As a worldwide leader in the retail business, the United States provides ample growth opportunities for all types of retail companies. The wide spectrum of the retail industry ranges from internet catalog sales, auto dealers, convenience stores to vending machines and clothing; thus dividing retailers into numerous categories.
Retailers of all sizes, including individual direct marketers or direct sellers, small- to medium-sized franchise unit owners, and large “big-box” store operators compete in the U.S.
From a growth perspective, the retail industry is among the dominant U.S. industries, and employs an enormous workforce. Retailers nowadays are largely concentrating on buyers’ needs and lure them with innovative products, attractive discounts, free shipping and the ease of shopping through smartphones and tablets.
Retail is no different from other U.S. industries, and is highly dependent on the economy to prosper. Such heightened dependence on the economy and factors like job growth and interest rates indicate that a speedy recovery of the economy is vital for the health of the retail industry. While the unemployment rate has decreased considerably over time, consumers are now beginning to draw out their savings to spend, anticipating some economic recovery.
So far this year, the broader markets have portrayed signs of a better pace of recovery and have thus sparked hopes of a better economic scenario going forward. The significant recovery in the stock market is reflected through strong gains for the broader market indices. (Read: 3 Hot Sector ETFs Surging to #1 Ranks)
The retail industry is highly competitive and encounters significant challenges. Although the U.S. economy has started witnessing a recovery, we still believe that 2013 will not fully mark the resurrection. Consumers are slowly regaining confidence and cautiously increasing their spending.
A recent Conference Board data suggested that Consumer Confidence Index improved to 81.4 in Jun 2013 from a revised 74.3 in May 2013. The index notched its highest level since Jan 2008, when it had touched 87.3. This prompts a sense of optimism about steady increase in consumer spending going forward. Consumer spending accounts for over 2/3rd of the U.S. economic activity.
Playing the Sector through ETFs
ETFs present a low-cost and convenient way to get a diversified exposure to this sector. We have highlighted a few ETFs tracking the industry: