Hardline and Softline Goods in Retail
There are two basic forms of merchandise in a retail store: hardline and softline. The term soft goods or softlines refers to merchandise that is literally "soft." Hard goods or hardlines are goods that are "hard" to the touch.
A store department or product line primarily consisting of merchandise such as hardware, housewares, automotive, electronics, sporting goods, health and beauty aids or toys would be considered hardline goods.
A store department carrying apparel or linens (sheets) products would be examples of softlines. Typically, we think of clothing stores as softline businesses and everything else as hardline. There are many items included in the soft goods line such as footwear, hats, books, and belts. Softlines give the retailer more flexibility with its visual merchandising as well since these items are smaller and easier to display than a hard good like a treadmill or television.
Examples of Softlines and Hardlines Stores
Retailers like Best Buy and HH Gregg are hardline retailers. They carry a large array of consumer electronic goods like televisions, stereos, and refrigerators. Other retailers like Bed Bath and Beyond focus on softlines with a wide array of linens and curtains and towels.
Probably the most common soft good retailers are apparel stores like Banana Republic or the Gap. There are many clothing retailers for all ages, so the softline category actually has more stores in total than hardline. Retailers like World Market and Pier 1 carry both. They have furniture (hardline) and drapes (softline.) Sporting goods retailers like Dick's also are good examples of the "both" category with lots of hardline inventory like fitness equipment and bikes mixed with softline items like running shorts and shoes.
Retailers who carry hardline goods are often called "big box" retailers since the products need so much space for display. But the big box label is due more to overall square footage of the store than the type of inventory. In recent years, manufacturers have made a concentrated effort to reduce packaging sizes to help with display space but sometimes are just naturally large. And customers want to be able to see and touch a product before they buy it.
Online Versus Brick-and-Mortar
While online retailers have had some success with hardline goods, brick-and-mortar stores still own this space. In fact, one of the pains of brick-and-mortar establishments is the concept of showrooming, where customers come into a retail store to touch and try a product and then go online to purchase.
The touch and feel aspect is becoming even more important in shopping than ever. Recent studies have shown that shoppers are more leery of online buying without being able to interact with the product first. This is what is many online retailers are no opening stores like Amazon.
How they Rate
Typically the gross margin in hardline goods is lower than that of soft lines. This is why you see so many retailers carry accessories and other items with higher margin to offset the low margins on televisions and washing machines.
Analysts group retailers into these two groups when considering investing or monitoring the economy. Often you will hear in the news that retail is down in sales, but the truth is hardline retailers might be down and softlines up during the same period.
Cost: A Big Factor in Each Sector's Performance
Hardline retailers take a bigger hit when the economy slows down. This is mainly due to the price point of hardline items being so much higher. But it's also a want-and-need thing as well. For example, people who want a new washing machine because their old one is acting up will try and see how long they can go before buying a new one when the economy is bad. But when things are good, they may act more quickly.
These economic factors are why we have seen so many retailers either close their doors or merge with others. The anchor stores for malls, such as Macy's and JC Penney, have long been multi-line retailers carrying both hard and soft goods. Though, they have been scaling back the hardline goods and focusing more on soft by removing their electronics or furniture departments and expanding their home furnishings and apparel.