Bricks and mortar is changing retail , but retail is not dying.
We’ve seen the headlines.
Macy’s closing stores.
Bed, Bath and Beyond closing stores.
Forever 21 going bankrupt (but being revamped).
It’s a “retail apocalypse” screams the headlines caused by Amazon and the big bad world of e-commerce.
Yes, the numbers look tough for brick and mortar retailers. More than 9,000 stores closed in 2019 which was more than 2018 and more than 2017—all record years.
Ugh…
But there’s a deeper story here.
My eyes were opened recently after reading a report by University of Chicago economist Austan Goolsbee. And as we plan our local cities and lament the lack of retail in places such as downtown Delray and Boca Raton we need to pay attention to societal trends and adjust our expectations and maybe our codes accordingly.
First, there is no doubt that e-commerce is growing by leaps and bounds. Twenty years ago, about $5 billion worth of goods were purchased each quarter online. Today, that number is about $155 billion per quarter.
But while that’s an impressive number it still represents only 11 percent of the entire retail sales total.
So almost 90 percent of goods are still purchased in a brick and mortar store and of that percentage, more than 70 percent of retail spending in America is in categories that are fairly well insulated from the internet due to the nature of the product or because of laws governing distribution.
These categories include cars, gas, food, beverage, drugs, home improvement and garden supplies.
So what’s going on out there?
Why is it so difficult for physical retailers to make it in the 2020s?
Goolsbee puts forth three societal trends as causes.
The rise of Big Box Stores—super centers and warehouse stores such as Costco actually ring up more sales than Amazon.
Income Inequality—as the middle class has been hollowed out, stores that cater to them have suffered or died. Retailers aiming at the high and low end of the income scale have found some success. So “dollar” stores have grown along with some high end designer retailers while retailers serving the once vast middle class— J.C. Penney and Sears have suffered.
Services Have Grown, Things Have Not—According to Goolsbee, with every passing decade Americans have spent less of their income on things and more on services and experiences. We are spending more on our health, more on restaurants, education, entertainment and business services than we used to and less on products sold in stores.
Here’s a cool stat: In 1920, Americans spent 38 percent of their income on food and 17 percent on clothing—almost all through traditional stores. Today, 10 percent of our income is spent on food and clothing eats up just 2.4 percent of our incomes.
So how does this affect our local communities?
Well, it might explain why Atlantic Avenue has become more of a food and entertainment destination than a traditional downtown where people go to shop for things like clothing and decorations.
The issue becomes more acute when property values sky rocket alongside rents. It’s hard for traditional retailers to pay high rents per square foot, especially since we still have a seasonal economy.
While we all (well some of us) love mixed-use development, it’s challenging to make retail work due to economic and societal trends. Of course, mixed-used does not have to be exclusively housing and retail, it can also include food and beverage, co-working, an educational use or something in the health or fitness space.
I have some very smart friends who have succeeded in real estate and they are having a hard time imagining what will happen to all the retail space we have built in Boca, Delray and Boynton Beach.
We definitely have a need for more housing, especially attainable housing and some of the overbuilt retail space can surely be used to add to our stock.
But that’s going to require some deft planning and a whole lot of political courage/hard work to convince residents who already live here why we need to make room for more people. P.S. if we do want our existing mom and pop retailers and family owned eateries to survive, density cannot be a dirty word. Let’s repeat: density done right is not a dirty word.
There was a time in Delray when density was encouraged in our codes and plans . And guess what?
It brought the town back to life.
Al Gore would call that an inconvenient truth, candidates running for local office would sooner break out in hives than embrace the concept but density designed properly and used strategically can do much to support the mom and pops and independent merchants we say we cherish. It’s also better for the environment than traffic-inducing sprawl like development.
Events too play a role too, by bringing people to town where they might stop and shop or come back to check out stores they might see while attending an arts show or festival.
As the son of an independent pharmacist, I have a deep appreciation for how hard it is to make it in retail and how important good retail is to a vibrant and vital central business district.
As we sift through the barrage of campaign attack ads already hitting our mailboxes and inboxes, it would be useful to see if any candidate offers ideas on how to grow the local economy in a high rent, seasonal environment with tons of competition from nearby cities, without an Office of Economic Development (the two member team resigned and have not been replaced) in a changing world being disrupted by technology and things we can never anticipate such as coronavirus.
It’s not an easy challenge, but real leaders…effective leaders…. ask the questions that matter and focus their communities on issues of substance. Or we can continue to accept vapid statements saying we are against crime, for good schools and against development.
Give me substance over tired canards.
It’s time.
We live in changing and complicated times. We need ideas and leadership.
