A study by an Iowa State University economist shows the so-called “big box” retail stores, and service related business have fared the best as the overall population of the state remained stagnant. Economist Meghan O’Brien studied the population trends between 2000 and 2005 to see how many people it takes to keep a business viable. O’Brien says overall, the service industry fared better than retail businesses.
O’Brien says retail businesses, particularly the ones that required a physical location, saw a “fairly dramatic increase” in the number of people required to make the business sustainable. O’Brien says the service industries saw larger drops in their threshold levels, or number of people needed to keep them running, than the retail industry.
O’Brien says real estate services saw the biggest decrease in the number of people they needed to keep viable. She says that includes appraisers and title companies, and they saw a drop of 37-percent in their threshold level, which O’Brien says is indicative of the real estate growth in that time period. Another service industry that saw a drop in its threshold level was financial investment activity, such as investment firms and portfolio management, which saw a 33-percent drop.
O’Brien says the big retailers like Wal-Mart bucked the trend in retail, as they saw a 64-percent drop in the number of customers needed to stay viable. O’Brien says the question now for researchers is how much of the lowering of the threshold for super stores has translated into an increase for smaller retailers such as shoe stores and electronic stores. O’Brien says they found the growth of the big stores wasn’t always a positive for them.
She says in the last two years (2006-2007) they saw considerable growth in the big box stores, but as the economy got better, people found the big stores were difficult to shop in ,and were willing to pay a little more for more quality goods. As the talk of a recession loomed, O’Brien says the big stores benefited.
O’Brien says price became a big factor again, and that was evident in the Christmas shopping season, where the big retailers performed the best, and the specialty stores had one of their worst shopping seasons in four or five years. O’Brien says Wal-Mart’s is also investing in a smaller versions of grocery stores after finding that consumers like shopping in the smaller stores.