Is the sky falling for U.S. retail?

Is it the Retail Apocalypse or simply Retail Restructuring?

There continues to be a great deal of apprehension about the retail sector. In June of 2017, Business Insider tallied more than 5,000 store closures with a projection of nearly 9,000 store closures by the end of 2017. Fourth Economy has mapped more than 1,700 of these closings across the United States. Traditional brick and mortar retail faces a fundamental challenge from shifts in consumer preferences and advances in online shopping and delivery services. The store closings are the physical manifestation of the challenges facing the retail sector, which often can leave significant redevelopment challenges for local community and economic development officials.

Despite the headlines and the hysteria, overall retail has been adding jobs. Job losses occurring over the last year may be a warning sign, but it is too early to tell. Fourth Economy created a dashboard to track three key statistics.

 

  • Overall retail employment
  • Jobs gains and losses from opening, expanding, closing and contracting
  • Worker separation and hires

 

At this point, the data on retail employment does not indicate a “Retail Apocalypse.” Over the long run, retail has been very volatile and the impact of the recession created a greater disruption than we are seeing now. What is portrayed in the media reflects a shift within retail. Over the past year there have been significant losses in general merchandise, and five other retail categories. These stores represent many of the traditional brands in brick and mortar stores.

 

Sep 2016 Sep 2017 Change
General merchandise stores 3,188,600 3,130,700 -57,900
Clothing & clothing accessories stores 1,351,800 1,321,100 -30,700
Food & beverage stores 3,096,200 3,067,400 -28,800
Electronics & appliance stores 530,200 502,100 -28,100
Sporting goods, hobby, book, & music stores 618,700 601,200 -17,500
Health & personal care stores 1,051,800 1,048,000 -3,800

 

Other categories of retail are increasing, with nonstore retailers (Amazon) leading the way. Gains have also occurred in motor vehicle and parts dealers as well as building material and garden supplies. These gains were not enough to offset the losing categories, but it shows that the retail sector should not be painted with a broad brush.

 

Sep 2016 Sep 2017 Change
Nonstore retailers 539,700 570,100 30,400
Motor vehicle and parts dealers 1,988,600 2,012,900 24,300
Building material and garden supply stores 1,279,100 1,296,600 17,500
Gasoline stations 932,400 940,500 8,100
Furniture and home furnishings stores 477,100 484,000 6,900
Miscellaneous store retailers 833,200 834,400 1,200

 

 

Even if retail is experiencing some short-term declines that portend larger losses to come, there are other segments of the service sector that are adding significant numbers of jobs. The 156,100 jobs added in food services and drinking places is nearly double the job loss in retail.

 

Sep 2016 Sep 2017 Change
Food services and drinking places 11,499,000 11,655,100 156,100
Personal and laundry services 1,458,500 1,491,700 33,200
Amusements, gambling, and recreation 1,616,200 1,635,300 19,100
Museums, historical sites, and similar institutions 161,500 168,600 7,100
Repair and maintenance 1,288,000 1,292,400 4,400
Accommodation 1,950,200 1,954,000 3,800
Performing arts and spectator sports 457,500 459,700 2,200

 

The dire forecasts are overblown. Consumers are shifting from commodities to experiences and many analysts say that retail’s future is to provide more than merchandise. This is as much about where the service is provided as how it is provided. Neighborhood level (Main Street) retail also appears to be adapting to these trends. People looking for and returning to walkable communities has helped, but so has the ability of “Mom and Pop” stores to differentiate through service and quality rather than low prices. The emphasis on more services, entertainment and food has also helped Main Street retail. Recent data on the performance of small retailers is not available at this time,  so it is not possible to fully evaluate these trends but it appears that the dominance of big box and superstore retailers is being challenged on two fronts – online and on Main Street.