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Retail sales: Trends in revenue and employment

by Akrur Barua, Daniel Bachman
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    23 January 2018

    Retail sales: Trends in revenue and employment Behind the Numbers, January 2018

    24 January 2018
    • Akrur Barua India
    • Daniel Bachman United States
    • Akrur Barua India
    • Daniel Bachman United States
    • See more See more See less
      • Akrur Barua India
      • Daniel Bachman United States
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    • Introduction
    • A large, yet declining, contribution to the economy
    • Mixed fortunes for different store types within retail
    • Higher sales does not mean higher share in payrolls
    • Have occupations within retail trade changed? Not by much
    • Wait and watch

    Retail trade is a key avenue of consumer spending and makes a major contribution to the labor market as well. The sector, however, is undergoing some changes, which have impacted total sales, revenues of different store types, and employment.

    Introduction

    Learn More

    Explore the Behind the Numbers collection

    The buzz of the holiday season may not be able to drown out the voices of concern about the future of retail trade.1 According to an article in Bloomberg, store closings in the first three quarters of 2017 far outnumbered new openings.2 Similarly, commentary on department stores long past their prime and young people setting aside more funds for retirement than immediate spending have not helped retailers.3 Changes in business are, of course, inevitable and retail trade is no exception to that. Large disruptions in the sector, however, will likely have repercussions for the wider economy. Retail trade is not only a key avenue of consumer spending (retailers sold goods and services worth $4.6 trillion in the year until November 2017), but also a major contributor to the labor market.4

    A large, yet declining, contribution to the economy

    In the period between 2000 and 2016, retail sales grew at an average annual rate of 3.1 percent. In 2016 alone, retailers recorded sales worth $4.8 trillion. How much does this figure amount to? Quite a lot. The value of retail sales in 2016, for example, amounted to 26 percent of nominal GDP. The ratio, however, has been slowly declining. Back in 2000, for example, the ratio of retail sales to nominal GDP was higher at 29 percent (see figure 1). Food services and drinking places, on the other hand, have seen sales rise at a faster pace than retailers during the aforementioned period.

    Retail trade is also a major contributor to employment. According to the Bureau of Labor Statistics’ establishment survey, retail trade made up 10.8 percent of total non-farm payrolls in the economy in the year until November 2017. However, akin to the trend in sales, the share of retail trade in total non-farm payrolls has declined over the years (11.6 percent in 2000). In contrast, food services and drinking places have seen their share in total non-farm payrolls grow during this period to 8.0 percent from 6.2 percent.

    Although retail sales have gone up, they have fallen slightly when compared to GDP

    Mixed fortunes for different store types within retail

    While overall retail sales have lagged the economy, some store types have done well. Non-store retailers have grown quickly, partially due to strong growth in e-commerce.5 The share of e-commerce in retail sales was 9.1 percent in Q3 2017, up from about 1.0 percent 17 years ago. Other store types where sales have grown faster than overall retail sales are health and personal care stores (4.8 percent), gasoline stations (3.3 percent), and general merchandise stores (3.3 percent). Health and personal care stores experienced faster sales because of the rapid growth of purchases of prescription pharmaceuticals, while the sales growth at gasoline stations is reflective of the change in gasoline prices.

    Stores that saw particularly slow sales growth include furniture and home furnishing stores; electronics and appliances stores; and sporting goods, hobby, book, and music stores (see figure 2). Brick-and-mortar sales in those types of stores have likely lost out to e-commerce. The surge in e-commerce is not likely to slow in the near term as young people focus more on the online market. Deloitte’s holiday survey for 2017, for example, found out that Generation Z and Millennials intended to spend 61 percent and 58 percent, respectively, of their holiday budgets online.6

    Non-store sales have surged over the years

    Higher share in sales don’t necessarily translate to higher share in payrolls

    With growth rates varying across store types, it is natural that the shares of different store types in total retail sales have changed. Non-store retailers, for example, have nearly doubled their share in retail sales over the last 17 years (see figure 3). Sales at motor vehicle and parts dealers continue to account for the largest share in retail sales, but the figure has dropped to 23.4 percent in 2017 (first 11 months) from 26.7 percent in 2000.

    A rising share in sales, however, doesn’t necessarily translate to a higher share in payrolls. Gasoline stations are a good example of this. While its share in total retail sales has increased—albeit with some volatility—its contribution to payrolls in total retail trade has fallen over 2000–2017. Similarly, motor vehicle and parts dealers contributed more to retail trade payrolls in 2017 (12.7 percent) compared to 2000 (12.1 percent), despite a decline in the share in total retail sales over this period.

    For all the surge in e-commerce, the share in payrolls of non-store retailers have increased only marginally since 2000 (see figure 3). What explains this phenomenon? It is likely that part of the increasing payrolls for non-store retailers is being taken up by the transportation and warehousing sector. For example, the ratio of payrolls in general warehousing and storage—a segment critical for e-commerce—to payrolls in retail sales has nearly doubled to 5.3 percent over 2000–2017.

    Shares of store types in retail sales and employment have changed over the years

    Have occupations within retail trade changed? Not by much

    Sales and related occupations dominate the retail trade workforce (see figure 4) with a sizable presence in all store types. The occupation’s share in the workforce has increased the most in electronics and appliance stores, from 49.0 percent in 2003 to 70.0 percent in 2016. Management occupations, on the other hand, have seen their share in total employment decline within all store types, except non-store retailers. Surprisingly, within non-store retailers, the share of transportation and material moving occupations has fallen to 18.2 percent in 2016 from 19.9 percent in 2003.

    The share of office and administrative support occupations in the total retail workforce increased from 16.5 to 17.5 percent over 2003–2016. Trends in shares of this occupation within different store types, however, vary. Overall, occupations that are witnessing a decreasing presence in the overall retail workforce are installation, maintenance and repair, and transportation and material moving.

    Sales and related occupations dominate the overall retail trade workforce

    Wait and watch

    Many retailers are beginning to understand that the sector is poised to undergo a significant change. Of course, retailing will continue to be the primary way consumers purchase goods. But the future may be quite different for some sectors, such as automobiles, where the consumer ownership model may be replaced by the purchase of transportation as a service.7 And as e-commerce takes up an ever-larger share of sales, the mix of occupations, wage rates, and the industry’s relationship to the economy likely will all change. The beginning of these changes is evident in the slowdown in employment and relatively slow growth of the sector’s revenues, features that may continue and even intensify in the future.

    Authors

    Akrur Barua is an economist and is based in Mumbai, India.

    Daniel Bachman is an economist and is based in Arlington, Virginia.

    Endnotes
      1. Unless stated otherwise, retail sales or trade includes motor vehicles and parts dealers, and gasoline stations; it excludes food services and drinking places; Deloitte, “Deloitte forecast: Retail holiday sales to increase 4 to 4.5 percent,” press release, September 17, 2017. View in article

      2. Matt Townsend, Jenny Surane, Emma Orr, and Christopher Cannon, “America’s ‘retail apocalypse’ is really just beginning,” Bloomberg, November 8, 2017. View in article

      3. Sapna Maheshwari, “Department stores, once anchors at malls, become millstones,” New York Times, January 5, 2017; Akrur Barua and Dr. Daniel Bachman, The consumer rush to “experience”: Truth or fallacy?, Deloitte Insights, August 18, 2017. View in article

      4. All numbers, unless stated otherwise, have been taken from Haver Analytics. View in article

      5. Dr. Daniel Bachman and Akrur Barua, Ring in the new: Holiday season e-commerce sales poised for strong growth, Deloitte Insights, September 22, 2016. View in article

      6. Rod Sides, 2017 Deloitte holiday retail survey: Retail in transition, Deloitte Insights, October 23, 2017. View in article

      7. See Scott Corwin, Joe Vitale, Eamonn Kelly, and Elizabeth Cathles, The future of mobility: How transportation technology and social trends are creating a new business ecosystem, Deloitte University Press, September 24, 2015. View in article

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    Topics in this article

    Behind the Numbers , Retail & Distribution , Consumer Spending , Americas Economics

    Deloitte's Retail, Wholesale, & Distribution practice

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    Akrur Barua

    Akrur Barua

    Manager | Deloitte Services India Pvt. Ltd.

    Akrur Barua is an economist with the Research & Insights team. As a regular contributor to several Deloitte Insights publications, he often writes on emerging economies and macroeconomic trends that have global implications like monetary policy, real estate cycles, household leverage, and trade. He also studies the US economy, especially demographics, labor market, and consumers.

    • abarua@deloitte.com
    • +1 678 299 9766
    Daniel Bachman

    Daniel Bachman

    Senior Manager | Deloitte Services LP

    Dr. Bachman is a senior manager with Deloitte Services LP, in charge of US economic forecasting for Deloitte’s Eminence and Strategy functions. He is an experienced US and international macroeconomic forecaster and modeler. Dr. Bachman came to Deloitte from IHS economics, where he was in charge of IHS’s Center for Forecasting and Modeling. Prior to that, he worked as a forecaster and economic analyst at the US Commerce Department.

    • dbachman@deloitte.com
    • +1 202 306 5576

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