Retail’s Economic Impact

Global retail is an established and fiercely competitive sector in developed economies. This study aims to identify the economic impact of the retail sector on the country. In addition, statistical techniques are applied and the dynamics of the retail industry are explored to gain a better understanding of this industry’s importance.

A Brief Introduction

In the retail sector, all entities that provide goods and services are included. In retail, products are sold at a single point of sale, such as an online or physical store. According to Statista, the US retail industry reached 6.5 trillion dollars in 2021. According to the graph below, retail sales in the U.S. have increased by 26 (T) U.S. dollars over the last ten years until 2021, and the global retail sector has generated 26 (T) U.S. dollars.

The US retail industry is the world’s largest. The following graph illustrates the revenue of the world’s leading retailers. The top three companies on the list are located in the United States, while Europe occupies the fourth position on the list. Furthermore, as shown in the graph below, the US is ranked highest among the other countries. JD.com Inc., which is located in China and has revenues below 100 billion USD, is the only Asian company on the list.

In its 2018 report, the National Retail Federation examined three different types of economic impacts: induced, indirect, and direct. Direct impact refers to the GDP, labour income, and jobs that are directly affected by the retail sector. There is also an indirect impact of the retail sector on other businesses. The induced effect is caused by household spending resulting from money received directly or indirectly. 

Trends in Retail Industry

The retail sector is significantly impacted by consumer behaviour. As a result of their behaviour, the market is shaped and retailers are forced to compete more fiercely. The following are some of the trends shaping the retail industry:

The Role Of E-Commerce In Retail

Gray asserts that e-commerce has become unmanageable in the retail industry, and sales are growing at an annual rate of 15%. Approximately 40% of all online sales in the United States are attributed to Amazon alone. Accordingly, the graph below illustrates the retail e-commerce sales forecast through 2026

Self-Service Checkout

According to Magestore, self-checkout offers the following benefits:

Queues are shorter, checkout is faster,

A higher level of customer satisfaction,

 Increasing the capacity of the shop,

 Employee output increased

According to Toshiba’s report, self-checkout is the second most popular checkout method among customers.

The intelligence generated by artificial means

Among the benefits of utilizing artificial intelligence in the retail industry are the following:

 Retail firms can benefit from artificial intelligence by operating more efficiently and profitably.

Automating, preventing losses, and making the process feasible.

There is a possibility of reducing costs, improving supply chains, and increasing customer satisfaction.

Augmented Reality

Business-To-Business

In a direct-to-consumer (D2C) retail sales strategy, the company creates, sells, and ships the product directly to the customer. Nearly 23% of Americans believe that DTC companies are the ultimate arbiters of what is hip and in style, according to Diffusion. DTC firms are perceived by 4% of Americans as providing higher quality goods at lower prices than their traditional competitors.

Methodology Of The Study

After gaining a comprehensive understanding of the retail industry and its dynamics, we proceed to the research phase. The impact of retail firms on the economy of the United States has been examined. To perform the time series analysis, data have been collected from the websites of the OECD (Organisation for Economic Co-operation and Development) and FRED (Federal Reserve Economic Data). The data were analyzed for 20 years from 2002 to 21. In addition, the predictor variables are CCI (Consumer Confidence Index) and GDP (Gross Domestic Product), and the regressor is the revenue of various retail sectors in the United States.

We conducted a descriptive analysis of our data set before using the ADF (Augmented Dickey-Fuller) test to determine the unit root. Last year, an ARDL (Autoregressive Distributed Lag) model was applied to calculate the long-run impact of profitability on the country’s GDP and CCI.

Final Thoughts

Retail is one of the fastest-growing industries in the world. The results and findings of the study analyze the impact of retail industries’ revenue on the Gross Domestic Product (GDP). Therefore, a time series analysis was conducted, which indicated that all the industries with a significant impact on GDP were positively affected.

Revenues are explained in the long run by the results, whereas some industries are not explained in the long run by the results. In contrast, retail industries’ revenue was neither significant nor cointegrated with CCI.

In general, it can be concluded that retail sector growth is cointegrated with the country’s GDP. In addition, the retail industry trends illustrate customer behaviour toward purchasing products and services, which could be interpreted as highly volatile. Therefore, companies need to move towards technological advancement and modernization as quickly as possible.

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According to the research above, the retail industry plays an important role in the economy. Therefore, we have compiled a list of retail-related products that could assist business owners in establishing a successful business. The following are some examples:

 A financial model for a retail store in Excel

 Excel template for multichannel e-commerce financial models

 A pitch deck for a retail clothing store

 Excel financial model for hardware retail stores

Business Plan for a Gas Station

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