Discount Retail Store Industry
Size
The size of the discount retail store industry has over the years grown to become a significant and competitive sector. In Canada, the enterprises involved in the market from the list to the largest include Rossy, Buck or Two, L’Aubainerie, Dollar Store, Great Canadian Superstore, Bargaining Store, Dollar Tree, Giant Tiger, Winners, Walmart Superstores and Dollarama. Statistically, by the end of July 2018, the number of stores operated by Dollarama was 1,160. By the time this data was collected, the whole of Canada had a total number of 3,104 discount chain stores (Discount chains number of stores Canada 2018 Statistic, n.d.).
Trends
In the US the discount retail store industry has been declining for the past five years to the level of -3.8%. Statistics done in 2018 showed that the industry had revenue of $98 billion. The number of businesses was observed to have declined by -0.6% while that of employees had a decline of -1.4%. The challenges pointed out in the industry are attributed to increased competition as many operators are joining the market. In 2018, the statistical trend anticipated the sector to continue declining in revenue at an average rate of 3.8%. Apart from stiff competition, discount retail store industry is characterized by expansion to other business avenues including indulging in perishable products. As a result, there is a likelihood of a decline in specializations such as supercenters and warehouse clubs (Industry Market Research, Reports, and Statistics, n.d.).
Competitive Structure Porter’s five Forces
Buyers Bargaining Power
As noted by Discount Retailers: Porter’s Five Analysis (n.d.), due to increased supply and entrance of many players in the discount retail store industry buyers’ bargaining power continues to rise. As a result, businesses are losing revenues. The trend is likely to continue because more players continue to join the market and are providing cheaper products. This is one of the reasons that took Zellers Inc out of business.
Suppliers Bargaining Power
The Discount retail store industry had strong suppliers bargaining power in the 50s due to Retail Prime Maintenance (RPM). However, the current business environment is highly competitive, and suppliers’ power is limited. However, in areas without many discount retail stores, the suppliers’ bargaining power remains high (Discount Retailers: Porter’s Five Analysis, n.d.).
Threats of Substitutes
The high risk of substitutes faces the industry. This is based on the fact that discount retail store industry has different products that can be readily available in other types of businesses including supermarkets. Customers may opt to go for cheaper substitutes depending on the products available in the market.
Threats of New Entrants
High entrants of businesses which characterize the discount retail store industry are causing stiff competition. The possibility of new entrants of firms is determined by economies of scale, capital requirements, brand identity, advertisement, and access of distribution. The stores enjoying economies of scale are likely to offer low price and survive in the market. The industry does not mainly rely on brand identity as many products are in the market making it possible to attract more entrants. In Canada, many entrances continue to join the industry because it is easy to set up, and capital is readily available to many entrepreneurs.
Competition Rivalry
As noted in this study, discount retail store industry is highly competitive based on the numerous businesses that have been set up. Also, a variety of enterprises provide the same products making it difficult for one firm to remain dominant in the market. The survival strategy is to ensure innovation and differentiation in the industry.
PESTLE Analysis
Political Factors
An analysis conducted by Rowland (2017) shows that the discount retail stores factor political matters relating to government policies and changes touching on the industry across the globe. Some of the external political factors affecting the discount retail store industry include pressure to pay employees high salaries, the stability of politics, and support for globalization. A clear strategy of incorporating the three factors allows businesses to prosper in the industry.
Economic Factors
Economic pressures affect how a business operates, and the profit or loss gained. Some of the economic factors affecting the discount retail store industry include the decrease in employment in the US and Canada which the industry should consider as an opportunity. Others include the stability of major economies as well as substantial economic growth.
Cultural and Social Factors
Consumer perception is profoundly influenced by the social and cultural aspects in the discount retail store industry. In this regard, this study notes that some issues such as healthy lifestyle and the provision of quality products are concerns in society. Others affecting the industry include urban migration and cultural diversity which affect the level and trends of purchase by customers.
Technological Factors
Zellers Inc. needed to address technical factors to succeed in the market. Currently, the discount retail store industry is faced with the need to address technical aspects to remain relevant and competitive. Some of the issues include robust automation of businesses, use of mobile phones and emails for communicating with customers as well as managing of analytical data for tracking and managerial purposes.
Ecological Factors
The discount retail store industry is faced with the need to ensure that environmental issues are sensitively dealt with to avoid creating a negative perception in customers. Also, it is crucial to provide business and ecological sustainability measures by taking part in green marketing. Business practices should be focused on environmentally friendly activities to avoid destroying the possibility of growth in the future.
Legal Factors
The discount retail store industry is legally required to comply with laws and regulations governing the areas of operation. Some of the commonly known legal issues in the sector include following food safety regulation, tax compliance and employment regulations among others. The market is highly volatile and requires players in the discount retail store industry to do further analysis of the external engagements while conducting business.
References
Discount chains number of stores Canada 2018 | Statistic. (n.d.). Retrieved from https://www.statista.com/statistics/485856/number-of-stores-of-selected-discount-chains-canada/
Discount Retailers: Porter’s Five Analysis. (n.d.). Retrieved from https://www.ukessays.com/essays/management/attractiveness-of-the-discount-retailing-industry-management-essay.php
Industry Market Research, Reports, and Statistics. (n.d.). Retrieved from https://www.ibisworld.com/industry-trends/specialized-market-research-reports/consumer-goods-services/apparel-accessories-stores/discount-department-stores.html
Rowland, Christine. (2017). Walmart PESTEL/PESTLE Analysis & Recommendations. Retrieved from http://panmore.com/walmart-pestel-analysis-recommendations-case-study