Apple, Amazon lead retail growth charts

06 July 2011

NEW YORK: Apple and Amazon are the fastest-growing major retailers in the US, indicative of new trends reshaping the market.

Data from the National Retail Federation, the trade body, showed Wal-Mart delivered $308bn in US revenues in 2010, an improvement of just 0.6%, and making up 73% of the organisation's worldwide total.

The company's current strategies include opening more Express stores in the US, as part of a global effort to serve what Mike Duke, Wal-Mart's CEO, has termed the "Next Generation Customer".

"They're connected to the world through smartphones and social media. They're in charge of when they shop and how they shop, and they know who has the lowest prices."

As well as the long-standing "everyday low prices" promise, Wal-Mart is also taking an international approach to talent management, enhancing its green credentials, and improving its ecommerce operations.

Kroger took second place in the NRF rankings, generating a turnover of $78.3bn in 2010, a 6.4% leap on an annual basis, while Target enjoyed a 3.8% expansion, posting $65.8bn.

On a recent conference call, Doug Scovanners, Target's chief financial officer, reported that the firm's median customer earns over $60,000 a year.

This high-earning cohort has proved to be highly engaged with Target's Redcards 5% rewards scheme, driving demand at a time when many other demographics have cut back on their spending.

"Our sales growth is coming from the top half, not the bottom half, of the income profile of guest households," said Scovanners.

Meanwhile, Walgreens' US revenues rose 6.3% to $61.2bn, benefitting from broadening its range into categories like food and wine, while Home Depot experienced a 2.2% lift to $60.2bn.

Despite the established nature of the top five, Susan Reda, editor of Stores Media, suggested two evolving trends are building on the considerable changes that have already impacted the industry.

Firstly, older customers are abandoning the superstore format, returning to smaller stores instead.

"The Boomer generation - the leading edge of which turns 65 this year - is now all about convenience," she said.

Moreover, younger buyers are pursuing distinct behaviours all of their own.

"Millennials are moving to the center stage of consumerism, poised to rewrite retail history in their own digital libretto," said Reda.

"Millennials love luxury brands (for a price), think games that net shopping rewards are 'cool' and are (and will be) loyal to stores that engage their senses and indulge their desire for excitement."

The two retailers logging the most impressive increases last year demonstrate such shifts in practice.

Amazon, the ecommerce pioneer, claimed 19th spot after a 46.2% jump in demand yielded US returns of $18.5bn. Jeff Bezos, the retailer's CEO, pointed out that this growth rate was extremely rare.

"Forty percent growth on that sales basis is very unusual," he said. "This is something that a broad team of people working very hard for a long number of year accomplishes.

"It's difficult operationally [and] it's difficult in terms of attracting customers to be able to support that level of scale and the expansion plans that support it."

Apple Stores and iTunes service also saw revenues surge by 32.3% year on year, to $18.1bn in US sales.

Earlier this year, Apple's retail network recorded its tenth anniversary, during which period it has secured over one billion visitors.

Richard Shim, an analyst at DisplaySearch, argued other major tech brands would have to follow Apple's lead.

"This is something that has to happen. The brands have to become more involved in the retail experience because the sales associates aren't going to be well-educated on every product," he said.

Data sourced from NRF; additional content by Warc staff