The Taxable Retail Market size is expected to reach US$ 22.97 billion by 2030, from US$ 13.49 billion in 2023, 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 location. By product type, the largest segment is food and beverage, accounting for 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 Market during the forecast period, accounting for over 46.5% of the market share in 2022. The growth of the market in North America is attributed to high per capita incomes and a culture of mass consumption.
- The Europe market is expected to be the second-largest market for Taxable Retail Market, accounting for over 22.1% of the market share in 2022. The growth of the market in Europe is attributed to rising standards of living and a growing preference for premium retail experiences.
- The Asia Pacific market is expected to be the fastest-growing market for Taxable Retail Market, with a CAGR of over 18.7% during the forecast period. The growth of the market in Asia Pacific is attributed to rapid urbanization, a expanding middle class, and embracing of modern retail formats.
Figure 1. Global Taxable Retail Market Share (%), By Region, 2023
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.
- 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 omni-channel 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.
- Urbanization and Growing Middle Class in Emerging Markets: Ongoing urbanization and expansion of the middle class in emerging economies generates new demand, especially for consumer discretionary goods. By 2030, roughly two-thirds of the global middle class is expected to reside in Asia Pacific, per Brookings Institution. Rising standards of living in countries like China, India, Indonesia, and others is leading to higher retail spending per household. Western fast fashion brands, luxury retailers, and even grocery chains are eyeing growth opportunities in these developing urban centers. Domestic retail chains are also flourishing in these regions.
- Retail Industry Innovation and OmniChannel Retailing: Retailers are innovating with data analytics, AI-enabled customization, interactive in-store experiences, and seamless omni-channel capabilities to attract consumers. For example, beauty retailers like Sephora and Ulta enable virtual try-ons, personalized recommendations, and in-store tech interactions. Clothing brands like Nike and Lululemon use customer data to tailor products and direct marketing. Location analytics supports targeted promotions when shoppers are nearby. Buy online, pick up in-store and ship-to-store fulfill omnichannel demands. Retail innovation makes shopping more convenient, customized, and engaging for consumers.
Taxable Retail Market Opportunities:
- Leveraging E-Commerce and M-Commerce Channels: As more shopping moves online, e-commerce and m-commerce present enormous opportunities for taxable retail growth. Retailers can tap into new demographics by enhancing their digital presence and improving customer experience on websites and mobile apps. Investing in fulfillment capabilities like fast shipping and in-store returns also helps meet customer expectations. E-commerce provides reach into new geographic areas as well. With the global e-commerce market size projected to grow at over 15% annually, retailers have significant room for digital expansion and gaining market share.
- Capitalizing on Experiential Retail and OmniChannel Strategies: Next-generation physical retail destinations focus on creating interactive, engaging experiences for customers. For example, showing how products can enhance lifestyles through in-store demos and experiences. Omni-channel capabilities like BOPIS, ship-to-store, mobile checkout, location-based promotions, virtual reality, and more seamlessly bridge online and offline channels. Curating localized offerings and services tailored to neighborhood demographics and preferences is another opportunity. Experiential retail done right promotes loyalty and brand affinity.
- 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.
- 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.
Taxable Retail Market Report Coverage
||Market Size in 2023:
||US$ 13.49 Bn
|Historical Data for:
||2018 to 2021
||2023 - 2030
|Forecast Period 2023 to 2030 CAGR:
||2030 Value Projection:
||US$ 22.97 Bn
- North America: U.S. and Canada
- Latin America: Brazil, Argentina, Mexico, and Rest of Latin America
- Europe: Germany, U.K., Spain, France, Italy, Russia, and Rest of Europe
- Asia Pacific: China, India, Japan, Australia, South Korea, ASEAN, and Rest of Asia Pacific
- Middle East & Africa: GCC Countries, Israel, South Africa, North Africa, and Central Africa and Rest of Middle East
- By Product Type: Food & Beverage, Apparel & Footwear, Consumer Electronics, Home Improvement, Personal Care & Beauty, Toys & Games, Others
- By Distribution Channel: Hypermarkets & Supermarkets, Convenience Stores, Online, Specialty Stores, Department Stores, Drug Stores/Pharmacies, Others
- By Location: Standalone, Malls, Strip Centers, Power Centers, Lifestyle Centers, Factory Outlets, Others
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
- Growing Consumer Spending and Disposable Incomes
- Increasing Internet and Smartphone Penetration
- Urbanization and Growing Middle Class in Emerging Markets
- Retail Industry Innovation and Omni Channel Retailing
|Restraints & Challenges:
- Rising Real Estate, Operating Costs and Taxes
- Intense Competition in Fragmented Market
- Supply Chain Disruptions and Inventory Issues
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 a star player. Brands aim to embed within cultural zeitgeists. Pop-up shops that attract social media photo shares are another example of this trend in action.
- 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.
- Personalization and Customization: Retailers are leveraging data analytics and AI to make shopping hyper-personalized. Dynamic pricing, customized product recommendations, tailored promotions and location-based targeting create individualized experiences that win consumers. Made-to-order items based on consumer preferences also fall under this trend. Platforms like Nike By You that let shoppers digitally customize products perform well. Personalized retail feels more relevant and helps drive sales.
- Smaller-Format Brick-and-Mortar: While big box retailers add smaller formats, even e-commerce players are exploring streamlined physical stores to enhance branding and sales. Target, Ikea, Best Buy, Costco and others are shrinking stores to locate in urban areas where real estate is limited. Smaller stores allow flexibility in customizing to local shoppers. E-commerce retailers like Amazon and Warby Parker operate small-format shops mainly for lift in brand awareness and product trials. Smaller brick-and-mortar gains traction especially in high-density cities.
Taxable Retail Market Restraints:
- Rising Real Estate, Operating Costs and Taxes: High real estate costs to secure prime locations remains 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 applting special taxes on retailers or raising sales tax rates additionally dampens consumer spending power. Tax policy reforms to support retailers could help alleviate cost pressures.
- Intense Competition in Fragmented Market: The retail industry is highly fragmented with many players vying for market share across different segments, channels and geographies. Online pure plays like Amazon compete directly with brick-and-mortar incumbents. Small independent stores retain niche consumer bases. Market saturation leaves retailers fighting aggressively on pricing and promotions to capture demand, hurting margins. High consumer expectations also raise the competitive bar. These factors make sustaining profitable growth challenging.
- Supply Chain Disruptions and Inventory Issues: Recent supply chain bottlenecks stemming from COVID 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 omni-channel fulfillment capabilities provides a competitive edge. Inventory optimization also helps retailers improve margins.
New product launches:
- 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 launched owned food and beverage brands Good & Gather, Favorite Day, and others. This strengthens its competitive positioning in groceries.
- In May 2020, Walmart introduced Walmart+, a new membership program offering unlimited free delivery and other benefits. This helps Walmart better compete with Amazon Prime.
Acquisition and partnerships:
- In January 2022, CVS acquired Signify Health for around $8 billion. This expands CVS' healthcare services offerings.
- In October 2020, Walgreens partnered with VillageMD to open 500-700 doctor-staffed clinics in its stores over the next 5 years. This expands its healthcare services.
- In June 2021, Nike acquired Datalogue, 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
Top companies in Taxable Retail Market:
- Best Buy
- Home Depot
- Walgreens Boots Alliance
- CVS Health
- Rite Aid
- Ace Hardware
- Dick's Sporting Goods
- L Brands
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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