I found these statistics in Stephen Moore’s Wall Street Journal op-ed on the future of retail startling:
By his estimate, the U.S. has at least 50% more retail space per person than Canada—and Canada’s figure is 50% higher than Germany’s. “It’s Germany that has it about right,” he concludes—which would mean the optimal amount of retail space is less than half the current American total. “I’ve traveled all over the country,” Mr. Freeman says. “The challenge is to find a place where retail isn’t overbuilt.” If he’s right, a severe real-estate contraction is coming, and weak stores and malls will get eaten alive. Can Macy’s survive? Probably not: “They are run by bean counters”—lawyers and accountants, not entrepreneurs.
There are some things in the op-ed that I agree with, for example this:
Somewhat counterintuitively, he argues that e-commerce is “not our enemy” but is becoming complementary to retail. Here’s his challenge to anyone who thinks digital sales are set to crush the old analog kind: “Explain Blue Nile. They were one of the first to sell online jewelry. Blue Nile comes in and blows the door off as one of our most successful stores. Who else? Apple! You can buy your phone online, and they can ship it to your house. But the Apple Store almost everywhere does giant business. Microsoft—same thing. Peloton is another one. They make exercise equipment and have just opened a store next to Nordstrom, highest sales in the country. They’re killin’ it.”
With a twinkle in his eyes, he tells the story of Bellevue Square’s 1,800-square-foot Tesla showroom. Tesla is largely an internet-based company, but it helped produce one of the biggest days in the mall’s history when Mr. Freeman says it sold close to $16 million worth of cars in 12 hours. “There were lines 10 blocks long, and the average person waited five hours,” he recalls, “the way people used to wait outside stores on Black Friday. There was even a sign in front of the store that read ‘limit of two cars per customer.’ ”
If that isn’t enough, he adds: “Guess what’s one of our most successful stores we just opened up three months ago? Amazon. They already mastered online book sales. Why are they creating a physical presence? Because they know they need to connect and fuse with you as a consumer.” That’s what he means by emotional fulfillment.
However, I don’t agree with one thing the op-ed claims. I don’t think it’s the “age of Amazon”. In fact I wouldn’t be a bit surprised if Amazon announced its intention of getting out of retail in five years. It isn’t making money in retail. It is in web services. Amazon’s stock has exploded in the last two years. How long can the company maintain that pace? Will its investors accept a company whose stock price doesn’t increase, that doesn’t show profits, and that doesn’t pay dividends?
I think we’re in the age of Walmart and Walmart will be the ultimate victor in the online retail space.
However, back to those statistics. Can the United States really prosper on the basic of personal consumption expenditures? Or, as I believe, do we really need to rebalance our economy in favor of business investment? Businesses used to invest a lot more with a lot less sales than they do now. The change is not due to phlegmatic personal consumption. It’s due to a decline in entrepeneurship among American managers.