Small-Business Rebound: Retail Sales Up as Consumers Resume Spending

by M. Sharon Baker on August 6, 2012
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It’s no secret that small businesses were hit hard during the recession, as consumers put off buying nonessential goods and services. But many sectors are now seeing a rebound in overall revenue.

Yoga centers, for instance, have sprung up nationwide, as many baby boomers look for lower-impact, lower-stress workouts. Overall industry revenues jumped to $7 billion, a 9.5% annual growth rate since 2004.

In Seattle, Anna McEvers and Heather Kass are fueling some of that growth. They opened their first Barre3 Fitness franchise in Bellevue, a Seattle suburb, in 2010. Classes were overflowing immediately, so the duo added another Barre3 in Seattle a few months later, and then a third in 2011.

“We never thought we were going to open three [so quickly],” says Kass, who teaches classes in addition to running the business with McEvers.

Market Sectors on the Rise

Various industry publications are predicting healthy revenue gains in other sectors this year, including furniture stores, tire dealers, and specialty food stores.

Annual revenues per industry — and their growth or decline over time — is just one way to help determine whether the timing is right for starting a small business. Savvy entrepreneurs also consider how profitable a particular segment is and how it has performed in the past several years.

The Retail Owners Institute has done much the heavy lifting when it comes to identifying profitable segments. The ROI provides benchmark results for more than 50 retail segments, as well as other vital retail operating metrics.

Recent figures show that used merchandise, which grew from 3.3 percent to 6 percent in pre-tax profits between 2007 and 2011, is the best-performing industry in recent years. (This shouldn’t be too surprising given the recession, which sent consumers scrambling for lower-priced goods and clothing.)

According to the benchmark figures, which are taken from The Risk Management Associations annual statements, other pre-tax profitability rebounds happened in:

  • Men’s clothing (jumped from 1.4 to 5.5 percent)
  • Cosmetics (grew from 2.1 to 5.7 percent)
  • General merchandise (increased from 2.9 to 3.6 percent)
  • Meat markets (climbed from 2.6 to 3.4 percent)

Patricia Johnson and Dick Outcalt, co-founders of the Retail Owners Institute, caution that trends of pre-tax profits alone may be misleading.

“For many independent retailers, shrinking their debt (a declining debt/worth ratio) may be far more important than profits,” Johnson says. “Similarly, a rising current ratio may best indicate an industry about to expand. Judgment must be applied whenever reviewing broad industry numbers.”

Johnson and Outcalt have seen an uptick in retail startups. “More bookstores are opening according to the American Booksellers Association and other associations are seeing similar trends,” says Outcalt, adding that the ROI has a sister site devoted to retail startups.

For another look at the top (and bottom) industries for small businesses today, check out this infographic:

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