As industries evolve and new business models emerge, so too does the need for accurate and up-to-date economic data. The North American Industry Classification System (NAICS), which has long been the backbone for classifying industries in the U.S., Canada, and Mexico, has recently undergone a significant update. This marks the first year the U.S. Census Bureau will release economic data based on the latest version of NAICS — the 2022 NAICS.
At Gain Consulting, we understand the importance of staying ahead of regulatory changes, particularly those that affect industry classification and reporting. In this post, we’ll explain the key changes in the 2022 NAICS update and what they mean for businesses operating in today’s rapidly changing economic landscape.
Why the NAICS System Matters
The NAICS system is crucial for businesses, government agencies, and analysts alike. Developed as part of a tri-national agreement between the U.S., Canada, and Mexico, it provides a consistent framework for classifying industries based on the activities businesses engage in. This classification system is used to:
Gather and analyze economic data — by government agencies such as the U.S. Census Bureau.
Forecast industry trends — for use by trade organizations and analysts.
Make business decisions — by companies evaluating market trends, potential investments, and competitive landscapes.
Whether you’re evaluating industry performance, making investment decisions, or measuring market share, understanding NAICS classifications is essential for any business looking to stay competitive and make data-driven decisions.
What’s Changed in the 2022 NAICS Update?
The 2022 update introduces over 100 changes across the NAICS codes. These adjustments reflect the ongoing evolution of the economy, especially in the wake of technological advancements, changing consumer behavior, and the rise of new industries. Let’s dive into some of the most impactful updates.
1. Retail Trade: A Shift Toward Product Categories
One of the most significant changes in the 2022 update affects the Retail Trade sector (NAICS 44-45). In the past, retail businesses were categorized based on the method of selling — for example, distinguishing between brick-and-mortar stores and online retail. However, the 2022 revisions place the focus on the types of products being sold, rather than the sales channels used.
For instance:
Electronic Shopping and Mail-Order Houses (454110) and Other Direct Selling Establishments (454390) have been merged with their corresponding storefront industries, reflecting the fact that many businesses now operate both online and in physical spaces.
An example of this change is the Hardware Retailers (444140) category, which now includes both traditional hardware stores and those that sell primarily online, where sales used to be classified separately.
This change will simplify the classification system and better align it with how consumers and businesses shop today, blending both online and offline sales activities under broader product-based categories.
2. Information Sector: Adapting to the Digital Shift
Another key change takes place in the Information sector (NAICS 51). Previously, businesses were categorized based on whether they published content through traditional means (like print media) or via digital platforms (like online publishing). The 2022 update eliminates this distinction, better reflecting the digital transformation of the media and publishing industries.
For example, Newspaper Publishers (511110) and Internet Publishing and Broadcasting (519130) have been merged under a single category, Newspaper Publishers (513110).
Similarly, Broadcasting (except Internet) (515) and other related services have been combined into Broadcasting and Content Providers (516), reflecting the increasing convergence of traditional and digital media.
These changes streamline industry categories, making it easier for businesses in the information sector to track their operations and report economic data, regardless of their method of content delivery.
3. Wholesale Trade: Mergers and Streamlined Classifications
The Wholesale Trade sector (NAICS 42) also saw some changes, including the consolidation of certain codes to simplify reporting. For example:
Men’s and Boys’ Clothing and Furnishings Merchant Wholesalers (424320) and Women’s, Children’s, and Infants’ Clothing and Accessories Merchant Wholesalers (424330) have been combined into one new category, Clothing and Clothing Accessories Merchant Wholesalers (424350).
These kinds of mergers and consolidations help to reduce fragmentation and make data collection more cohesive, allowing businesses to have a clearer view of industry trends.
When Will These Changes Be Reflected?
The 2022 Economic Census will be the first major publication to reflect these updates, with its release scheduled for December 2024. Over the next few years, other Census Bureau economic programs will transition to the new NAICS codes, with full implementation expected by 2027.
For businesses that rely on NAICS for reporting or benchmarking, it's important to be aware of these changes now. If you use NAICS data for regulatory compliance or strategic planning, aligning your reporting with the new classifications will help ensure that your data is accurate and up-to-date.
How Will These Changes Affect Your Business?
The changes in the 2022 NAICS update may affect your business in several key areas, from market analysis to reporting and strategic planning. Here’s what you need to know:
1. Data Accuracy and Reporting
If your business uses NAICS codes for reporting to government agencies, financial institutions, or industry organizations, you’ll need to ensure that you’re using the correct updated classifications. Aligning with the new codes will ensure your data is accurate and consistent with the latest industry standards.
2. Market Analysis and Strategic Planning
The shift in classification within sectors like retail and information means that businesses will need to adjust their market analysis frameworks. Companies in sectors that are heavily impacted by digital transformation—such as retail and media—will need to reframe how they analyze industry trends and competitors.
Understanding the broader categories in which your business operates will help you identify new opportunities and stay ahead of shifting industry dynamics.
3. Investing and Forecasting
For businesses and investors evaluating new markets or considering investments, the NAICS update offers clearer insights into emerging industries and sectors. By tracking the updated NAICS codes, businesses can make more informed decisions about where to allocate resources and how to respond to evolving market demands.
Conclusion: Stay Ahead of the Curve with Gain Consulting
The 2022 NAICS revisions reflect the continued evolution of the U.S. economy, particularly in the retail, information, and wholesale trade sectors. By aligning your business with the latest classifications, you can ensure that you’re making data-driven decisions based on the most current industry standards.
At Gain Consulting, we specialize in helping businesses understand and navigate regulatory changes like the NAICS update. Our team is here to help you make sense of the new classifications, adjust your reporting processes, and leverage updated data for strategic decision-making.
If you need help understanding how the 2022 NAICS updates impact your business or want to discuss how to adapt your strategies in light of these changes, contact us today. We're here to support you as you navigate these changes and stay ahead of the competition.
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