A lot has been said regarding the imminent death of brick and mortal retail. Amazon zealots claim the e-commerce giant will ultimately void the need for retail stores, opening up a huge cavity of vacant commercial real estate in the U.S.
While it is true that Amazon is wildly successful in e-commerce and is taking market share from retail stores, I think this is a golden age for retail. Sure, some big companies – Sears and Circuit City, for example – have gone extinct. There are thousands of retail concepts that have become sellers of buggy whips over the centuries. But for every retail dinosaur there are a number of retailers that are embracing technology and encountering new ways to reach customers. Most large retailers now generate a significant percentage of their sales over the internet. The retail industry is not dead, it has just radically changed.
Earlier this month, Amazon introduced the first ever product delivery using a drone. While it is tough to beat the convenience of ordering a product online and finding it on your doorstep two days later, consumers will always need to examine the look, touch, fit, and feel of an apparel item. Though shopping is still an interactive and social experience, it has been well reported that mall traffic has been declining for many years.
What often goes unreported, however, is that high-quality “destination” malls are performing well. The real pain has been in malls that are located in less densely populated areas that are too small to attract traffic-driving retailers such as an Apple Store or H&M. Yet despite the narrative that the shopping mall is antiquated, the American consumer is consuming more than ever.
Millennial consumers in particular are accelerating the evolution of the retail industry. Millennials total 25% of the U.S. population – outnumbering Baby Boomers – and make up more than three times the size of the Generation X demographic. Millennials have grown accustomed to embracing new technology in order to get what they want more immediately and more conveniently – think Netflix for on-demand videos, Uber for transportation, and Venmo for virtual payments. Clamoring to engage with this rising class of consumers, retailers are quickly embracing new ways of marketing, merchandising, and payment in order to enhance the ease and convenience of shopping.
Consumption is a very important contributor to the U.S. GDP. Consumer spending accounts for more than 70% of the U.S. GDP, far outstripping investment by businesses, government expenditures, and net exports. Additionally, there are nearly 5 million retail sales workers in the U.S. and, to gear up for the holidays this year, retailers reportedly hired between 640,000 and 690,000 additional seasonal workers.
The U.S. consumer is also in great shape right now. Consumer confidence is at a multi-year high, household net worth reached an all-time high earlier this year, and interest rates remain historically low. As consumers, we should feel good right now.
How is the retail season shaping up this year? Compared to last year, when retailers were faced with a historically warm winter that left inventories piled high, stores shelves are leaner. In the absence of must-have apparel trends this year, retailers are reliant on promotional activity to spur sales. Ever since the great recession in 2008, consumers have been programmed to expect a deal, and this year you can expect the same big sales to draw you into stores.
Admittedly, some of us like to shop more than others. But whether you enjoy shopping or not, gift giving is something we all do. I find gift cards, wine, perfume, and books great gifts to give when pinched for time. But nothing beats the rush of an unexpected “wowza” gift for a lucky recipient. After all, we are all children at heart. Remember that equally as important to what you give is acting grateful when you receive something – whether you are or not.
Now, go out there and contribute to the economy by shopping for family and friends for the holidays.
But before you go, participate in our holiday gift polling question. We want to hear from you.