TAXABLE RETAIL MARKET SIZE AND SHARE ANALYSIS - GROWTH TRENDS AND FORECASTS (2023 - 2030)

The taxable retail market size is expected to reach US$ 22.97 billion by 2030, from US$ 13.49 billion in 2023, growing at a CAGR of 7.9% during the forecast period.

The taxable retail market refers to the portion of overall retail sales that is subject to sales tax. This includes most tangible goods sold through retail channels like grocery stores, department stores, drug stores, convenience stores, online retailers, and more. Key offerings in this market include food and beverages, apparel, consumer electronics, home furnishings and improvement goods, personal care items, toys and games, and other miscellaneous retail merchandise. Growth in the taxable retail market is driven by factors like rising disposable incomes, population growth, urbanization, and evolving consumer preferences.

The taxable retail market is segmented by product type, distribution channel, and Region By product type, the largest segment is food and beverage, accounting for 2022 over 25% of the market. The food and beverage segment is growing due to increasing demand for fresh, healthy, and convenient food options.

Taxable Retail Market Regional Insights:

• North America is expected to be the largest market for taxable retail during the forecast period, accounting for over 47% of the market share in 2023. The growth of the market in North America is attributed to high per capita incomes and a culture of mass consumption.
• Europe is expected to be the second-largest market for taxable retail, accounting for over 22% of the market share in 2023. The growth of the market in Europe is attributed to rising standards of living and a growing preference for premium retail experiences.
• Asia Pacific is expected to be the fastest-growing market for taxable retail, growing with a CAGR of over 18% during the forecast period. The growth of the market in Asia Pacific is attributed to rapid urbanization, an expanding middle class, and the embracing of modern retail formats.

Figure 1. Global Taxable Retail Market Share (%), by Region, 2023

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Analyst Viewpoint: The global taxable retail market remains lucrative with significant opportunities for growth. Rapid urbanization and rising disposable incomes in developing nations are key drivers of increasing retail spending. Evolving customer preferences now demand variety, value, and convenience pushing retailers to innovate consistently. However, market saturation in developed countries poses a restraint.

Online retailing is disrupting traditional brick-and-mortar stores providing customers access to virtually limitless selection. Asia Pacific currently dominates the global taxable retail space and is expected to continue leading with India and China as the fastest-growing retail markets. North America and Europe hold large revenue shares but show signs of maturing with online shopping gaining more traction.

Taxable Retail Market Drivers:

• Growing Consumer Spending and Disposable Incomes: Rising disposable incomes and growing consumer spending are major drivers of the taxable retail market. As households have more discretionary income, they are able to spend more on retail purchases of goods like clothing, electronics, home furnishings, leisure activities, dining out, and more. For example, US personal consumption expenditures increased steadily over the last decade, fueling retail sales growth. Higher incomes also enable consumers to trade up to more premium offerings. Additionally, low unemployment rates and strong labor markets in recent years have supported rising disposable incomes in many regions. This results in more consumer confidence and willingness to spend. According to Euromonitor International, in 2022, global disposable incomes and expenditure per household are both expected to grow 2023-2025 by 2.6%.

• Increasing Internet and Smartphone Penetration: Widespread internet and smartphone access has been a significant driver for the taxable retail market by enabling consumers to shop online anytime and anywhere. High-speed broadband connections allow for richer digital experiences. Mobile commerce is especially disrupting the retail landscape, with eMarketer forecasting retail m-commerce sales to exceed $3 trillion globally by 2025. Retailers who leverage omnichannel strategies tend to gain market share. Social media also influences retail as consumers turn to platforms like Instagram and TikTok for inspiration, recommendations and engagement. According to Pew Research Center, in 2023, although 100% of users now access the internet through mobile devices, the utilization of other gadgets like tablets, streaming devices, and 'smart' devices has increased from 8% in 2021 to 13% in 2022.

Taxable Retail Market Opportunities:

• Expanding Further into Emerging Markets: With factors like rising incomes and younger demographics, emerging markets offer enormous room for growth versus mature markets. Tailoring products and marketing for regional nuances provides an advantage. Partnerships with local retailers and distributors can enable market entry and expansion. Categories like apparel, consumer electronics, and personal care products have high growth potential as aspirations and middle-class lifestyles rise. Capturing market share early on among emerging middle-class consumers tends to engender long-term loyalty as economies develop. According to Reuters, the growth forecast for the emerging market and developing economies in July 2023,  has been revised upward to 4.0%, which is 0.3 percentage points higher than the October 2024 projection and 0.1 percentage point above the 3.9% estimate for 2022.
• Private Label and Direct-to-Consumer Offerings: Private label merchandise allows retailers to diversify into higher-margin categories under their own brands tailored to customer needs. For example, Target’s popular private-label brands now account for nearly one-third of sales. Direct-to-consumer models also present an opportunity to build deeper customer engagement and capture more value. Vertical integration can help retailers lower costs as well. Avoiding third-party intermediaries gives retailers more control over their brand experience. Private label and DTC strategies will open up differentiation and profitability opportunities. According to NIQ Data, sales of private-label food products have experienced a notable 16% growth over the 2020-2021 two years, reaching a total of US$ 135.5 billion as of March 2022.

Taxable Retail Market Trends:

• Experiential Retail Gaining Traction: Experiential retail that immerses customers in unique in-store adventures rather than merely product shopping is a growing trend. Retailers are incorporating food & beverage, entertainment, technology, community events, and more to make physical stores engaging destinations. For example, the NBA Experience store in New York lets customers shoot hoops and feel like star players. Brands aim to embed within cultural zeitgeists. Pop-up shops that attract social media photo shares are another example of this trend in action. According to India Retail, in 2022, the retail sector in India boasted a total value of US$ 836 billion. Traditional retail plays a dominant role, contributing 81.5% to the overall market, in 2021, followed by organized brick-and-mortar retail at 12%, with online sales channels making up 6.5%. in 2022.

• Sustainability and Ethical Sourcing: Sustainable retail practices such as renewable energy in stores, reduced packaging waste, LEED-certified buildings, recycling programs, responsibly sourced materials, and transparency around supply chains cater to eco-conscious consumers. More shoppers, especially younger demographics, align their values with brands that are ethical, inclusive, and environmental stewards. Retailers pursuing sustainability, fair trade, and local sourcing tend to foster consumer trust and loyalty. This trend drives growth for eco-friendly brands. According to Invest India, 2015 to 2021 over the past 8.5 years, India has witnessed an impressive 396% surge in its installed non-fossil fuel capacity, which nowxceeds 179.322 gigawatts, encompassing large hydro and nuclear sources. This accounts for approximately 43% of the nation's total capacity as of July 2023. Notably, India achieved the highest year-on-year growth in renewable energy additions, reaching 9.83% in 2022.

Taxable Retail Market Restraints:

• Rising Real Estate, Operating Costs, and Taxes: High real estate costs to secure prime locations remain a major restrain, especially with store footprint sizes shrinking. Rising property prices and commercial rents squeeze profit margins. Operating costs from labor, utilities, and inventory management also curb profitability. Local governments applying special taxes on retailers or raising sales tax rates additionally dampen consumer spending power. Tax policy reforms to support retailers could help alleviate cost pressures.

Counterbalance: Diversify your investment portfolio to include a mix of different asset classes such as stocks, bonds, and commodities. This can help to offset the risks associated with rising real estate costs.

• Supply Chain Disruptions and Inventory Issues: Recent supply chain bottlenecks stemming from COVID-19 impacts, climate events, labor shortages, and more have made it difficult for retailers to maintain optimal inventory levels. Out-of-stocks and excess inventory due to forecasting challenges impact revenues. Shipping delays alienate consumers. Supply chain visibility tools and resilience against disruptions are imperative. Building agile omnichannel fulfillment capabilities provides a competitive edge. Inventory optimization also helps retailers improve margins.

Counterbalance: In a taxable retail market facing supply chain disruptions and inventory issues, implement an effective inventory management system to track and manage your stock levels. This can help to prevent overstocking or understocking issues.

Recent Developments:

Key Developments:

• In January 2022, Amazon launched Alexa-enabled smart glasses called Echo Frames, allowing hands-free access to Alexa. This expands Amazon's wearables portfolio.
• In June 2021, Target, is an American retail corporation that operates a chain of discount department stores and hypermarkets, launched owned food and beverage brands Good & Gather, Favorite Day, and others. This strengthens its competitive positioning in groceries.
• In May 2020, Walmart, is an American multinational retail corporation introduced Walmart+, a new membership program offering unlimited free delivery and other benefits. This helps Walmart better compete with Amazon Prime.

Key Strategy Initiavtives:

• In January 2022, CVS, is an American retail corporation. A subsidiary of CVS Health, acquired Signify Health, Building trusted relationships to make people healthier. for around $8 billion. This expands CVS' healthcare services offerings.
• In October 2020, Walgreens, is an American company that operates the second-largest pharmacy store chain partnered with VillageMD, the nation's second largest pharmacy chain to open 500-700 doctor-staffed clinics in its stores over the next 5 years. This expands its healthcare services.
• In June 2021, Nike, is an American athletic footwear and apparel corporation acquired Datalogue, proprietary machine-learning technology a data integration platform. This enhances Nike's data analytics capabilities for personalized e-commerce experiences.

Figure 2. Global Taxable Retail Market Share (%), by Product Type, 2023

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Top Companies in Taxable Retail Market:

• Walmart
• Amazon
• Costco
• Target
• Best Buy
• Home Depot
• Kroger
• Lowe's
• Albertsons
• Publix
• Walgreens Boots Alliance
• CVS Health
• 7-Eleven
• Rite Aid
• Ace Hardware
• Menards
• Dick's Sporting Goods
• L Brands
• Nordstrom
• Macy's

Definition: The taxable retail market refers to retail sales of tangible goods that are subject to sales tax, as opposed to services and intangible goods like digital downloads which are often exempt. It covers retail channels like supermarkets, department stores, specialty retailers, convenience stores, drug stores, and online marketplaces. Key offerings include consumer staples like food and beverages, apparel, consumer electronics, home furnishings, personal care items, toys, and various other discretionary retail merchandise sold to end consumers. The taxable status depends on state and local sales tax regulations. The taxable retail market excludes resale activity, intermediaries, and retail sales to businesses. It is a major component of overall retail activity and an important barometer of consumer demand and economic health.

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