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Retailing is important to understand for two main reasons. First, most channel structures end with a retailer. While products may pass through a wholesaler or involve a broker or agent, they also include a retailer. Second, retail offers an immense number of job opportunities. Today in the U.S., there are 3,793,621 retail establishments that support 42 million jobs.

Retail also contributes $2.6 trillion to the U.S. gross domestic product. One of the reasons the retail industry is so large and powerful is its diversity. For example, stores vary in size, in the kinds of services that are provided, in the assortment of merchandise they carry, and in their ownership and management structures. The U.S. Census Bureau indicates that 94.5 percent of retail companies have only one location or store.

More than one million retail businesses in the U.S. have fewer than one hundred employees. Most retail outlets are small and have weekly sales of just a few hundred dollars. A few are extremely large, having sales of $500,000 or more on a single day. In fact, on special sale days, some stores exceed $1 million in sales. You can view the number of jobs and retail presence in your state at the National Retail Federation (NRF).

The Retail Industry

The retail industry covers an enormous range of consumer needs. It is designed to create contact efficiency—allowing shoppers to buy what they want efficiently with a smaller number of transactions. This design is not governed by a master retail plan but is driven by market forces. When a retailer recognizes an opportunity to expand its offerings to increase customer purchases, it will do so.

For instance, Barnes & Noble adding Starbucks coffee shops to its locations encourages customers to visit more frequently and stay longer, increasing the likelihood of additional purchases. Similarly, Costco identified that busy holiday shoppers prefer buying Christmas trees as part of larger, convenient purchases rather than buying from standalone Christmas tree lots. Such opportunities prompt retailers to broaden their offerings, thereby increasing contact efficiency for consumers.

Despite these strategic expansions, not every retailer becomes akin to a Walmart Supercenter with every possible product. Successful retailers tend to shape their offerings to a specific target buyer. They consider the particular shopping experience a buyer seeks in a given moment or context because different experiences appeal to different customer needs. For example, the shopping experience for filling a car’s gas tank dramatically differs from that of staying at a luxury resort. Retailers therefore define their target segments, identify the service outputs that these segments require, and tailor their offerings accordingly to provide value aligned with each segment’s expectations.

The Role of Target Market Strategy in Retailing

Effective retail strategy involves segmenting the market, understanding diverse consumer needs, and designing unique value propositions for each target segment. Market segmentation allows retailers to focus their resources on particular customer groups, enhancing their ability to meet specific demands efficiently. Retailers who recognize that customers seek different experiences and services are better positioned to optimize their offerings, increase customer satisfaction, and foster loyalty.

For example, luxury retailers focus on providing high-end, personalized service, while discount retailers emphasize affordability and convenience. A retailer’s alignment to a targeted segment facilitates more effective marketing, stock management, store layout design, and service delivery. As a result, tailored retail strategies lead to sustainable competitive advantage by enabling retailers to serve their customers better than competitors who offer a more generalized experience.

Global Coordination and Standards Development

As the retail industry becomes increasingly global, standardization and cooperation across borders are essential. The Memorandum of Understanding (MoU) signed between the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) exemplifies efforts to develop high-quality, compatible accounting standards. Their commitment aims to facilitate transparent and comparable financial reporting worldwide, thereby supporting global retail operations and investments.

This cooperative effort underscores the importance of harmonized financial reporting standards, which help multinational retailers and investors navigate cross-border transactions. The aim is to minimize discrepancies between regional standards, streamline compliance, and enhance the confidence of international stakeholders. The joint initiatives also promote the development of common solutions for accounting challenges faced by global retail corporations, fostering a more integrated and efficient international retail landscape.

Conclusion

The retail industry plays a crucial role in the economy due to its diversity, extensive employment opportunities, and significant contribution to gross domestic product. Its adaptive nature enables businesses to respond to market opportunities, tailor their offerings to targeted customer segments, and enhance consumer experiences. As the industry evolves in a globalized context, standardization efforts such as those between FASB and IASB are vital for ensuring consistent financial disclosures and fostering international growth. Understanding retailing's strategic, operational, and financial dimensions is essential for stakeholders aiming to succeed in this dynamic sector.

References

• Grewal, D., & Levy, M. (2018). Retailing Management (10th ed.). McGraw-Hill Education.
• Price, J., & Feick, L. (2017). Retailing: A Strategic Approach. Journal of Retailing, 93(4), 437-442.
• U.S. Census Bureau. (2021). Statistics of U.S. Businesses. Retrieved from https://www.census.gov
• National Retail Federation. (2022). Top 100 Retailers. Retrieved from https://nrf.com
• Kotler, P., & Keller, K. L. (2016). Marketing Management (15th ed.). Pearson.
• De Chernatony, L., & Harris, F. (2018). Corporate Branding and Retail Strategy. Journal of Brand Management, 25(6), 607-622.
• FASB & IASB. (2002). Memorandum of Understanding – High-Quality International Standards. Financial Accounting Standards Board.
• Hansen, R., & Mowen, M. (2009). Cost Management: Accounting and Control. Cengage Learning.
• Becker, H., & Gerhardt, T. (2019). International Harmonization of Financial Standards for Retailers. International Journal of Accounting, 54(3), 261-290.
• Hitt, L. M., & Covin, J. G. (2018). Strategic Management in Retail: Building the Future. Journal of Retailing, 94(4), 319-332.