The “retail apocalypse” has been wiping out malls across America, leaving vacant storefronts left and right. Part of this phenomenon traces back to the rise of online shopping, but that’s not the only reason physical stores are shutting down.
What we already know: Online shopping and the recession
It’s easy for the retail industry to point fingers at the rise of online shopping and the 2008 recession. Admittedly, blaming the digital revolution is somewhat on point.
Nearly everything can be bought online, allowing customers to shop from the comfort of their couches. Though some consumers still prefer to look for clothing in person, many shoppers do prefer the convenience of online shopping.
And the 2008 recession did lead to severe downsizing. Many people tightened their belts and cut retail spending out of their budget, which certainly hit stores hard.
These things did undoubtedly contribute to the demise of the retail industry, but they’re not completely at fault.
Companies can sell their products online, and the economy has drastically improved over the last decade, so there must be other factors at work here.
Store websites don’t bring in the same revenue
The competition online has ruined many people’s feelings of brand loyalty. Instead of going to a store that might have something that they want, people will just Google what they need.
Rather than clicking aimlessly around a particular store’s website, many shoppers just search for the product that they’re looking for and buy from the site with the best offer.
The ever-growing Amazon also has fed into this issue. Amazon offers a wider array of goods at prices that are hard to beat, allowing them to overshadow smaller companies.
Huge online retailers also offer free shipping and returns, which makes shopping at home easier than shopping in a store.
Another part of this issue is the fact that American interests are shifting. In 2016, Americans spent $54.8 billion on ordering take out and dining out, more than they spent on groceries.
This shift suggests that people in the U.S. would rather spend their disposable income on food than on clothing, and though those things aren’t mutually exclusive, it has affected retail spending.
The United States also went too big
The United States also built far too many stores. According to The Atlantic, “The number of malls in the U.S. grew more than twice as fast as the population between 1970 and 2015.”
With about 1,200 malls in the U.S., we have 40 percent more shopping space per capita than Canada, where they have the second-highest ratio. America boasts ten times more shopping space per person than Germany, which ranked seventh on Cowen and Company’s list.
Though the United States has more shopping space per person than any other country, it was bound to hit a breaking point. The 2008 recession played a big part in this; the financial crisis made people less inclined to spend money on clothing, and as a result, retail downsized.
Takeaway
As the retail industry faces bankruptcies and store closures, it’s important to note that retail was never a practical or sustainable industry. Having excessive stores open becomes more of a burden than a benefit at a certain point, like when there are three Starbucks locations within blocks of each other.
Though having fewer stores means there are less retail jobs, that’s not necessarily a bad thing. Retail is evolving right before our eyes, and soon enough, new jobs will come about to replace retail positions.
Our economy won’t collapse as retail stores close down, the money and jobs will just emerge elsewhere.
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