SIC Code 5331: An Analysis Of The Retail Variety Industry
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Retail Variety Industry Analysis
June 24, 2015
1. Introduction The purpose of this report is to determine if the Retail Variety Industry, SIC Code 5331, is attractive or unattractive. This industry is defined as one that sales general merchandise. Some of the offerings include apparel, automotive parts, dry goods, hardware, groceries and home furnishings. The major component of this particular industry is that the offerings are at discounted prices and does not include department stores and warehouse clubs. The main activities are maintaining discounted prices on all of its offerings.
Executive Summary We found that the industry that we are focused on is made…show more content… There are several sellers in the industry and consumers put pressure on them to lower prices and increase quality in their products and better service. This in turn increases product costs and lowers the profit margin for the industry and the company. Because their strategy is low-cost leadership, they sell a variety of undifferentiated products providing consumers with more options to shop elsewhere, and because the competition is so fierce, these stores now offer price matching so they do not experience a loss in sales to their competition. Also, consumers can experience low switching costs because they can easily switch from one store to the next and get comparable products. High buyer power negatively affects the attractiveness of the retail variety industry, deeming it…show more content… Intensity of rivalry is one of the main forces that can shape the competitiveness of an industry. The strongest basis for competition in this industry is price. According to IBIS World, because these stores are known for their value offerings, price has become more and more important in the last five years as the economic downturn led to less disposable income to spend on industry goods. Consumers expect prices amongst the top competing stores so be similar, making it important that these stores prices are congruent with each other. Amongst price battles between these top companies, another factor that increases the rivalry is store location. Stores are competing to have locations in high traffic areas in order to increase exposure and sales. Prominent shopping centers are prime locations for these companies so that consumers do not have to make multiple trips while shopping, in hopes of their stores being the most convenient one to shop at. Another factor that increases intensity between rivals is if market share is of equal size. All the top competitors in this industry have similar market shares, thus making the rivalry increase. The top industries account for 53.3% of industry revenue as of 2015, making it that much important for these companies to try and win customers over by their loyalty. Overall, that makes the strength of this factor