By Randy Snyder
The subject, by virtue of the effect it is having on all of our shopping habits is important to everyone. The retail scenario has undergone many different changes throughout the years. The era of shopping downtown transcended shopping centers borne with “strip centers” manifesting into enclosed, air conditioned malls in the mid-fifties, power “big box” stores in the nineties bringing us to the present phenomena, e commerce or the “on line” shopping habit that is transforming the way people shop and buy.
The most vulnerable shopping mainstay to realize adverse effect due to e commerce shopping is the giant enclosed shopping mall we have grown to know and love. From 1956 to 1995, the exponential growth brought us over 1500 shopping centers nationwide. Many of our national chains depend on their stores in these shopping venues for their sales growth in terms of increased revenue and growth through proliferation. As the shopping centers wane in importance as a part of the national retail revenue growth at the expense of e commerce shopping, the same national chains suffer lost sales forcing store closures necessary to sustain the remaining stores along with building their e commerce platforms as well.
Some of the familiar names and their estimated store closures in 2017 are Sears and K mart – 358, JC Penny – 158, Payless Shoes – 800 – 900, Macys’ – 68, Gap – 200, Radio Shack – 1000. High end brands that may not survive 2018 are Neiman Marcus, Tiffany and Saks. A “shake out” of the retail industry is inevitable due to the fact that the US dedicates more space to retail than any other country in the world – five times more shopping space per capita than the United Kingdom and 40% more than Canada! The metamorphous is forecasted to lead to the closing of 20 to 25% of our enclosed shopping malls over the next five years.
Conversely, e-commerce, or the metaphorical name of “on-line shopping” led by the behemoth, Amazon will grow at a double digit rate and realized an approximate 23% year over year. Amazon has now entered into the grocery sector with their purchase of Whole Foods and also the brick and mortar business opening book stores in several cities suiting the type of customers that uses its websites featuring Amazon’s technology products such as the Kindle e-reader. It is worth mentioning that Amazon says one employee can handle five sales at the same time it takes one sales associate at a brick and mortar store to close one sale. It is estimated that the current (2017) holiday shopping season will realize an overall 3.6% sales increase and Amazon is forecasted to realize over half of the total sales increase!
The prominence of on-line shopping can be further illustrated by the fact that shoppers are spending approximately 36% of their shopping budget on line and 96% of Americans have made an on line purchase and 80% in the past month. The two generations that are the most frequent shoppers clearly favor shopping on-line as 67% of millennials and 56% of Generation X prefer this choice.
Another ancillary and negative affect of this evolution will be the jobs that exist due to sales associates in the brick and mortar stores. As sales dwindle sales associate numbers and budgets will be cut back. Also the training for associates will be reduced as well. Quality associates offering exceptional service has become the exception rather than the norm over the years. The pall regarding retail employment does not bode well for the estimated 14.8 million people, about 10% of the US labor force currently employed. Smart retailers will focus on productivity and training of existing staffs creating benchmarks and resolve the “out of stock problem” with in-store portals having direct access to warehouse and nearby store’s inventories to satisfy customers on the spot shipping items delivered to their home addresses.
Inevitably, many large shopping centers will become ghost towns. However, savvy and well positioned developers with centers located in prime suburban locations can change to attract new and retain existing clientele. The addition of entertainment venues, dining choices, personal grooming stores such as hairdressers, cosmetic salons, nail salons, spas, electronic and technology outlets will revitalize those locations. Also, off price retailers, i.e. TJ Maxx, sporting goods giants such as Dick’s sporting goods and Academy sports can also re-lease large amounts of empty spaces created by department store vacancies.
All statistics in this article were found in Newsmax Magazine, October, 2017.