Lately I’ve been noticing more shuttered retail stores, commercial storefront vacancies (even including unrented, premium Class A space in new mixed-use developments) and particularly uncrowded experiences when I swing by the local shopping mall. It’s an image that’s somewhat inconsistent with the explosive population growth in Northern Virginia which continues to spawn new houses, restaurants and commercial office complexes just about as quickly as they are approved by overwhelmed planning and zoning offices.
Much has been written about the so-called brick and mortar shopping apocalypse as e-commerce continues to change when, where and how we buy products. Just a sampling of mainstream, retail business directly affected by the e-commerce shift include:
- Payless Shoes (filed Chapter 11 bankruptcy protection),
- Radio Shack (only 70 of a one-time high of 7,300 retail stores remain operational),
- JC Penney (offering early retirement to 6,000 employees), Macy’s (closing 68 locations and losing 3,900 jobs) and,
- Sears – the iconic granddaddy of all American retail stores – has “substantial doubt about its ability to continue (Sears Holdings Annual Report, 2016)”.
There are many, many more retailers – large and small – experiencing this same storefront attrition.
The two main culprits:
Decades of Overbuilding
The Pacific Standard’s, Dwyer Gunn, summarizes that “Retail square feet per capita in the United States is more than six times that of Europe or Japan. And this doesn’t count digital commerce. (The retail construction) industry, not unlike the housing industry, saw too much square footage capacity added in the 1990s and early 2000s. Thousands of new doors opened and rents soared. This created a bubble, and, like housing, that bubble has now burst. We are seeing the results: doors shuttering and rents retreating. This trend will continue for the foreseeable future and may even accelerate.” This is a textbook supply-demand conversation and that market is experiencing a significant correction.
The Rise of Online Shopping
It’s impossible to discuss the on-line evolution without recognizing the Amazon gorilla in the room which, according to Bloomberg’s Rupp, Coleman-Lochner and Turner, is responsible for 53% of e-commerce sales growth in 2016 with 47% by everyone else. The “in-pajama shopping experience” is becoming the new norm for many of the products that we consume in our own time, when and where we prefer, particularly among younger, tech-savvy consumers. Indeed, says Bankrate.com’s Gili Malinsky, “America is going through a shopping shakeout, as people rely more on their devices than their feet to buy the products they want.”
Lost will be many jobs and roles built upon the multi-generational, on-premise, retail shopping experience – particularly sales roles and physical merchandise management jobs. And while there might be more traditional retail jobs in an Amazon-less world, there would likely be fewer better-paying software developer jobs (Dwyer Gunn). And well-paying jobs committed to improving changing supply chain management needs and the customer experience requirements of a digital economy.
It’s not coincidental that UDig itself has re-defined its very focus in response to this changing consumer economy; the work that our Digital Practice delivers correlates directly to the demands of the marketplace. Our Practice Leadership, technical consultants and business development teams are wholly focused on delivering technology-based solutions that help businesses scale for consumer demand, whether they sell products, services or manage data for any number of purposes. With expertise in Strategy, Design and User Experience, Mobile and Front End Development, our clients tell us that their customers’ digital experiences are paramount to their competitive viability. Message me if you’d like to hear more about some of UDig’s success stories along these lines and the role that we are playing in the ascendant digital economy.