Tuesday, April 18, 2017

Retail Tipping Point and Wider Impact

Here is a New York Times article from over the weekend on the impact of store closings.  The article is broad in its scope.  There are so many factors impacting retail that it is hard to point to one dominant cause for retail's problems.  E-commerce is surely a factor and the improvements to delivery will drive its growth.  Still, trying clothes on before purchase is not going to go away.  Buying online on spec and hoping clothes fit gets old fast with the hassle of returns. But something big is happening, especially since the overall economy is still growing.
Store closures, meanwhile, are on pace this year to eclipse the number of stores that closed in the depths of the Great Recession of 2008. Back then Americans, mired in foreclosures and investment losses, retrenched away from buying stuff.

The current torrent of closures comes as consumer confidence is strong and unemployment is low, suggesting that a permanent restructuring is underway, rather than a dip in the normal business cycle. In short, traditional retail may never recover.
A strong real estate market is not helping retailers.  As landlords push rents they are forcing retailers to close, and apparently, it is not just the small, local retailers, as evidenced by empty stores on 5th Avenue, Beverly Hills, and SoHo.  I noted this urban high rent blight here

I repeat this passage in the middle of the New York Times article without much comment because of its severity:
Between 2010 and 2014, e-commerce grew by an average of $30 billion annually. Over the past three years, average annual growth has increased to $40 billion.

“That is the tipping point, right there,” said Barbara Denham, a senior economist at Reis, a real estate data and analytics firm. “It’s like the Doppler effect. The change is coming at you so fast, it feels like it is accelerating.”

This transformation is hollowing out suburban shopping malls, bankrupting longtime brands and leading to staggering job losses.

More workers in general merchandise stores have been laid off since October, about 89,000 Americans. That is more than all of the people employed in the United States coal industry, which President Trump championed during the campaign as a prime example of the workers who have been left behind in the economic recovery.

The job losses in retail could have unexpected social and political consequences, as huge numbers of low-wage retail employees become economically unhinged, just as manufacturing workers did in recent decades. About one out of every 10 Americans works in retail.
I think it's time to start start re-purposing or razing real estate.

1 comment:

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