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Will Retail Stores Last?
Old 09-19-2012, 03:13 PM   #1
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Will Retail Stores Last?

Having spent most of my working years in the retail industry, this article tweaked my interest:

charles hugh smith-The Inevitable Decline of Retail

It is a personal opinion about the future of the retail business. It runs in the face of today's lifestyle where malls and shopping are often the centers of leisure time activity.

After twenty three years of retirement, our own lifestyle has changed, and "buying" has been replaced with "getting rid of", except for food and more mundane pleasures. Our home is no longer a showplace, where interior decorating, entertaining groups, buying the latest appliances, or showing off our latest "new stuff" is important. We're in to comfortable recliners, minimum housework and many fewer visits to the Mall and NO movies except for what's on TV.

For most of my career, I worked for one of the very largest retail businesses, and was an integral part of changes that eventually ended with the closing of that business. (Hint... before the rapid rise of Walmart.) It was the handwriting on the wall.

So now with the rise of internet buying, and a profit squeeze throughout the industry, we are seeing major declines in the number of national retail businesses and an even faster decline in the "downtown" and mom-pop-family businesses.

On the face of it, except for increasing vacancies in malls, and shrinking strip centers, the idea that the "buying mantra" of the suburban lifestyle is in any danger, has not been in the forefront of "news".

Should it be? Better still, what do you see in the future? Is shopping a part of your leisure time activities? A trip to the store every day? Three times a week? For pleasure? For basic needs? For social interaction? Entertainment...(movies)? How many hours per week?

Do you see retail shopping as an integral part of your retirement years? Will internet shopping eventually cause retail store shopping be replaced with another type of activity? Will the 100,000 sq ft. stores be the only source of goods?

Is the current decline in stores simply a natural shake out of the weakest, or given the current extended economic decline, a forecast of a change in lifestyles.
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As a matter of interest... when I started in the business, the larger stores (in which I worked) had sales of about 6 million dollars, and employed (all departments) about 250 persons... and were open 80 hrs/wk. Today, the larger stores have sales of +-#30 Million, and are open 168 hrs/wk, often having less than 250 employees.
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Old 09-19-2012, 03:22 PM   #2
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Interesting question....

I have not been to a mall in a good while... heck, probably not at all this year... we do go to some big box stores such as WalMart etc..... my wife goes to a few of the other discount clothes stores and we go to a sporting good stores at times...

I have increase my purchases online over the years, but I am not a big buyer online... probably less than 1 purchase a month...

Now, grocery shopping is different... wife spends a LOT of money there....
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Old 09-19-2012, 03:33 PM   #3
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Depends on what you mean by retail. Certain retail areas are already replaced-books, music, much of electronics, some clothes.

I can't see high street big city retail going away anytime soon, but malls are such a punishing experience that when more and more movie watching migrates to at-home media, the malls could suffer. However, some pretty savvy hedge fund managers have recently bought into a formerly bk mall operator- General Growth as I remember.

If retail for the masses goes away, there is going to have to be something else to take its place, because most people do not like to hang out with their little family in their home all the time.
Right now, it is hard to know how much mall stress in due to a secular market trend, and how much to our broken economy.


I can't see restaurants going away, and restaurants are retail. I can't see grocery stores going away, though I imagine that more and more gourmet and specialty items will be bought online. Clothes is an interesting one. Middle market places that are more a trial than a treat should go away, I don't know if they will. People, especially women, with the money to shop at high-end clothes stores with very good, highly personalized service will do so, in my opinion.

However as investments, they need to be bought right. And it may become a fairly small market over time. Overall, since I do not like to invest in industries undergoing discontinuity, grocery stores are the only area that would interest me. The board knows that I bought WMT around $50, and recently sold. Still an excellent company, but perhaps less margin of error. Recently bought Safeway, which is not in Walmart's class, but appears to me to be solid and too cheap. All of these things will go down when the whole market does, it's just the nature of the beast.

Edit- I just read the linked article. I think this guy knows what he is talking about. Warren Buffett once said that cost trumps everything else, and the longer I live the more I see the wisdom is this. From the article: "Caution! You must be a big box retailer, a corporate chain rag store or an immigrant with solid connections back in the home country (or to people buying in China) to buy product at a low enough price in container size loads. The native American owned small independent retail store is an extinct business model. You cannot buy from domestic USA wholesalers, resell and live."

Plenty of 50 year old laid off "semi-retired" guys have failed to realize this, and are now living solely on social security.

Ha
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Old 09-19-2012, 06:11 PM   #4
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Quote:
Originally Posted by imoldernu View Post
...Is shopping a part of your leisure time activities? A trip to the store every day? Three times a week? For pleasure? For basic needs? For social interaction? Entertainment...(movies)? How many hours per week?

Do you see retail shopping as an integral part of your retirement years? Will internet shopping eventually cause retail store shopping be replaced with another type of activity? Will the 100,000 sq ft. stores be the only source of goods?
Shopping is at the bottom of my list of activities in FIRE. I do not enjoy the behavior of the general public and the noisy background musak in stores. My habit is to buy 2 of an item on sale, 1 for immediate use, 1 for a refill and store the 2nd one until needed. In wintertime, I will have 2 spares on hand for high frequency consumables (TP for example).
I keep a running list of things needed and go to stores only when I happen to be near them. For perishables, I usually recruit Mr B to go for milk, eggs and bread. I'm growing my own produce and herbs in containers, freezing the excess harvest for winter use. I will go to the mom-n-pop stores if a lower cost on meat justifies it, or I want to order a sub.

I avoid theatres. Again, human behavior is the main reason. I subscribe to Netflix on the 2 DVD per month plan.

As far as Internet shopping goes, I use Amazon and drugstore.com heavily. I put chronically used items on a wish list and check it periodically for a markdown by the vendor. I do use chain store online sites to compare prices. I order only when I have enough to get the free shipping and absolutely love the front door delivery. The savings on gasoline (10 miles 1 way to the nearest small city) adds up over time.

I think that Internet commerce will never replace the mortar and brick retail stores. Most of the people I know look forward to making the physical trip to the big box and mall stores as a way to "get out of the house". Not my cup of tea, but to each their own...
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Old 09-19-2012, 10:22 PM   #5
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Interesting topic. Since DH retired 2 years ago and I semi-retired we go out shopping much less. My first place for most non-food shopping is Amazon. And like many I go to a retail store and look for stuff and then often buy online. There are some exceptions. Clothes is usually one of them. Not because I'm a woman and love clothes shopping (as the article suggests). I would prefer a root canal to going clothes shopping. However...I haven't much luck with buying most clothes online as you need to be able to actually try on the clothes and see the quality (or lack thereof). Even ordering from a retailer I like I sent back almost everything due to texture being unexpected or fit not right.

But - amazingly enough - I decided this week to go shopping more frequently particularly grocery shopping. I just got a device through Weight Watchers to measure activity (similar to a fitbit). What I've learned is that on days that I don't go shopping or go to work I am very sedentary. There just isn't that much to do around the house that causes me to need to walk around. We downsized to a 1 story house. I have lots of allergies so we have someone in to do the house cleaning. Yes, we have to feed pets, take showers, get something to eat. But even after you do all that, if you don't need to leave the house to go shopping or to work I find I end up sitting most of the day. I'm not idle...it is just that most of what I do is done sitting (using the computer mostly).

Of course, I can do exercise -- we bought a Concept2 -- but even so the rest of the day is sedentary. I realized that this is largely a side effect of the fact that I don't go out to stores and walk around shopping nearly as much now as I once did.
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Old 09-19-2012, 10:55 PM   #6
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Certain classes of retail, shoes and jewelry come to mind, are difficult to fit and/or view accurately online. Certain bulk home supplies, such as lawn fertilizer and sand, are prohibitively expensive to ship. IMO brick and mortar retail sales of such items will survive the best.
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Old 09-20-2012, 12:33 AM   #7
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Certain classes of retail, shoes and jewelry come to mind, are difficult to fit and/or view accurately online. Certain bulk home supplies, such as lawn fertilizer and sand, are prohibitively expensive to ship. IMO brick and mortar retail sales of such items will survive the best.
Shoe stores or departments are already heavily challenged by Zappos. Women, the main shoe buyers, know what they want, perhaps by trying them on in Nordstrom, then they order from Zappos. (Now owned by Amazon.)

It is hard to analyze, but I think except at the very high end, jewelry stores are also at risk.

At the high end, many things are possible. Men are not likely to buy their Ferraris online. But even Tiffany sells some items online.

However, for sure no one is going to have concrete or aggregate mailed to him. I'd say that Lowe's and Home Depot are pretty safe.

I am glad I was a young householder when I was. It was fun to put a son or two in the truck, drive down to the crusher by the river, and get a load of
bank run or crushed rock. Maybe stop at a local hamburger place on the way back.


Ha
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Old 09-20-2012, 08:17 AM   #8
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Stores will survive because most people want instant gratifacation.

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Old 09-20-2012, 11:49 AM   #9
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I buy almost everything on Amazon. I do Amazon prime and get most things 2nd day right to my door. Of course food I buy at a Supermarket (Krogers). Also, I buy clothes mostly at Kohls.
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Old 09-20-2012, 12:05 PM   #10
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Totally depends on the kind of shopping. If you are shopping for one big ticket item, yes, online sales are displacing retail. I don't think it will largely displace grocery shopping in my lifetime, though.
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Old 09-20-2012, 04:59 PM   #11
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I'm sorry to see the demise of many brick and mortars. I read an article where a lot of people browse in them, figure out what they like, and then web search for price. Nothing immoral about it, but I just don't feel right doing that. We used to have not one but two camera stores in town, now with Ritz going bankrupt there will be none in a town of 270,000. Sure I can read reviews and get a good price on line, but there are many things I want to touch, feel, try one etc; like cameras, running shoes, or for that matter clothes, which I hate shopping for. So I resist the temptation of finding it in a store and then going on line. I do a fair amount of on line, but I don't let it substitute when I've browsed. Just a personal choice. Most of the time I don't see the price differential so great that it pains me to pay brick and mortar. Plus, as indicated, you get instant gratification!
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Old 09-20-2012, 07:53 PM   #12
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With local stores, I notice anywhere from a 20-100% markup compared to buying online at least for photography gear. While it would be nice to be able to play with the gear beforehand, I've gotten very good at reading reviews, measuring out sizes, and understanding how it might fit my needs sight unseen.

I've also heard that some of the big online vendors retail prices are below what small camera stores can get wholesale. No wonder they've almost all disappeared.
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Old 09-21-2012, 04:41 PM   #13
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It's hard for me to generalize since I've never been one for the "shopping experience". I go to get what I went there for and then leave. I also dislike malls and only go there for specific item.

My internet buying has increased of course, as more and more of what we use is available online but some things just don't work with that model, such as jeans that fit "just right". Shoes, for me, are another.

And some things I buy online I'd have to drive 70 miles or more to get so that's a no-brainer.

But I also believe there are enough people who enjoy malls to keep at least some of them solvent.
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Old 09-21-2012, 06:52 PM   #14
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With local stores, I notice anywhere from a 20-100% markup compared to buying online at least for photography gear. While it would be nice to be able to play with the gear beforehand, I've gotten very good at reading reviews, measuring out sizes, and understanding how it might fit my needs sight unseen.

I've also heard that some of the big online vendors retail prices are below what small camera stores can get wholesale. No wonder they've almost all disappeared.
Of course in one sense that has always been true. The old popular photography used to have adds from the NYC camera stores that way undercut local prices. Of course now Amazon and others do the same (as well as cameras being sold in electronics stores). Does anyone remember the old stand alone hi-fi stereo stores that tend to be going extinct?
But then this trend is not exactly new Sears and Wards put a lot of general stores out of business as well as organizations like Marshall Fields wholesale business that sold with markup to the local merchant.
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