According to McWilliams et al. (2016), industry analysis in America is a broader that consists of the industry structure in, analyzing how the structure affects the price, output and economic welfare of the country and looking at how prices are set. Furthermore, the paper will look at the effects incurred by the industry when various prices are set. In addition, how different consumers respond to the price change, is there any potential for collusion and are their trade barriers and how do they protect the retail industry.
One of the largest industries in the United States is the retail industry. This type of industry is comprised of a number of companies who engage in the selling of final products to the final consumers. Retail industry also consists of the multi-store retail chains that are privately owned and also publicly traded ones in the stock exchange (Hong & Li, 2015). The retail industry contributes up to two-thirds of the United States gross domestic product. Hence evaluating the overall retailing industry performance and the opening and the closing of the retail firms in the industry is used to tell how the United States economy is doing. For instance, in the year 2012, a number of firms closed down in the industry which was a good indicator that the consumers preferences have changed resulting from the unsteady economy. According to Lehar et al. (2016), by the year 2014, the total sales from the retail industry reached a sum of $22 trillion. By the year 2015, the same sales were expected to rise to $ 24 trillion.
Up to date, the total retail industry sales has increased by almost 4.5 percent. Taking the amount of revenue into consideration, the United States retail industry comes out to be an undisputed industry. One example of a firm in the retail industry is the Walmart which comes out to be largest global retailer located in the United States. From the statistics made by the Global Powers of Retailing, United States hold a percentage of 76 percent in the retail industry (Parnell, 2013). Although most of the retailers in the United States do operate domestically, most of them nowadays are trying to make their presence outside the country. In addition, any other business that is involved in selling the end products to the members of the public is often referred to belong to the retail industry.
Prices are indeed affected by the retail industry structure in America. According to Waldman & Jensen (2016), one of the ways in which the prices are affected in the retail industry is the tactic of every day low prices. This facilitates the offering of goods and services at relatively low prices. This is the price that aims at promoting the prices of each and every good. This makes it difficult to have an irregular variability between the discount price and the regular price. On the other hand, there is usually a disparity between the lowest and the highest price. It depends on the promotion strategies and the sales made every day aiming at enticing the buyers. In addition, we have the tactic of having the smaller selection in terms of brands, very small price fluctuations and which is less convenient in the format through offering a large number of items.
The retail industry is fond of using the shopping framework which makes the industry to be in a good position to alter the prices effectively. On the other hand, due to the structure that exists in the retail industry, they are able to formulate small average savings on each item they sell. Through the various price alteration, the retail industry is able to make huge amounts of output in every year. If the price set is favorable, the output increases as the sales made by the customers go up. However, if the retail industry in America makes a mistake of setting a higher price that the consumers may not afford and are not comfortable with, the sales in the industry dramatically changes having a negative effect. The US retail industry impact to the economic welfare has induced impacts, indirect and direct impacts to the economy (Belleflamme & Peitz, 2015). The induced impact has led to some changes in the labor income and gross domestic product that comes from the household spending that is usually earned directly or indirectly from the retail industry. Second, we have the indirect impact to the economic welfare which also affects the labor income and jobs all this coming from purchases of intermediate and capital goods. Finally, we have the direct impact such as increased in gross domestic product to the economic welfare.
According to Hong & Li (2015), the retail industry in America has had the custom of using the key value categories and the key value items to set the prices in the industry. The prices to be set depends on the price of the competitor then deciding to set a higher price to that of the competitor or slightly lower than that of the competitor. There also exist the margin goals, range architecture, market share targets, and price elasticity factors to be considered when setting any price only if there is no need to use the competitive price index. In price setting, there is the use of the basket and the transaction data where each item is priced according to its performance on the market (Ashenfelter et al., 2015).
Second, we have the shoppers price-perception data where various items categories are priced accordingly. Third, we have the merchant judgment where strategic pricing is included. Use of this kind of a pricing strategy ends up making the retailers to treat every item in the industry the same way. At the end of the pricing process, this results in unprofitable "race to the bottom". This results from the way the competitors notches down in order for them to stay low in the competition. Having a dynamically segmented approach to the item level pricing makes the retailers be in favorable condition to make use of the multiple objectives. The dynamically segmented approach pricing also affects the market activity, promotional activities, safety-stock position and also the in-store space allocation.
According to Ferguson (2014), consumers in the retail industry are said to respond consistently with the pricing mechanism. The increase in prices is a clear indication that there is the increase in quality which at the end makes the goods purchase to increase drastically. The probability of a consumer to purchase a given product which has been associated with an increase in price is usually relatively high. When salient attributes do occur in the market, this is said to drive the consumers to purchase such products easily. However, in some instances changes in prices does makes the consumers shift to the existing alternatives (Hainmueller et al., 2015). This will make the demand of the overrated item to reduce since there are other cheaper products which are serving the same purpose and fulfilling the same needs. This in turns makes the consumers spend less on the goods and services hence allocating none or a little proportion of their income.
The retail industry has held a high possibility of deceiving the customers. Some internet management companies have been paid in the past to post fake reviews that aim at indicating high sales to a company in the industry (McWilliams et al., 2016). This tends to make other customers to purchase the product basing their decision that the price are favorable and the item is of high quality. In addition, we have the fake discounts where in recent years several companies in the retail industry have had the behavior of posting fake discounts of which in the real sense is not the case. Customers at the end purchase the item in greater quantities believing that the prices have been reduced. The other possible deception in the retail industry is through fake YouTube views. Fake video views can be used by the industry to deceive the customers that the industry has much attention of which is not the real thing. On the other hand, we have the fake Twitter followers who may have been posting information talking about the considerable prices in the industry. Such at the ends up deceiving the customers purchasing items of the quality they never targeted.
The retail industry in America has several Facebook pages for different firms in the industry. Most of the firms in the retail industry are fond of using the tactic of having fake Facebook likes which in turn mislead the customer when making their buying decisions (Ferguson, 2014). On the other hand, the retail industry is fond of creating a form of nostalgia to the customers. This makes the customers have less value for money hence at the end they pay more for the goods they want. According to Ferguson (2014), the next possible collusion is the use of sic rude sales people to approach and convince customers who are not familiar. The retail industry also has the attribute of packing their goods in smaller packages. This has led to the customers consuming more at long last without their consent. Since the retail firms in the industry are usually laid out unintuitive, they end up making the customer be confused and get lost when making their daily purchases.
According to Hainmueller et al. (2015), the tactics they use to make and alter their prices, mostly women are easily deceived. Women are said to buy more than men believing that the products to be bought are of lower prices. On the other hand, we have the illusion of bulk bargains of which in the real sense they do not occur. In addition, the retail industry is fond of giving out free treats that at the end gets the consumers confused and make them purchase more the product which they had been enticed. Furthermore, recently it has been noted that the retail industry is causing a lot of illusion whenever they drop the dollar sign. This makes the customers view the price of an item in less value and not in dollars.
The retail industry is mostly dominated by monopolies kind of. These monopolies do hold some production rights which enhances them to compete on the healthy ground in the market since there are few firms producing the same products. According to Wilson & Mutersbaugh (2015), the next trade barrier that does protect the retail industry is the legal protection. The law fully protects the retail industry inhibiting other existing industries to produce the same products being produced in this sector. If any industry attempts to indulge in the restricted practice, severe consequences are incurred which may even lead to the closure of the industry or be heavily fined. The third is the restriction to the access to raw materials. There exist some raw materials that are only available to the retail industry only. This tends to make the retail industry to be ever competitive in the market since the industry is able to maintain a continuous supply.
The retail industry in America during the past few years has been incurring less taxation from the government. This has enabled the industry to stand strong creating fewer chances to collapse. In addition, we have the offering of the subsidies by the national government used as a trade barrier in protecting the retail industry. This facilitates the retail industry to operate efficiently incurring less cost than the other industries in America. There is also the nationalization which has gone ahead in converting many industries to be part of the retail industry which mainly concentrates on the efficiency in the operation process (Asker & Bar-Isaac, 2014).
Ashenfelter, O. C., Hosken, D. S., & Weinberg, M. C. (2015). Efficiencies brewed: pricing and consolidation in the US beer industry. The RAND Journal of Economics, 46(2), 328-361.
Asker, J., & Bar-Isaac, H. (2014). Raising retailers' profits: on vertical practices and the exclusion of rivals. T...
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