Article Contributed by IBISWorld Analyst Eben Jose
It hasn’t been the best of times for small businesses lately, but with the national unemployment rate finally decreasing and disposable income increasing, consumers are hitting Main Street once again for some retail therapy. Often facing overwhelming competition from retail megastores, many small businesses face an uphill battle from the outset and often don’t survive beyond a couple years. Some industries, however, offer better prospects for entrepreneurial endeavors. Based on IBISWorld research, the following are the top five small-business retail sectors based on start-up costs, barriers to entry and estimated revenue growth in 2012.
Retail Sector - Estimated 2012 Revenue Growth (%)
Tire Dealers 10.0%
Handbag, Luggage and Accessory Stores 5.5%
Art Dealers 4.0%
Furniture Stores 3.4%
Specialty Food Stores 2.3%
Tire Dealers
Opening a tire dealership probably isn’t on the top of anyone’s to-do list for 2012, but based on numbers alone, it’s one of the most promising small-business retail sectors to start a business. Changes in consumer preferences toward more fuel-efficient tires and pent-up replacement tire demand from people who postponed purchased during the recession are expected to fuel industry profit in 2012. IBISWorld expects revenue to grow at an average rate of 3.1% per year in the five years to 2016, and 10.0% in 2012 alone.
Handbag, Luggage and Accessory Stores
With the recession in the rear-view mirror, people are slowly loosening their purse strings on more discretionary purchases, including of purses nonetheless. Aside from small hiccups during the recession, handbag, luggage and accessory stores have fared rather well. The dips in consumer confidence and disposable didn’t significantly discourage shoppers, and now that both of these factors are on the rise, sales are also forecast to increase. With revenue expected to grow at an average annual rate of 5.1% through 2016, this retail sector offers appealing opportunities for start-ups.
Art Dealers
It’s unlikely that consumers will come across an original Picasso at their local art dealer, but that won’t stop them from looking in 2012. Similar to most luxury goods retailers, art dealers experienced a surge in demand while the economy was booming, with wealthy consumers splurging on original art. Although that demand slowed during the recession, it is expected to return as fine art’s investment and aesthetic appeal increases. Requiring only the ability to source and value artwork, the low levels of labor and capital needed to get started in this sector make it an appealing one for start-ups. IBISWorld estimates revenue for art dealers to grow 4.0% in 2012 and at an average annual rate of 4.3% through 2016.
Furniture Stores
Although some furniture can be viewed as nondiscretionary, demand for furniture generally follows trends in consumer sentiment and income levels. Prior to this year, furniture stores experienced a harsh drop in demand as confidence in the economy fell and Americans reduced their spending. But with homeownership and per capita disposable income expected to increase in 2012, consumers will stop flipping over the couch cushions and finally upgrade their furniture. As such, 2012 offers great opportunities for furniture store entrepreneurs, especially with revenue projected to increase 3.4% in 2012 and at an average annual rate of 3.0% through 2016.
Specialty Food Stores
The foodie population is expanding fast. While supermarkets continue to serve the majority of this customer base, there is a growing number of consumers who want a finer, and sometimes even more exotic, eating experience. There’s no doubt that spending on high-end food took a hit during the recession as Americans tightened their wallets and became more price conscious. But with disposable income increasing, people are once again seeking out their favorite foods. With low initial start-up costs and revenue expected to increase 2.3% in 2012, specialty food storeowners can expect business to heat up in the coming years.
About the Author
Eben Jose is an analyst with IBISWorld, the world’s largest independent publisher of U.S. industry research. IBISWorld’s team of expert analysts covers 700 different market segments.