Never Mind the Internet. Here’s What’s Killing Malls. : Economics

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The premise of the article is that there are three factors other than ecommerce that are killing bricks and mortar retail. Here’s a copy of the text from the article where it presents evidence for those other factors.Big Box Stores: In the United States and elsewhere, we have changed where we shop — away from smaller stores like those in malls and toward stand-alone “Big Box” stores. Four years ago, the economists Chad Syverson and Ali Hortacsu at the University of Chicago analyzed the recent history of retail and found that the rise of warehouse clubs and supercenters was bigger than the rise of online commerce.They gave this telling example: Over the 14 years through 2013, Amazon added $38 billion in sales while Costco added $50 billion and the Sam’s Club division of Walmart $32 billion. Amazon had the higher growth rate, but the bigger problem for most brick-and-mortar stores was other, larger brick-and-mortar stores. This continued in 2019.Income Inequality: Rising income inequality has left less of the nation’s money in the hands of the middle class, and the traditional retail stores that cater to them have suffered. The Pew Research Center estimates that since 1970, the share of the nation’s income earned by families in the middle class has fallen from almost two-thirds to around 40 percent. Small wonder, then, that retailers aiming at the ends of the income distribution — high-income people and lower-income people — have accounted for virtually all the revenue growth in retail while stores aimed at the middle have barely grown at all, according to a report by Deloitte.As the concentration of income at the top rises, overall retail suffers simply because high-income people save a much larger share of their money. The government reports spending for different income levels in the official Consumer Expenditure Survey. In the latest data, people in the top 10 percent of income saved almost a third of their income after taxes. People in the middle of the income distribution spent 100 percent of their income. So as the middle class has been squeezed and more has gone to the top, it has meant higher saving rates overall.Services Instead of Things: With every passing decade, Americans have spent proportionately less of income on things and more on services. Stores, malls, and even the mightiest online merchants remain the great sellers of things. Since 1960, we went from spending 5 percent of our income on health to almost 18 percent, government statistics show. We spend more on education, entertainment, business services and all sorts of other products that aren’t sold in traditional retail stores.That trend has continued for a long time. The federal government’s Current Expenditure Survey goes back more than a century. In 1920, Americans spent more than half their income on food (38 percent) and clothing (17 percent) and almost all of that was through traditional retail stores. Today, food eaten outside the home and in it accounts for 10 percent of spending and clothing just 2.4 percent.Economists debate theories of why we have shifted to services and away from goods but no one questions that it has happened. It means that over time, retailers selling things will have to run harder and harder just to stay in place.

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