Retail sales involves the purchases offinishedgoods and services by consumers and businesses. These goods and services have made it to the end of the supply chain, which starts with the goods producer or provider and ends with the retailer.
The beginning of the supply chain includes commodities and other raw materials. Manufacturers create the product. The middle of the supply chain iswholesale sales. They distribute the goods and services to retailers. The retailers sell them to the consumer.
Key Takeaways
- Retail sales include sales of services and durable and non-durable goods within a specific time period.
- Consumer spending is almost 70% of U.S. GDP, making retail sales a good economic indicator.
- The U.S. Census Bureau publishes data on retail sales every month.
Retail and Its Primary Job
Theretailindustrydistributes all of these goods and services to customers.Retail outlets include brick-and-mortar stores like Target and Macy's. It also includes online retailers such as Amazon. Retail distribution also includes home sales such as Avon Products and TV retailers like QVC. The retail industry also sells services, including restaurants, hotels, and hairdressers.
Note
The most critical time in retail sales is the holiday shopping season.
Retail accounts for almost 20%of annual sales for many retailers. For jewelers, it accounts for 70% of yearly sales.The holiday shopping season customarily beginsonBlack Friday,the day after Thanksgiving. Italso includes other big shopping days, such asCyberMonday,Green Mondayand every other shopping daythrough Christmas. Some retailershave a "Christmas in July" sale to stir up sales during the slow summer season.
Measuring Sales and Trends
The U.S. Census Bureaumeasures retail sales with the monthlyU.S. retail sales report. It reveals total sales, percentage change, andchange inyear-over-yearsales.
Note
The Census Bureau doesn't adjust forinflationin the Retail Sales report.
That meansvolatilegas and oil prices affect the results. That can be misleading. Gas prices typicallyrise in the spring. Traders bid up the prices in advance of anticipated demand for the summer driving season. When that happens, it seems like retail sales are skyrocketing. Sales seem to drop like a stone in the late summer or autumn. That's when gas prices fall as vacationers return home.
Retail Categories
The Census Bureau divides retailsales into 13 categories. The largest category is auto and auto parts stores. Since it's such a large component, the Census Bureau report also shows retail sales without auto.
Here are all 13 retail categories:
- Auto dealers, including auto parts, new and used vehicle sales
- Non-store retailers, which means online retail sales
- Department stores
- Apparel, such as specialty clothing stores
- Electronics and appliance stores, including big-box retailers like Best Buy
- Food and beverage stores,includinggrocery and liquorstores
- Building and garden supply stores, such as Lowes and Home Depot
- Sporting goods/hobby stores, like Hobby Lobby and Michael's
- Health/beauty shops, including drugstores
- Furniture stores
- Hospitality and leisure, including hotels, restaurants, and bars
- Gas stations
- Miscellaneous
Reflecting the Economic Environment
Retail sales tell you how muchdemandexists for consumer goods. That's critical becauseconsumer spendingmakes up almost 70%of total U.S. economic output. The threeothercomponents of gross domestic product(GDP)are business spending, government spending, and net exports.
The Bureau of Economic Analysis releases the GDP report each quarter throughout the year. If each month's retail sales are strong, then it's likely that the GDP report will be solid as well. The only time that won't be true is if prices are rising due to inflation. The retail sales report doesn't adjust for inflation. The BEA's report uses so-calledreal GDP, which does adjust for inflation.
It'sworth also looking atyear-over-yearretail sales in addition to the monthly percentage changes. The GDPreport gives an estimate for a year. Retail sales growth since the prior year will give you a better indication ofGDP growthwhich is also compared to the prior year.
Frequently Asked Questions (FAQs)
What is a retail sales job?
Positions in the retail trade industry include cashiers, customer service representatives, salespersons, and managers. These careers exist in many industries, including retailers that sell motor vehicles or parts, appliances, sporting goods, and food stores.
What is a general sales tax on retail sales?
A general sales tax provides revenue for governments by imposing a tax on all retail sales. The U.S. government does not impose retail sales taxes, but state and local governments do. Alaska, Delaware, Montana, New Hampshire, and Oregon do not impose sales taxes.
