The Death Of Retail ?

Retail, as we understand it today, is undergoing a remarkable and fundamental change. Most in the industry don’t yet realize how dramatically different the retail environment will be in just a few short years.

Most are still talking about the current economic uncertainty as the cause for the changes in the industry. What they fail to realize is that the current state of retail is more than a simple temporary slowdown. It’s a fundamental shift being driven by several trends in the way America shops that are coming together to provide the “perfect storm” for the death of retail as we know it today.

Strong words I know.

Every time the American Consumer takes a break from the unprecedented 30 year spending frenzy they have been on, one pundit or the other calls for the end of retail as we know it.

In 1981- 1982 the stock market suffered one of its worst years in decades. Fortunes were lost and the warnings began that Americans were racking up debts that had reached unsustainable levels. I thought for sure that this would cause an adjustment to retail purchasing, but still the American consumer kept on spending.

On October 19^th, 1987 the stock market suffered what was up until then the single largest point drop in history. “Black Monday” saw the market loose 22% of its value in a single day. I went to the local mall to see how the stores were faring, and I couldn’t find a parking space.

Sept. 11, 2001, the day that America’s very way of life came under attack, did little to change the way America spends. After a brief time to morn, retail spending actually increased as President Bush reminded us that shopping was a patriotic duty.

Even the burst of the dot com bubble later in 2001-2002 did nothing to stop spending. Somehow, even though everybody knew it could not happen, the American consumer just kept buying at a torrid pace.

The warnings issued over the years were based on solid reasoning. Consumers in 2007 were spending more than they made. The savings rate in this country had actually fallen to a negative number. With consumer buying making up over 70% of the nation’s Gross Domestic Product, there were strong indications that it could not continue. It’s because of these worrying trends that whenever the economy hit a rough patch, the calls for the death of retail rose in volume.

I had been though every one of these major economic upheavals and I had seen the consumer spend its way out each and every time.

So when the “Credit Crunch”, or the “Housing Bubble” or the “Economic Meltdown” or whatever nomenclature sticks, happened on Sept. 29^th, 2008, I went where I always go to see how the economy is faring, I went to the store.

What I found stopped me dead in my tracks.

For weeks, the aisles were empty. Almost nobody was shopping and nobody was planning to shop. Even those who were shopping were only spending what they absolutely had to.

For a full year, the American Consumer has stayed out of the big box retail shops in record numbers. It’s not a simple correction; it’s a big change in the American Consumer's buying attitude. One that may make the way retailers are operating today obsolete.

The trends driving the change coming to retail include:

The rise of frugality

• Unemployment
• Savings rate
• Garage sale chic

Going green

• Sustainability
• Buying local
• safety

Consumer intelligence

• Lessons learned
• The internet
• New Options

These trends will not be going away when the economy ”recovers”. I say that with some qualification, because it is very possible that the economy will never “recover” in the sense that things go back to the way they were.

It’s a whole new ballgame out there where increases in the stock value of large retailers will not be predicated on growth, where new shoppers don’t exist and where brands have no more importance than either outlet or price.