MARKET ANALYSIS
Commission in the United States has tightened its regulation on corporate compliance after the Enron accounting scandal of 2001 (How).
MARKET SIZE The US apparel retail industry has grown moderately in recent years and this trend is expected to continue. The US apparel retail industry had total revenue of $329.4 billion USD in 2011, representing a compound annual growth rate (CAGR) of 2.7% between 2007 and 2011. The United States accounts for 28% of the global apparel retail industry value. The apparel retail industry consists of the sale of all menswear, womenswear and childrenswear. The womenswear segment was the industry’s most lucrative in 2011, with total revenue of $170.4 billion USD, equivalent to 51.7% of the industry’s overall value (Apparel). In 2012, US retail e-commerce sales totaled $225.5 billion USD. Digital sales are expected to increase at a 14% compound annual growth rate (CAGR) from 2012 to 2017. Only 6% of US retail sales came from e-commerce in 2012. The e-commerce apparel and accessories market generated a total revenue of $45.6 billion USD in 2012, up from $37.6 billion USD in 2011. Apparel and accessories e-commerce sales are projected to reach $87.8 billion USD by 2016. Apparel and accessories is the second highest purchased product category online. A projected compound annual growth rate of 17.2% is projected up until the year of 2016. Mobile already accounts for 11% of e-commerce sales, and its share will jump to 25% by 2017 (Retail). In order for Nordstrom to successfully integrate the “Rediscover the Way You Shop” initiative into its direct mail catalog, it is important to review the size of the US fashion retail e-commerce market and the effects on the company’s initiative. With apparel and accessories being the second largest product category of purchases through e-commerce, Nordstrom is well equipped to succeed. Customers are familiar with online shopping and do not need to be convinced to do so. The most profitable segment of US fashion retail is womenswear. This means that Nordstrom must place emphasis on this product category throughout this initiative (Retail).
PESTEL ANALYSIS
POLITICAL Currently, Nordstrom operates its 117 full-line stores solely in the United States- a country with a stable political scenario and no serious threats. Nonetheless, considerable differences can be noted in Democratic and Republican policies. The two political parties have been in opposition for years in regards to their rules and regulations. This may have implications for government spending and tax rates, which in turn can affect economic stability. Presently, the federal rates on corporate taxable income range from 15% to 35% (Puzzanghera). At 35%, the corporate tax rate in the United States is the highest among the world’s developed economies (Puzzanghera). Lowering corporate tax rates would attract new businesses and prevent existing ones from leaving the United States (Puzzanghera). Another known factor which can affect businesses is the change in government regulation. For example, the Securities and Exchange 28
ECONOMIC The United States has the world’s largest economy with an estimated GDP of $17.1 trillion USD as of Q1 2014 (United States). At the same time, the United States has a national debt of $17.48 trillion USD (The). Although it has been the largest economy since the 19th century, it has been closely followed by China in recent years “when measured using purchasing power parity” (Monaghan). Based on expectations from the International Monetary Fund, China will surpass the United States as the world’s largest economy this year (Monaghan). Nonetheless, research shows that the United States economy is poised for at least moderate growth in 2014. According to Kiplinger’s Economic Outlook for 2014, United States GDP growth is expected to rebound to a rate of 2.5% to 3% after a “weather – and inventory – related slowdown in the first quarter” (Payne). Consumer confidence is returning to a higher level than was recorded before the government shutdown and polar vortex affected spending. Disposable income (adjusted for inflation) grew a solid 3.8% from January to March 2014 (Payne). In addition, unemployment rates are expected to decline with an estimated 2.6 million workers being added to payrolls this year (Payne). What’s more, retail sales are expected to accelerate this year, gaining roughly 5% from December 2013 to December 2014 (Payne).
SO CI A L Income distribution in the United States is characterized by vast inequalities, resulting in low social mobility. A 2011 study by the Congressional Budget Office found that “the top earning 1% of households increased their income by about 275% after federal taxes and income transfers over a period between 1979 and 2007, compared to a gain of just under 40% for the 60% in the middle of America’s income distribution” (United States Congress). Data from the Census Bureau shows that Americans’ median household income was $51,017 a year in 2012, down 8.3% from 2007. The ensuing economic recession pushed many more Americans into poverty. In 2010, the poverty rate peaked at 15.1%, and has barely decreased since then (Hargreaves). Additionally, the United States is experiencing a shift in demographics with an aging population and the rise of a new Millennial generation. According to the Administration 29