General merchandise stores are defined as retail stores that sell a number of lines, such as dry goods,
apparel and accessories, furniture and home furnishings, small wares, hardware, and food. General
merchandise stores are subdivided into three major groupings: department stores, variety stores, and
miscellaneous general merchandise stores. Each of these three groupings has different characteristics.
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Department stores, by far the largest of the three, accounts for over
89 percent of total employment and almost 80 percent of total sales
within the general merchandise industry. A department store carries men’
s, women’s and children’s apparel, household appliances or other home
furnishings, and various other lines. These stores are generally arranged
in departments with individualized accounting. Department stores usually
provide their own charge accounts, deliver merchandise, and maintain
open stocks. After a disappointing performance in the second half of the
eighties, department stores have increased their market share during the
nineties. In 1990, department stores accounted for 9.0 percent of total
retail sales and 14.1 percent of nondurable goods sales. Since then,
restructuring within the department store industry has led to continued
gains in market share. In 1998, department stores accounted for 10.1
percent of total sales and 17.2 percent of nondurable sales. The rise of
discount department stores (or "superstores") such as Wal-Mart, Target
and K-Mart, have contributed to the overall growth of the industry by
posting better than industry sales increases every year in the 1990s.
Consumer spending at department stores is likely to remain healthy in
the near future. Technology advances and continuing change will keep
costs, and therefore prices, down, which should lead to strong sales in
the future.
One of the major reasons for stronger department store performance
has been the consolidation in the industry. Many of the big names in
department stores not only downsized their operations in an effort to
become more efficient and profitable, but also merged with other giants
in the industry. Even so, department stores face stiff competition from
various other forms of retail businesses. Entities such as the Home
Shopping Network, mail order catalogs, and Internet retailing have the
ability to capture sales due to their convenience and ease. Nonstore
retailers have greatly increased their sales revenues in recent years due
in large to the explosion in "e-retailing." Department stores continue to
face competition from specialty stores—those that offer goods in a
certain category line; and from the latest trend in retailing—the "category
killer" or "superstores." These superstores, like Home Depot, and
Borders seriously threaten department store sales because they offer
practically every product within a particular retail category usually at much
lower prices.
Variety stores, the smallest component of general merchandise, are
defined as retailers who do not carry a complete line of merchandise, are
not departmentalized, do not carry their own charge service, and do not
deliver merchandise. As such, variety stores have been performing quite
poorly in recent years. Since the mid-1980s, annual variety store sales
have grown at a meager rate of 1.0 percent. Variety stores’ share of all
general merchandise sales has fallen from 7.2 percent in 1980 to 3.3
percent in 1998. The growth of specialty stores and superstores is the
major reason behind the demise of variety stores. Although the major
attraction of variety stores is lower prices, not carrying complete product
lines have made these stores especially vulnerable to superstores, which
carry every product in a category at relatively low prices.
Miscellaneous general merchandise stores, the final category, are
similar in structure to department stores, except they generally have
fewer employees. Miscellaneous general merchandise stores normally
have fewer than 50 employees. Sales at these stores have struggled in
the mid-1990s. Sales growth (in real terms—i.e., without inflation)
averaged 6.8 percent from 1986 to 1993, but have slowed significantly
to a mere 1.3 percent average since then. The market share within
general merchandise stores held by miscellaneous stores has remained
somewhat strong, due largely to the strength of past sales and the
demise of variety stores. Miscellaneous merchandise stores market share
grew from 11.5 percent in 1980 to 20.7 percent in 1993, but has since
fallen back to 18.0 percent in 1998.

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