[CHRON] Online shopping is reaching such a critical mass with American households that many of the icons of the traditional mall —from Macy's to The Gap and J.C. Penney — face an increasingly uncertain future.Full price stores started coming under pressure with the founding of E.J. Korvette's (which wasn't really Eight Jewish Korean Vets, but Eugene & Joe's Corvette)
A government report Friday suggested a modestly healthy consumer, with retail sales up 1.3 percent in April. Americans are eating out more at restaurants. They're buying more cars. But the main beneficiaries of spending in the past year have been Amazon, eBay and other internet behemoths.
Where things are usually cheaper and more convenient but harder to return.
Spending at these non-store retailers shot up 10.7 percent from a year ago, the government said in a week when earnings reports showed disturbing drop-offs at Macy's, Kohl's, Nordstrom and J.C. Penney.
I'm guessing their drop went toward Walmart and Target and such, with Walmart and Target losing revenue toward the online stores.
Shoppers who once crowded malls are now ordering on phones, computers and tablets, siphoning sales from physical stores, which face growing pressure to reinvent their businesses.
If you need to touch it or you need it this afternoon you need brick and mortar. If Wednesday will do, you go with online.
"Online is cannibalizing the store business," said Marshal Cohen, chief industry analyst at the NPD Group.
Sears and Montgomery Ward got their start with mail order, and Penney's joined them. Online came around and Penney's went upscale, competing with Macy's. Ward's petrified and went out of business. Sears is still at the old stand, but they're not mass mailing catalogues anymore and their K-Mart acquisition hasn't competed wth Walmart. It's not a question of whether they'll go under, but when.
The magnitude of the change may be just beginning to intensify. Online shopping has attuned customers to focusing on price and hunting for the best bargains, thereby shrinking profit margins at many stores.
The stores are under pressure to pay more for their employees. Retail wages and benefits (hah!) have been horrible for years. Retailers are now going to self-checkout.
| How will they keep people from shoplifting? |
If your store's closed you know nobody's gonna buy anything.
Online, in the meantime, has been catching up to the general merchandise stores that range from Wal-Mart to Nieman Marcus.
Nieman Marcus is probably losing more proportionately than Walmart, which is opening superstores that sell groceries and tires.
Back in 2000, for every dollar spent at physical stores, just 30 cents were spent online and at mail-order houses, according to government figures. Now, the online category makes up nearly 70 cents for every dollar spent at general merchandise stores.
Sixteen years ago things were pretty primitive online. Amazon was a good idea that grew, unlike a hundred other internet flops.
"We have yet to learn the ramifications of just how paramount these shifts in consumer behavior are," Cohen said. "This is a cultural shift from the younger generation that is only going to carry forward."
Pretty much everyone's doing it now. The "older generation" today was sixteen years younger then.
The April retail sales report from the Commerce Department showed uniformly solid growth. It assuaged concerns that an economic slowdown in the first three months of 2016 might have significantly disrupted consumer spending.
As far as anybody but the Commerce Department can tell the economy is flat as a board. They tell us we've got one percent inflation and things still cost more on a curve kind of like Zim-bob-we. If you go to the grocery store the shopping basket that cost you $100 in 2008 will cost you about $175 today.
The gains weren't just online. Though internet purchases rose 2.1 percent from March, auto sales jumped 3.2 percent. Clothiers, restaurants, sporting goods stores, grocers and gas stations also posted gains.
Gasoline is still down. Clothing has shifted all the way to tee shirts and either shorts or jeans -- suits cost too much. Business casual costs a lot. Restaurants have shifted to fast food and chains. It's hard to find regional cooking anymore; it costs too much to run a restaurant. I suspect the profits from sporting goods stores is from people buying guns.
Only building materials stores suffered a monthly drop, but their annual sales growth was solid.
I don't know about everyplace else, but around here they keep building. The rents I've seen posted for apartments are more than my mortgage.
Though sales at department stores edged up slightly, they've sunk 1.7 percent over the past 12 months. The shift online points to more disciplined consumers whose collective habits can reshape sales. Impulse buys make up 45 percent of store purchases, for example, but only 23 percent online, according to research at the NPD Group.
I think people shop online when they want to buy a specific thing. Stores are designed to add impulse buying. It's harder to do that online.
At the same time, the improving economy has yet to fully relieve the financial pressures on many Americans. Across the country, households are more reluctant to spend than they were before Great Recession struck in late 2007.
Prices are way up, labor force participation is way down.
Ken Perkins of Retail Metrics, a research firm, notes that incomes have been rising only tepidly despite a stronger job market. A result is that women may be less likely to step up spending on clothing at a time when Amazon has intensified price competition.
I believe salaries have been dropping and wages have been tepid. Lots of jobs now are 32 hours -- part time, which means no benefits. Labor is plentiful, but it's still not cheap.
"My gut says that women don't have the money outside replenishing items," Perkins says. "And the Amazon effect is gaining momentum."
Women are also wearing tee shirts and shorts. We're unisex ugly.
Shoppers such as Morgan Province of Herndon, Virginia, say they're tightening spending for a variety of reasons.
Oh, well. That clears that up.
Province says that she's saving for a move and that when she does buy, she's spending more online. She's going to Amazon.com every two weeks, compared with every six or eight weeks a year ago. "It's more convenient," Province says. "It's more affordable, and there are more options."
You don't need to try on tee shirts and shorts, so you can buy them online.
John Blackledge, an analyst at Cowen & Co., says he expects Amazon.com to replace Macy's Inc. as the No. 1 apparel retailer by next year.