by Brianna Crandall — August 29, 2017 — Early in January, Macy’s released a list of 68 stores it would be shuttering nationwide in 2017. This was followed the next day by an announcement from Sears of 150 scheduled closings, a total that later swelled to more than 250. Less than a month later, JCPenney announced plans to close 138 stores. According to Brian Andrus, president of the Florida Gulfcoast Commercial Association of Realtors (FGCAR):
People started talking about a “retail apocalypse” as if one of the largest industries in the United States was somehow mysteriously disappearing. However, what’s happening to retail is not extinction, but change. Retail itself is alive and well.
Andrus notes that while retail spending fluctuates with the economy, U.S. retail sales have a long-term average annualized growth rate of 4.18%, significantly higher than the gross domestic product (GDP) (according to a U.S. Department of Commerce report). Online shopping, which bypasses the store entirely, has grown rapidly over the past decade and is definitely a factor in decreased store traffic; however, by the first quarter of this year, online sales amounted to only 8.4% of total retail volume — not exactly a vanquishment of brick and mortar activity, says Andrus.
Moreover, a 2014 study by consulting firm A.T. Kearney found that 95% of all retail sales are captured by retailers with a brick-and-mortar presence, and that two-thirds of consumers who purchase online use the store before or after the transaction. Clearly, the store is far from being extinct.
It is, however, changing. A recent analysis in Forbes looked at some of the reasons that while there is no retail apocalypse as such, why some retailers are flourishing while others struggle.
- Many of the chains which are closing stores, such as Sears and RadioShack, are responding to problems that have built up over decades. Current trends may have exacerbated their difficulties, but they didn’t cause them. These brands did not adequately change relative to the buying public’s desires.
- During the same time that stores have been announcing closings, others — among them Dollar General, AutoZone, Ulta, Kroger and T.J. Maxx — have been opening new stores all over the country. These are decidedly different types of retail, but retail regardless.
- Numerous malls and retailers are creatively working to bring customers back into their centers by providing more customer experiential opportunities — a different mix of retailers, different and updated type of restaurants, theaters and other attractions.
- The retailers that are growing and flourishing have made investments in knowing the local public better or pivoting to the changes in their local public as well as investments in both technology and people.
Out-of-date retail personnel classifications skew numbers
Andrus points out that the “apocalypse” scenario is validated by out-of-date personnel classifications. Specifically, the U.S. Bureau of Labor Statistics counts as retail workers only those people who actually work in stores. The vast majority of the jobs being lost in the retail industry are in-store workers, which leads the statistic to be compared with other areas of down-trending activity (e.g. coal mining).
Yet, Amazon has recently announced plans to hire 50,000 workers, and has recently held job fairs in four cities. Even though they all work in the retail industry, the fact that they work in this different capacity negates them from being counted. This paints a false illusion, says Andrus. None of those employees — nor the workers at rapidly growing tech centers such as macys.com — will be counted as retail employees.
The important thing to remember is that retail is going to continue to change and continue to need to change rapidly over the coming decades. It requires forward-looking, nimble action on the part of property owners, asset managers and the commercial real estate industry. To avoid dead spots — and to make sure commercial neighborhoods reflect the real vibrancy of our communities — we have to work together and be both passionate enough and professionally skilled to make the right moves. Commercial realtors that are true professionals are a vital part of making this happen. We look forward to working even more closely with developers, municipalities, and the entire Florida business community.
Additional references for the statistics cited in this article, as well as Andrus’s credentials, can be found in the FGCAR announcement about the trends.