60,000 to $160,000.

Market Analyst
Both retail and wholesale have a growing need for accurate and ongoing analysis of what customers are buying, when and how they're buying, and what all the data means for buyers, advertisers, and strategic planning. Marketing majors who understand how to model demographic information and analyze the volumes of transactional data generated by customer purchases will find numerous opportunities in this field, both inside large companies and in a proliferating number of independent research groups. Salary range: $35,000 to $55,000.

Director of Marketing
Many retailers are now focusing on loyalty programs and efforts to more accurately predict their customers' needs and behavior. Distinctly separate from sales, marketing directors and their staff manage external research and coordinate all the internal sources of information to retain their best customers and attract new ones. This is an increasingly visible slot, and e-commerce is now an integral part of the job. Salary range: $85,000 to $135,000.

Information Technology
Big retail outfits employ complex technology systems and specialized software-everything from logistics and supply chain software to Web servers and e-commerce software to POS (point of sale) systems. New technologies are entering the picture regularly, too; for example, RFID technology is currently changing the way big retailers manage their supply chains and track inventory. Someone's got to develop, maintain, and fine-tune all those technologies, and that someone works in IT. Even very small operations now rely heavily on Quick Response and EDI. For those interested in networks and systems, this is still a relatively open arena. Job titles in this area include Web designer, e-commerce manager, system applications programmer, system developer, project manager, and point of sales administrator. Salary range: $40,000 to $110,000.

Many retailers offer internships that often develop into buying positions or a place in their management-training programs. Your high school or college may also offer similar arrangements with selected retailers. Here's what most employers look for when they hire at all levels:

  • With the ever-increasing focus on keeping customers happy, you need to enjoy serving people and be perpetually alert as to how to serve them better. There is also a lot of teamwork in these jobs, often under fairly stressful conditions.
  • These marketplaces are constantly changing and so are the customers. The more attuned you are to the shifts, the more successful your retailing career will be.
  • You need to be self-motivated and aggressive-whether you're making a sale or improving the new orders and transactions systems. And when you take on new responsibilities or make decisions under deadline pressure and they don't work out, you have to know how to handle the repercussions.
  • You need to be self-motivated and aggressive-whether you're making a sale or improving the new orders and transactions systems. And when you take on new responsibilities or make decisions under deadline pressure and they don't work out, you have to know how to handle the repercussions.
  • Perhaps even more sought after than the ability to sell just about anything to just about anyone are the problem-solving and data-analysis skills that marketing needs. You're also eminently hirable these days if you understand technology and enjoy the architecture of systems and networks.
  • Love the store, love the merchandise it sells, love the prestige and cachet of your particular niche in the industry. The pay is low, the hours are long, and advancement is never easy. Insiders are unanimous: If you'd buy what this company is selling, you're a much stronger potential hire.