Question

Which of the following statements about NAICS codes is false?

1) Three-digit NAICS codes are very useful to the retail analyst.
2) In almost all instances, the NAICS code reflects the type of merchandise the retailer sells.
3) Four-digit NAICS codes provide much more information on the structure of retail competition than three-digit NAICS codes.
4) The U.S. Bureau of Census classifies all retailers using three-digit NAICS codes.
5) The major portion of a retailer's competition comes from other retailers in its NAICS category.

Answer 1

The false statement about NAICS codes is that the U.S. Bureau of Census classifies all retailers using three-digit codes; NAICS codes can range up to six digits for a more specific classification. Three-digit codes are broad, and retailers are classified with more detailed codes for precise categorization.

Step-by-step explanation:

The statement that is false among the ones provided about NAICS codes is statement number 4: "The U.S. Bureau of Census classifies all retailers using three-digit NAICS codes." In fact, the North American Industry Classification System (NAICS) provides codes ranging from two to six digits, with each additional digit providing a more specific category of classification. Three-digit NAICS codes are relatively broad, and therefore the U.S. Bureau of Census does not simply classify all retailers using only this level of detail. As the detail increases with the four-, five-, and six-digit NAICS codes, retail analysts can gain much more specific insights into the type of merchandise sold and the structure of retail competition.

Additionally, while it is true in many circumstances that a retailer's competition primarily comes from others within its NAICS category, it is important to acknowledge that competition can also arise from businesses outside of one's specific NAICS category, especially in the age of diversified retail services and online shopping.