Department stores like Sears, K-Mart, J.C. Penney and Macy’s are closing locations in droves. Retail brands like Bebe, Family Christian Stores and American Apparel have disappeared from storefronts.Nearly every major newspaper and business magazine has run stories about the supposed decline in retail.
While this narrative may seem to hold water when one drives past shuttered big-box stores and observes empty mall storefronts, it’s almost entirely lacking in factual basis.
Quite simply, America’s retail sector is healthy overall and the areas that are declining can count e-commerce as only one cause of their decline.
Total employment in the retail sector did fall slightly in 2017 and will probably continue the decline in 2018, but, according to the Bureau of Labor Statistics, the sector’s unemployment rate — people previously employed in retail and looking for work — also fell.
Meanwhile, productivity in the retail sector rose along with both capital investment and wages.
Put together, these statistics paint a picture of a healthy economic sector where store owners can’t find the workers they might want and, instead, are investing in higher wages and new technology to make more money and serve more customers with a very slightly smaller labor force.
This is prosperity, not apocalypse.
But what about the shuttered big-box stores and dying malls? They’re real, of course, but hardly anything new.
Enclosed malls have been in decline for a long time, along with the department-store chains that traditionally anchored them. Only two large enclosed malls are under construction right now anywhere in the United States, and fewer than 10 have opened in the last 10 years.
For decades now, new shopping complexes all around the country have overwhelmingly been town-center designs that combine traditional urban aesthetics with outdoor amenities, ample parking, and mixed uses like residences and offices.
Anchors are more often destination retail than multiline department stores. This simply reflects changing tastes and business models similar to those that saw most downtown department stores replaced with enclosed malls between the 1960s and 1980s.
E-commerce is a small part of the reason for the decline of these traditional malls. According to the Department of Commerce’s most recent statistics, only 9.1% of retail sales take place online and, while they are likely to continue significant growth, such sales probably won’t ever make up even half of all retail sales.
Seven of the top 10 American online retailers are companies like Home Depot, Best Buy and Macy’s, which do the overwhelming majority of their business offline. All of these brands make some “online” sales via pickup at traditional stores.
Furthermore, many stores found in shopping centers like sit-down restaurants and hair salons do business that can’t move online ever as they are currently conceived.
Important products that make up a sizable share of retail sales like fuel, building materials, tires and ready-to-eat hot food are more or less impossible to sell online and ship to homes from centralized distribution centers in the way people want.
And others like fresh groceries, medicines, grooming products, automobiles, furniture, appliances and clothing are things that many people will want to touch, smell, feel and try before buying and will often want to have right away rather than waiting even a few hours for delivery.
Many sales for these items will probably never take place online.
While there are a few sizable companies like Overstock.com and Zulily.com that do sell their wares only online, many of the large e-commerce companies are actually moving offline: E-tail giant Amazon.com has not only purchased Whole Foods’ 450 or so stores but is also opening a few shops under its own brand.
Retail will continue to change. Traditional midrange department stores may well soon go the way of video rental stores, music stores, muffler shops, and horse-buggy technicians.
More malls may close. Other types of stores may have to provide more services, human expertise and entertainment to keep customers coming in. Some storied retail names will surely vanish from the American consciousness.
But that doesn’t mean retail is on its way out. Humans tend to be tactile, so when they buy stuff, they’ll often head to a store.
Image credit: Syda Productions