The current occupant of the Oval Office would have me believe he’s The Champion of Small Business In The Face Of The Evil Empire of….Amazon. Spare me. (And, NO, the USPS isn’t going broke because of the shipping contract the company has with Amazon. It has much more to do with the Republican supported and enacted restrictions on its pension plan, which require inordinate prepayments into the plan. [IG Report]) So, returning to the topic at hand, let’s start with the proposition that nostalgia isn’t conducive to successful retail marketing.
A Little History
Extrapolated into the realm of the ridiculous, there was a time before Macy’s and Bloomingdales (1858, 1861) when shoppers roamed among small retailers along commercial corridors. Add the installations of elevators and escalators and the retailers could further “departmentalize” their offerings. Surely there were objections from smaller retailers at the time, and there were probably others who decried the Memphis Piggly-Wiggly grocery store’s 1916 decision to let customers get their own items from the shelves rather than have a clerk do the accumulation. However, it’s unimaginable to give any credence to the notion that innovations in retailing are necessarily nefarious.
The department stores faced competition beginning in 1872 from Aaron Montgomery Ward whose catalog advertised shipping via Express rail services, and from Richard Sears. Their catalog sales were boosted by the decision in 1913 to have the Post Office deliver domestic packages. [AtlasObs] Again, to assert that companies like Amazon, which depend on Internet ordering systems are somehow essentially different from the innovations adopted by Ward and Sears is risible. What we might be hearing from the White House is the lament for brick and mortar retailers who rent property?
Another Change in Retail Habits
We’ve moved from shopping along Main Street, to shopping from catalogs, to shopping from online catalogs. And, yes, Amazon is now a big presence in the retail system:
“The simplest explanation for the demise of brick-and-mortar shops is that Amazon is eating retail. Between 2010 and last year, Amazon’s sales in North America quintupled from $16 billion to $80 billion. Sears’ revenue last year was about $22 billion, so you could say Amazon has grown by three Sears in six years. Even more remarkable, according to several reports, half of all U.S. households are now Amazon Prime subscribers.” [Atlantic]
However, this is an over-simplification which goes nowhere toward explaining how a chain store founded in 1962 in Arkansas has grown into a 2,000,000+ employer, or why Target seems to be holding its own in the Big Box Store category. Notably, both Walmart and Target have an Internet operation.
We can lament the demise of the brick and mortar retailers, but as the Atlantic article points out, part of the hard, sad, truth is that we simply built too many of them.
“The number of malls in the U.S. grew more than twice as fast as the population between 1970 and 2015, according to Cowen and Company’s research analysts. By one measure of consumerist plentitude—shopping center “gross leasable area”—the U.S. has 40 percent more shopping space per capita than Canada, five times more the the U.K., and 10 times more than Germany. So it’s no surprise that the Great Recession provided such a devastating blow: Mall visits declined 50 percent between 2010 and 2013, according to the real-estate research firm Cushman and Wakefield, and they’ve kept falling every year since.” [Atlantic]
Toss in a measure of stagnating wages and decreased levels of discretionary spending and it’s little wonder the mall traffic is declining.
“After adjusting for inflation, wages are only 10 percent higher in 2017 than they were in 1973, with annual real wage growth just below 0.2 percent. The U.S. economy has experienced long-term real wage stagnation and a persistent lack of economic progress for many workers.” [Brookings]
Those “many workers” are deciding the Big Box, and online bargain offers, are preferable to mall browsing. We overbuilt malls, organized them around “anchors” which are looking at declining sales from Big Box, discounters, and online shopping, and thus shouldn’t be surprised when the free market works.
That the current president is upset with the reportage of the Washington Post, owned by the same man who founded Amazon, is no surprise either. However, that doesn’t fully explain his antagonism which may also be a function of being a real estate developer, and a real estate developer who seems to be freighted with altogether too much nostalgia for those “Good Old Days” when we’d take the transit or pile into the family wagon to shop on site. There have been major innovations in retailing since the first butcher opened his first shop and accepted payment in cowrie shells.
The Nevada Situation
Obviously, the largest factor in the Nevada is “Accommodations and Food Service,” read: Casinos and restaurants; but the second largest employment category is good old fashioned retailing. As of the SBA’s 2017 report, there are 140,879 people employed by retailers; of this figure 39,947 are employed by small businesses, or about 28%. [SBA pdf]
There’s reason for cautious optimism in southern Nevada with regard to wages and spending, but …
“The Las Vegas MSA’s 12MMA of average weekly earnings (not inflation-adjusted) went up by another $3 in November. This was the 4th month in a row nominal average weekly earnings rose by $3, continuing a steady streak of growth started just over 3 years ago in September 2014. On a YOY basis, the 12MMA was up $37 (5.0%) from November 2016.
When considered on an inflation-adjusted, YOY basis, earnings rose by 2.8% in November 2017 compared to November 2016, reaching $669 (in 2007 dollars). This was an increase of $1 from October. Las Vegas’ average weekly real wage is now $82 (10.9%) below the most recent inflation-adjusted peak of $751 that occurred over 10 years ago in August 2007. The trough occurred in February 2012 at just over $616, so Las Vegas remains much closer to the trough than the peak.” [StatPak]
If we’re looking for significantly increased demand to boost the southern Nevada retail sector further, something is going to have to happen to those average weekly wages. The picture for northern Nevada is slightly more optimistic:
“While Washoe County’s economy continues to benefit from rising taxable retail sales, the YOY growth rate has fallen considerably from a year ago. In November 2017, the rate of growth was 6.2% YOY, or 3.2 points lower than the year period ending in November 2016. However, when compared to the month prior, it is down 0.2 points. Taxable retail sales reached $686.8 million in November, having already surpassed, in March 2016, the previous peak on a nominal basis (not inflation-adjusted). As the chart shows, Washoe’s taxable sales growth is very near the state average at just 0.4 points below.
Success in business attraction and retention is driving the region’s economy and is the primary cause of growth in taxable retail sales, though increasing visitation has also contributed.” [Statpak]
One other factor to be considered before pronouncing Amazon as the harbinger of demise for retail malls is good old fashioned demographics. Neighborhoods change, people move, and the “centrality” of a mall constructed in the late 1960’s or 1970’s may not reflect the residential and traffic patterns 40-50 years later.
And yes, I remember shopping for vinyl records in Park Lane Mall ages ago… when I was still playing vinyl records… before I shifted to CDs … before I downloaded … anyone who expects (or wants) retail endeavors to remain constant in the tides of time will have about as much success as King Canute attempting to command the liquid form of tides.