Yesterday, I drove past a dinosaur in economically-struggling Lima, Ohio and it all hit me. Entire communities hinge on the success of anchor stores. This particular retail development is home to nearly 800 jobs (affecting 1,000 more jobs) in a town of 38,500.
Online is cannibalizing the store business, said Marshal Cohen, chief industry analyst at the NPD Group. But we know this, already. What many may not realize is just how fast the fall of brick & mortar retail is happening. Additionally, we are not considering the macroeconomic factors that that are speeding the inevitable.
Commercial real estate is booming in the United States (despite businesses’ ability to keep up). Leases continue to trend upward and to the right as eCommerce giants like Amazon (who do not need to pursue traditional commercial leases) are trending in the same direction. Dwindling demand at brick and mortar retailers hinder longterm vision for new investments that could prevent path to a business’ bankruptcy.
via Wolf Richter:
There has been a large increase in stalled transportation vehicles including trucks and trains which simply have gone out of business due to a lack of demand in the market. This shows us the effects of the 2008 financial crisis still linger on heavily even today. The lack of demand and surplus of supply in many sectors of the economy including retail is continuously putting the U.S economy in a downward spiral and has kept it on the brinks of another recession.
I am a cheerleader for the proliferation of eCommerce but I also realize that eCommerce growth will contract, as well, if there aren’t people to buy the products. With an estimated 400 of 1,200 malls set to shutdown in the next five years, our somewhat thriving economy will begin to teeter into recession for the first time since 2008 unless retail expectations are met by department stores. Struggling stores like Macy’s, Kohl’s, and J.C. Penney anchor and subsidy the rest of the mall’s hundreds of employees. The system doesn’t work without their success.
While it seems that eCommerce is to blame for the department store retail recession, it can also be a part of the solution. Tomorrow, in part two of this last word, I will summarize how an omni-channel solution for major retailers coupled with partnerships with startups like Postmates could curb the mall real estate exodus and attempt to play ball in an increasingly Amazon-driven world.
Seeking Alpha: “Consumer Spending is in The Toilet”
Business of Fashion: “Why Americans Aren’t Shopping”
See more of the issue here.