Economics Principles: Retail Industry Paper Example

The retail process involves getting products and services to customer acquired directly from the manufacturer. Retailers are the final business entities that link manufacturers to customers through a distribution channel (Zhu, Singh & Manuszak, 2009). Retail stores and companies often store identical or similar products in the same geographical area. Retailers provide value by creating functions like holding inventory, breaking bulk, an assortment of product and services and providing services to manufacturers, wholesalers, and consumers (Zhu, Singh & Manuszak, 2009). This industry involves understanding the consumer needs, developing good merchandise assortment and to effectively display the merchandise to make it attractive and easier for shoppers to buy.

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Oligopoly market structure describes best the retail industry. This market structure is dominated by small firms which results in a state of limited competition. This competition within a given environment can either against each other or collaborative (Zhu, Singh & Manuszak, 2009). Due to the nature of the market, retailers always user their shared market power to increase prices and earn extra profit. Since most are driven by profits, the prices of products and services always go beyond fair market values. these market structures burden customers because they are forced to pay more for goods and services and most of the poor customers suffer because consumable compose a larger share of their budget. There are little incentives to lower cost in oligopolies results to limited innovations and fewer efficiency improvements (Goldmanis et. al, 2010).

The face of the oligopoly market is competition from other business and since they cannot sustain losses, it leads to prisoner's dilemma limiting time on the existence of oligopoly because each firm has the incentive to cheat by lowering prices to attract more customers (Goldmanis et. al, 2010). The oligopolistic market structure builds businesses to maximize profits, there are market barriers of entry and exit, few businesses dominate the market, products may be differentiated or homogeneous, and oligopolies set prices (Zhu, Singh & Manuszak, 2009).

In an oligopoly, new business competitors in the market are undermined formally through the formation of cartels or informally through a common pricing strategy. The reason why participant's actual prices of product or services are to try and drive competitors out of business. Since new business has inadequate capital and lacks established customers they cannot compete. Once they are out of business, the forms in the oligopoly increase prices (Goldmanis et. al, 2010). Retail oligopolies customarily use artificial barriers to preclude new sellers from entering the marketplace. Most of them rely upon government intimidation of the federal, state and local level to reduce competition and maintain their hold in the market. Expensive advertising campaigns together with patents and trademarks create oligopolies on a global or national scale (Goldmanis et. al, 2010).

Microeconomics involves the use of available resources to impact individual and business. Understanding microeconomic factors affecting the business helps in research and planning and also developing long-term business strategy development. In oligopolies market structure the business factors that are considered to affect the business is mostly the customers and competitors. Customers have a direct microeconomic impact on business because of it through them that the business will be able to generate profits (Zhu, Singh & Manuszak, 2009). It is important for a business to attract customers. It is mandatory for a business to identify their customers, present and develop effective marketing campaigns. This is important and integral in building a customer base and spawning income streams. In oligopolies, competitors have a microeconomic impact on business economic occupation. In theory, more competitors mean that business there is a diminishing share of dollars customers spend.

The key trends today in the retail industry involves new technologies and superior methods that are used to retain and attract new customers. These innovative trends have affected the entire retail value chain (Krafft & Mantrala, 2014). Each year new trends emerge and become popular globally. The main aim is to keep customers satisfied and happy and so they have to adjust and implement current trends to stay ahead of the curve. The main concern of customer is purchase goods without hustle at a good price and receive them on time. A retailer who make huge profits always address the issue of convenience (Krafft & Mantrala, 2014).

This shows that online shopping is the fastest growing trend in the retail industry globally. The sales in 2017 amounted to 2.3 trillion dollars and they are projected to grow to 4.9 trillion in 2021 (Statista, 2018).

By 2014 the number of digital buyers was estimated to be over 2.14 billion globally and this number is expected to grow to over 5 billion by 2021 (Statista, 2018).

Conclusion

One of the biggest current trends in the retail industry is the mobile purchase and payment solutions. Customers now are able to access products and services online through the mobile application without physically being at the stores (Krafft & Mantrala, 2014). They have the option of purchasing the item online through online banks, credit and debit card and other mobile payments like Android Pay, Apple Pay, and Samsung Pay. Businesses have enhanced their performance ensuring they deliver goods on the same day. Businesses are also moving to social media to sell their products (Krafft & Mantrala, 2014).

References

Goldmanis, M., Hortacsu, A., Syverson, C., & Emre, O. (June 01, 2010). ECommerce and the Market Structure of Retail Industries. The Economic Journal, 120, 545, 651-682.

Krafft, M., & Mantrala, M. K. (2014). Retailing in the 21st Century: Current and Future Trends. Berlin: Springer Berlin.

Statista. (2018). The Statistics Portal. Retrieved from https://www.statista.com/statistics/251666/number-of-digital-buyers-worldwide/

Zhu, T., Singh, V., & Manuszak, M. D. (August 01, 2009). Market Structure and Competition in the Retail Discount Industry. Journal of Marketing Research, 46, 4, 453-466.