Issue No. 189: The next 40 years.

Last Word: The Great Retail Divide

Bloomberg’s Shelly Banjo brought this graph to my attention today.  The most dramatic point is the steep decline of retail business beginning in Q3 of 2008, coinciding with the great recession. The y-axis is pretty damning, upon inspection. While some argue that eCommerce is but 9% of all retail sales, this illustration tells the real story. Department store retail and its associated real estate are at recession levels of activity with no recovery in sight. Additionally, department stores have suffered from negative growth for the majority of the last 10 years. eCommerce has enjoyed 6-12% growth YoY during that same time period.

I’m no economist but as I’ve mentioned in “House of Cards” (Issue 179), a mass default of second and third tier malls could potentially move us towards the commercial equivalent of 2007’s housing bubble. While that would be an incredibly negative period for most of America, it’s this type of event that would lead to mass adoption of eCommerce, out of sheer necessity. I define that as a jump from 9% to 25% before 2020.

Much like China’s progression, where 89% of tier one city inhabitants shop online, the country’s reliance on eCommerce wasn’t solely software-driven. The swift adoption was influenced by lacking brick and mortar retail opportunities and an increase in eCommerce shipping and logistics real estate.

To keep up with increasing demand from smaller urban and rural areas, online retailers are seeking to expand logistics infrastructure and services. For example, Alibaba’s logistics arm, Cainiao, now owns 180,000 express delivery stations for the shipment of products and has recently expanded its fresh food distribution centers across China. The firm recently completed its first external funding round and is expected to spend $16 billion over the next five to eight years to expand its network. (Economonitor)

As department store retail sputters in much the same way that print media has, it will provide us opportunities to accelerate towards the mass adoption of the next 40 years of American consumerism.  – @web

See more of the issue here.

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