After losing a lot of ground during the Great Recession, today’s economic environment seems perfect for retailers looking to return to their glory days. Gas prices are low, wages are rising, and GDP has grown for the past eight years in a row. Still, even these seemingly ideal conditions can’t help this ailing industry. Nine retail chains have filed for bankruptcy in 2017, including HH Gregg and Payless. Meanwhile Macy’s, Sears, J.C. Penney and RadioShack each announced that they would be closing more than 100 stores this year. Retailers are even fleeing Manhattan’s famous Fifth Avenue shopping district, with Ralph Lauren being the latest brand to shut down their flagship store.
So why exactly are brick and mortar retailers failing when they should be thriving? Well, the first reason is an obvious one: Amazon. Between 2010 and 2016 the e-commerce giant saw its North American sales quintuple from $16 billion to $80 billion. What’s more, several reports have suggested that half of all U.S. households now subscribe to Amazon Prime. Besides this enormous enterprise, improved online shopping platforms have also allowed startups to compete against traditional retailers. Warby Parker, for instance, upended the eyeglasses industry thanks to a cheap and risk-free business model that lets customers try on frames at home.
Online shopping isn’t the only thing bringing down big retailers, though. Recent studies show that today’s young consumers are more interested in spending money on experiences rather than products. So while shopping malls become increasingly empty, hotels and restaurants are getting more business than ever before. In fact, for more than a decade “food services and drinking places” have seen sales grow at twice the rate of retail spending. Still, not all hope is lost for traditional retailers. Some optimistic observers think the rise of self-driving cars will allow companies to create roving fleets of autonomous vehicles that bring products directly to customers. Of course, struggling brands like Macy’s and Sears will likely need to compete with the mighty Amazon in this new retail arena as well.
- What are the primary causes behind the decline of traditional retailers?
- Will self-driving vehicles be able to breathe new life into the retail industry?