Social & Economic Impact of Retailing

Instructor: David Whitsett

David has taught computer applications, computer fundamentals, computer networking, and marketing at the college level. He has a MBA in marketing.

Retailers impact their local community through their involvement in social causes and creation of jobs. In this lesson, we'll examine the social and economic impact of retailing.

A New Store Comes To Town

A mega-retailer is coming to your community. Job fairs are bringing a buzz ahead of time. Construction workers and trades people participate in the building of the store. On grand opening day, there's a sea of cars. The management decides to bond with the community through charitable donations to local causes and sponsorship of youth sports teams. Within a short period of time, the retailer has made quite an impact both socially and economically.

This store-opening example is a microcosm of how retailers affect their local communities on a daily basis. Let's take a look at its impact from an economic and a social basis.

The Economic Impact of Retailing

The retail industry is made up of individuals and companies that sell finished goods to end-user consumers. How big is retail? An estimated two-thirds of the U.S. gross domestic product (think total size of the economy) comes from retail sales. According to the U.S. Bureau of Labor Statistics, as of May 2015 over 15 million people were employed in the retail industry. Five of the world's top ten retailers are headquartered in the U.S. (Walmart is the biggest).

So retail is big; very big. As such, it can have an enormous impact on local and national economies. During the Christmas season, the retail industry does almost 20 percent of their annual business. They also hire extra help, which creates temporary jobs. Retail sales figures are often used as a measuring stick of the overall economy and consumer confidence. Of late, jobs in the retail clothing sector in physical store locations have declined across the U.S. because of inexpensive and convenient online options. But the retail sector overall has still been growing on an annual basis because it also includes non-store sales.

The Social Impact of Retailing

Let's go back to our store-opening example. Let's say that a month after the store opens someone sees a store employee dumping trash into the creek behind the store. A video of the incident goes viral and the story makes the local news.

Some consumers avoid spending money with organizations that behave irresponsibly or unethically (like dumping trash in a creek). Many consumers feel better about supporting brands that use sustainable business practices like selling goods made of recycled materials. Corporate social responsibility (CSR) is a broad concept that includes delivering economic, environmental, and social benefits to stakeholders through sustainable business practices.

Using a recyclable bag is a common CSR practice
Recyclable bag

How does this translate to the retail sector? Here are some CSR practices that make sense for retailers:

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