The âAmazon Factorâ and Covid-19 only hastened the shutdown process. Before 2020, some of the largest retailers were forced to reorganize or liquidate due to large debts incurred by private equity buyouts. Here is a list of other factors that contribute to the ongoing decline of bricks-and-mortar retail:
- Record closings â In 2020, 9,553 stores closed, a figure that was up slightly from the 9,548 stores that closed in 2019. The most significant closures (250+ stores) announced in 2020 include GNC (1,200 stores), Pier 1 Imports (936), Stage Stores (738), Justice (600), Tailored Brands (Menâs Wearhouse and Jos. A. Bank; 500), Zara (500), Catherines (320), GameStop (320), Starbucks (267), Papyrus (254), AT&T (250), and Victoriaâs Secret (250). Since the Great Recession began in 2007, more than 45,000 U.S. stores have closed. Abandoned shopping malls are increasingly turning into hulking gray masses, a phenomenon dubbed â Grayfields.â
- Selling metrics â A key retailing parameter, sales per square foot, has fallen precipitously at public retailers from an average of nearly $375 in the early 2000s to around $325 in recent years, according to commercial real estate research firm CoStar, citing U.S. Census, Moodyâs Analytics and CoStar Portfolio Strategy data.
- Dying malls â The New York Times weighed in with this startling headline: âDepartment Stores, Once Anchors at Malls, Become Millstones.â Ouch! Whatâs driving this trend? The following phenomena have a lot to do with it:
- Digital Lifestyle and Time Compression â The Digital Lifestyle Ubertrend is altering shopping behavior, driving more consumers to shop online, which jumped 27% in 2020 (see âMind the Gapâ). Not only is it more convenient to shop online, it also saves money. As BusinessWeek observed in May 2005, âThe typical one-hour trip to the mall costs about $30 at the average hourly pay for managers and professionals.â Besides the âtime is moneyâ justification, consumers save on gas or public transportation. This growing realization is amplified by the Time Compression Ubertrend, which has given everybody a big case of too-busy disorder.
- Prime membership â Real estate developers count on premium retail brands to anchor shopping malls. However, Amazonâs 200 million Prime members are siphoning off sales from brick-and-mortar stores, causing retailers to collapse and abandon retail outlets. In its core markets of books, music, and consumer electronics, Amazon has had a devastating impact on the retail landscape, contributing to the loss of such former stalwarts as Blockbuster, Borders, Circuit City, Good Guys, RadioShack, and Tower Records.
- Own worst enemy â The retail industryâs challenges are partially self-inflicted. Capgemini reported that âa third of consumers would rather âwash the dishesâ than shop in-store.â While that means that two-thirds are still OK with shopping in brick-and-mortar stores, the question is for how long? USA Today reports that millennials are âkillingâ department stores, noting that traditional retail is ill-equipped to address the needs of this generation.
- Mind the gap â Another issue is that pundits and retail analysts have been fixated on the large gulf that separates U.S. retail and e-commerce sales for years now. In 2020, U.S. retail sales were $4.8 trillion, down 0.7% from 2019. U.S. e-commerce sales, in comparison, while âonlyâ $759 billion in 2020, increased 27% from $598 billion the year before. While the pandemic fueled that e-commerce growth rate, itâs clear what direction the market is heading in.
By 2035, as much as 40% of U.S. retail sales, or more than $2 trillion will move through online channels.â
â Michael Tchong
Ubertrends
By 2035, as much as 40% of U.S. retail sales, or more than $2 trillion will move through online channels. The chief driving forces driving this trend are AI, machine learning, and industrial robotics, which will optimize how products consumers buy are chosen, warehoused, packed and deliveredâŠthe same day.
Ubertrend Categorization: Digital Lifestyle and Time Compression.
Photo of Borders at the AOL Time Warner Center in New York on Jun. 13, 2004 by Michael Tchong.