E-Commerce Crushes Mall Retailers One by One. Here’s the Data

Brick-and-mortar department stores – the lucky ones still open – are on schedule to be toast.

E-commerce sales in the first quarter soared 12.4% from a year ago to $127.3 billion (not seasonally adjusted), the Commerce Department reported on Friday. Last year, e-commerce sales blew through the $500-billion level for the first time ($513.6 billion). For 2019, e-commerce is on track to hit $575 billion, an increase of $61 billion. Over the past five years, e-commerce sales have doubled. On a seasonally adjusted basis, e-commerce sales in Q1 hit an all-time high of $137.7 billion.

E-commerce includes sales by the online operations of brick-and-mortar retailers. The top ones have huge and thriving online operations: Walmart, Home Depot, BestBuy, and Macy’s in that order are the fourth through seventh largest e-commerce sites in the US, behind Amazon, eBay, and Apple.

So this is the business Macy’s brick-and-mortar stores are in:

But none of the major retailers, with one exception, disclose just how much of their own booming e-commerce sales have eaten into their brick-and-mortar sales. They brag about percentage growth of their e-commerce sales, but refuse to disclose the booming dollar-terms of their e-commerce sales and the dreadful dollar-terms of their brick-and-mortar sales. They have a large amount of money tied up in their physical stores, and so it’s better to keep investors in the dark about the performance and ultimate fate of those stores.

The exception is Nordstrom. Last year, it started disclosing the dollar terms of its “digital sales.” By Q4, its digital sales were 33% of its total sales.

Macy’s, for example, just reported a decline in net sales in Q1 compared to a year ago, but “double-digit growth in our digital business” – the only thing Macy’s said about its e-commerce sales. With overall revenues declining and e-commerce sales booming, its brick-and-mortar operations must have been beset by plunging sales. But Macy’s keeps this data secret.

To obfuscate this fact further, Macy’s and other retailers now include their digital sales in their “comparable sales” metrics – formerly called “same store sales.” So these “comparable sales” no longer say anything at all about the sales at brick-and-mortar stores.

People say that e-commerce accounts for only a small portion of total retail sales (10.2% in Q1) and therefore doesn’t matter. But this is misleading because e-commerce has not yet made major inroads into sales at gasoline stations, auto dealers, and grocery and beverage stores that together account for 52% of all brick-and-mortar sales. With those taken out of the tally, e-commerce now amounts to 23.6% of the remaining 48% of retail sales.

The stores that are directly targeted by e-commerce are the classic “mall stores”: Department stores (Sears Holdings, Bon-Ton Stores); book stores (see Borders, B. Dalton, Waldenbooks); video stores (Blockbuster); music stores (Tower Records); hardware and hobby (Orchard Supply Hardware); toy stores (Toys ‘R’ Us); jewelry and accessory stores (Claire Stores); sporting goods stores (Sports Authority); electronics and appliance stores (Circuit City, CompUSA); clothing and clothing accessory stores (Limited Stores, Pacific Sunwear, Aeropostale); and shoe stores (Payless Shoe Source).

The blue line in the chart below represents sales at these “mall stores,” and the red bars represent e-commerce sales:

So yes, e-commerce is only 10.2% of total retail sales. But it has already killed entire retailer categories, such as video stores, and is killing others while it is leaving other retailer categories essentially unscathed, such as gas stations, auto dealers, and grocery stores – though that may change in the future.

Total retail sales in Q1, including e-commerce, rose 2.0% from a year earlier (not seasonally adjusted). For reference, over the same period, inflation as measured by the Consumer Price Index rose 1.9%. Retail sales without e-commerce sales ticked up only 1.7%. This was below the rate of inflation. And yet, e-commerce sales jumped 12.4%.

The strength in e-commerce despite the weakness in the rest of retail sales is part of the historic shift that has been going on for over two decades and will continue for many more years until the shift is finished. It didn’t happen overnight, and it won’t be finished overnight.

The second quarter started out better: The “advance estimate” of total retail sales for April (e-commerce sales data is not available, it’s reported quarterly) rose 4.9% year-over-year, not seasonally adjusted, right back in the middle of the range of the past six years.

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  81 comments for “E-Commerce Crushes Mall Retailers One by One. Here’s the Data

  1. I AM THE MOB says:

    You are cherry picking a small number of “mall stores” against all of E-commerce..And notice you didn’t cite any link to what data you are using for “mall stores”..

    And notice retail sales started to plunge right after China was allowed in the WTO in 2000? Right around the same year movie sales peaked as well..Along with US energy consumption..And US real median income.

    • Wolf Richter says:

      In the first paragraph, I cited and linked the Commerce Department where his data is from. This data is public. Anyone can get it. It’s raw data that you download in a spreadsheet, and you have to know what to do with it.

      Listed in paragraph 8 are the mall-store categories that are included in the “mall stores” numbers. There is nothing “cherry-picked” about it. E-commerce v. brick-and-mortar is a running series I do every quarter. You’re new here, so you don’t know. That’s OK. Welcome aboard!

      Total retail sales didn’t plunge starting in 2000. But department store sales plunged (first chart). This has zero to do with China or the WTO or median incomes, and everything to do with e-commerce because total retail sales were growing JUST FINE when e-commerce is included.

  2. Paul says:

    Adjusted for inflation, that last graph would look quite different!

    • Wolf Richter says:

      Yes, the top blue line, which is essentially flat, would plunge by about 46% since 2000. And the red columns, which are now rising at a rate of 12% to 16% a year, would rise at a rate of 9% to 13% a year. If your money is on brick-and-mortar retail, this inflation adjusted chart would make you vomit.

      • roddy6667 says:

        The amount of brick-and-mortar shopping space in the US is about 4X as much per capita as in France and other parts of Europe. It’s a house of cards that is collapsing, making e-commerce look like it is the cause.

        • Azimuth says:

          In the US market, this has been happening overall for decades. A growing American city always has a belt that’s the newest, best, most-desired brick n mortar stores and malls. But there are also always older belts, usually situated more inward to the city than this prime belt. The prime belt expands like a wave front around the city, leaving belts of older stores and malls behind.

          Those were the older malls with the vacancy signs. Their anchor tenants had moved to the prime belts, and now they were filling in with anyone who wanted cheap space in a mall, including churches and government offices.

          That’s probably a lot of that extra 4x per capita of retail space, stuff that had been obsoleted by the real estate developers even before the bricks started melting.

  3. alex in san jose AKA digital Detroit says:

    This is a temporary blip.

    For the average person, it’s cheaper and easier to do things off-line. Yeah I’ve griped about not being able to find things like foot powder or vacuum cleaner bags in my tiny podunk town of San Jose, California, but I actually found “my” foot powder in Target the other day and bought a couple of cans, at $2-something cheaper than online.

    I’ve gotten into Studio Ghibli movies and you can’t watch them online, you have to buy the DVD or blue-ray. Well, online they run about $30, but my little walk in Japanese video store in Mitsuwa Marketplace has them for $13 or so.

    Now YouTube seems to be rationing when you can watch things on there, and it’s blacked out for me for hours at a time or who knows, I may have watched my last YouTube content last night. I know they’ve been putting up ads on there asking me if I want to try some kind of “YouTube Prime” that I know I’d have to pay for, and I’ve always been turning it down, but now, like Internet access itself in my area, it’s being rationed and eventually, if you can’t pay, you can’t play.

    What this means is a return to the bricks-and-mortar economy for the bottom half or so. Maybe the bottom 75%.

    I already know I’d be far better off financially if I started making illegal street food or buying flowers and hustling those on busy nights downtown. I don’t do this because I want to develop my street music skills, where nothing tangible changes hands – in Hawaii there are “undercovers” who will haul you off to jail if anything tangible changes hands, at least if you’ve not paid off the right people. And by playing the shakuhachi I’d be in tight with the most powerful bloc there, the Japanese …

    But the thing is, the online world, like a lot of things, is becoming an increasingly exclusive playground of the well-heeled, and meanwhile there’s half or more of the population who are going to be “included out” who are they going to buy from?

    • Debt Wazoo says:

      > like Internet access itself in my area, it’s being rationed

      Please to elaborate.

      • alex in san jose AKA digital Detroit says:

        Internet where I am is almost as slow as dial-up, sometimes just plain conks out, and is expensive. I didn’t even have internet access here for the first 5 or so years in San Jose, only going online from a place with crappy wifi or from my boss’s house in the next county. I didn’t have internet access for the first five years here because I could not justify paying 10% or more of my gross income for it.

        Keep in mind, I’m living like say the bottom 60%. I make barely over min. wage, live in a structure not intended for human habitation, don’t own a car and probably never will again, do a lot of my cooking at home, etc.

        There used to be neat internet things even the very poor could access, though. I’ve bought and sold so many things on Craig’s List I’m really saddened at its passing. Oh, you can go to the site and it’s still up, but try selling anything on there. Since I don’t have a smartphone, I can’t use the modern apps. I took my 3 ukuleles to the local musical buy-sell place, “Starving Musician” which gave me more than a pawn shop would have, and a guy in my temple bought my trumpets. It’s back to word-of-mouth, maybe flyers, for us now. I have some sign-painting stuff I want to sell, and will probably make flyers and put ’em up near the places that give art classes.

        The answer for the bottom 60% is to do as much as they can to go backwards, not forwards. Instead of 4 family members having 4 smart phones, get a land-line and an answering machine. That’ll save just about enough money to feed the family if they cook at home.

        • GrassRanger says:

          “Internet where I am is almost as slow as dial-up, sometimes just plain conks out, and is expensive.”

          What you are encountering is an unintended consequence of net-neutrality where in everyone pays the same for internet access regardless of their use of it. Downloading a few web pages uses a comparative trickle of bandwidth but watching Apple TV or a Netflix movie requires a virtual fire hose, yet you pay the same as the movie watcher. Think of what your water bill would be if your usage was averaged with a large business like a meat packing plant to come up with the bill for both of you. This makes it a little clearer why Netflix and other electronic entertainment giants are so dead set against changing the net neutrality rules.

        • Clete says:

          This is interesting — thanks for sharing your details. We can be a lot better informed when we look beyond our neighborhoods.

        • alex in san jose AKA digital Detroit says:

          GrassRanger – I am *very* pro Net Neutrality. If it weren’t for that, we **wouold** be down to dial-up speed.

    • kitten lopez says:

      i actually agree with you very much. that’s why i’m waiting for things to burn out and cycle back around.

    • Ed says:

      alex – how is it easier to buy things from a retail store? You can go to Amazon or google and type in the keyword and get whatever you need delivered to your house within 1 day versus wasting time and money going to a store?

      From my experience, buying online is significantly cheaper. Somewhere between 20%-50% cheaper depending on the good. I’m not even factoring in the cost of gas to get to the store or time-wasted searching for the good inside the store.

    • Juanfo says:

      Remember when everything on the internet was free.

    • HB Guy says:

      Alex, I’d question whether it’s really “cheaper and easier for the average person to do things off-line”.

      Have you considered the cost of driving @ $0.52/mile (per the AAA) to/from one of IOUSA’s dime-a-dozen malls or Tar-zhe stores; the value of your time or having to deal with crowds, etc.?

      For this “average person”, on-line shopping is the cheaper/easier alternative.

      • Prairies says:

        By “average person” you are correct if you add the stipulation average urban shopper. The rural folk likely don’t get the same service for the same price.

  4. Just Some Random Guy says:

    My small local mall lost its main anchor tenant. So they converted the space into a call center. About 200 people work there now. Several medical offices opened up as well, replacing shoe stores and things like that. And I heard a mega fitness center is planned as well. Stores are either service or speciality retail. There’s a cigar store with a smoking room inside, a computer repair shop, a dance school. Basically all things Amazon can’t provide.

    And from what I can see the food court does brisk business with GrubHub and Doordash deliveries.

    So there is life after retail if malls have some vision, it seems.

    • alex in san jose AKA digital Detroit says:

      Shoe repair’s a good idea too. You won’t sell shoe repair services to someone like me who grew up barefoot most of the time, then wore the cheapest most disposable shoes I could, then finally settled in on vintage Doc Martens which never wear out and look great with a decent shine, but a lot of people pay a lot for shoes and they have a “favorite” pair that they can’t find another of, or afford another of, etc. Bonus if the repairman knows how to make shoes for people with foot problems because with an ageing populace and a majority overweight populace, there will be only more foot problems.

      Another good idea would be a tailor shop. You buy those pants on sale at Macy’s etc then take ’em over and get ’em hemmed. And how many people sew these days anyway? Who even sews on a button?

      • Iamafan says:

        Our favorite Japanese store Nijiya closed down in Westchester Co. NY Replaced by the same owner of another local Japanese store. Not the same Japanese feeling. Certainly not the same food and items.
        Stores in Japan have many curious cheap stuff unlike here. If we’re all going the Japanese way in QE, I don’t mind the stores. I always go Gaga in the food basements in their department stores. They are to die for. The Japanese have found the secret recipe for keeping department stores alive – food.

      • doug says:

        Being a cobbler allows one to meet and help a lot of folks while making decent cash(emphasis on ‘cash’)…Internet proof for now.

      • Heather says:

        I sew on buttons. Also hem pants, shorten sleeves, etc. i used to have a small, in my house, alterations and custom sewing business, couldn’t believe how much people would pay me to hem a pair of jeans! Or sew costumes for their kids! More people should learn how to sew. When I was growing up in Hawai’i, most of my friends sewed and a lot knew how to draft their own dress patterns. Don’t know why people don’t do that anymore. Singer Sewing School was a big thing!

        • kitten lopez says:

          i’m hoping to help it come back because whenever i practice fit people at the gym, i end up with a horde of people wanting me to do THEM too.

          i told sewers who wanted to sew for ME, i said, “you could start your OWN thing and i’ll help you. we’ll start a THANG…many different styles… all custom…LOCAL…”

          yeah, CASH…

        • OutLookingIn says:

          Being the second youngest of five brothers, our Mother made it compulsory to learn, washing, pressing, sewing, darning, cooking, and even flower arranging, among numerous other things of everyday living, like making a bed!
          When I joined the army, she presented me with an old Singer Featherweight (little carry case model) sewing machine. I protested, but she insisted saying I could thank her later.
          In basic training as soon as the guys seen me sewing badges on and altering my own uniforms, I got swamped with requests! Even had some drill instructors bring me uniforms! Charging a small, modest fee, made me a tidy little sum by the end of basic.
          I still have that little Featherweight and thank my Mother every time I use it.

        • Clete says:

          Down here on The Other West Coast (100 miles south of Tampa) there’s a gal from Hong Kong who hems my slacks for $16. (I’m gigantic, so I have to special order with the hems undone.) She’s been in business for at least 15 years, and she’s always busy.

      • sierra7 says:

        Alex in SJ:
        “Who even sews on a button?”
        I do.
        But, I’m real old school and grew up during the Great Depression and remember the life my parents and relatives lived as Italian immigrants.
        I now live in the Sierra foothills and constantly listen to my friends and neighbors complaining about loosing population and small businesses are closing right and left and what they can do about it.
        I have no answer except times are changing and unless we turn to living more as a “commons” we will continue to descend into a “alter-life” just as capitalist consumers.
        Interesting musical instrument(s) you claim to play or own….not trumpets.
        We raised our children in San Jose; one of my fav areas is Willow Glen but unaffordable to me….left 20 years ago.
        Too many of my friends buy most everything on line; brick and mortar stores are struggling mightily and closing faster.
        The county town I usually try to shop in has been loosing brick and mortar businesses to the likes of the big box crappers like Wal-Mart and Lowes; destroyed several good hardware (Orchard and another very good one) stores and other retailers. The county (and town) struggle to try to find solutions.
        Yet, in San Jose I’m told that shopping centers like Santana Row and Westfield Valley Fair doing just fine…….But, Silicon Valley business is a bit different so far compared to so many other regions’.

      • kitten lopez says:

        there’s a tailor not far from Macy’s mens store, high up in an office building, and they shoo away the complaining yelpers who try and talk their prices down for multiple shirts. they don’t want those kinds of customers since hand work is hand work and you cannot “industrialize” tailoring and three shirts isn’t easier than working on ONE.

        they tell people to go away as they don’t need the advertising and get a stream of customers word of mouth.

        THAT is Mt. Olympus to me.

  5. Bobber says:

    The data highlights the income concentration we see in the US today.

    If you take the $575B of e-commerce sales and divide that by total US households of 128M (in 2018), you get average e-commerce spend per household of $4,500.

    If e-commerce is only 10% of total retail, then the average US household is spending $45,000 per year on all retail. Median household income is only $62,000, however, so it’s clear the wealthy folks are spending a ton and skewing the averages.

    • doug says:

      Bobber, somehow I think you need to take into account ‘debt’ as many folks spend more than they have, way beyond cash on hand.

      • Bobber says:

        If the lower income classes are taking on debt to keep up the spending, that would make the system unstable and be rather short-sighted. Wouldn’t the Fed increase rates to put and end to that, sooner rather than later, assuming it wants to maintain market stability?

    • Ed says:

      Bobber – A pretty significant portion of those retail sales are B2B don’t you think? Don’t assume it’s all household spending. Businesses spend big bucks.

  6. Javert Chip says:

    That red e-commerce vs Mall-stores growth chart has been slightly exponential (excluding Great Recession) since 2000, and looks only to be getting steeper (eg: rate of mall-store decay is increasing).

    Good on Nordstrom for disclosing e-sales; it’s fascinating to watch the rest of Mall retail fail to disclose material investor information. Hypothetically, a 12% e-commerce growth rate takes 6 years to double, equalling Mall-store sales (sooner if the trend continues to accelerate).

    I doubt B&M retail goes away completely, but the numbers are now so big and the market has spoken so clearly that even bigger retail changes are in our need-to-mid-term future.

    I’m logging off because it’s about midnight and I need to shop Amazon for wine glass jewelry and a bike shirt (should take about 8-10 minutes).

  7. Josh says:

    One of the reasons I stopped going to malls in NY and CT is that they started charging for parking. Excuse me, I’m going to the mall to buy stuff and you are charging me $2-$3 to park? I don’t think so. Wolf has recently posted several times on why he keeps his site free to attract a bigger audience. Why would malls install a paywall and lower their audience?!? I assume the parking fees goes to the mall owner (e.g. SPG) and doesn’t get divided by the stores. If I was a store and the mall started charging for parking I would be livid.

    • Serge says:

      Where did you see $2-3 for parking? It’s more like $17-35. Chicago mall: Current parking rates are as follows:
      $23.00 for 1 hour or less
      $28.00 for 1 – 2 hours
      $33.00 for 2 – 3 hours
      $38.00 for 3 – 10 hours
      $50.00 for 10 – 24 hours.

      Manhattan is not much different.
      It’s all done to do away with car ownership and reduce traffic.

      • Michael Fiorillo says:

        Reduce traffic? That’s a good one: Manhattan’s streets are jammed with Uber cars, while mass transit is allowed to collapse and the blame is being (mis) directed at the unionized MTA workforce.

        • NotMe says:

          Mass transit is terrible. No human should be forced to use it. It is not fit for animals.

          In NYC, the union transit workers decide to take lunch on Fridays so they quit driving from 1130 to 1 o’clock on the crosstown bus having dozens of stranded passengers at each stop.

          In SF, the union transit worker starts lifting a bag to his mouth at every stop, and after a while charges at 55 miles an hour through every stop as heads to the downtown with panicked passengers on the bus and fist shaking people at every street corner.

          The streetcars in SF have been renamed the MRSA express in honor of the untreatable infectious bacteria clinging to all parts of the insides.

          My dad had to take the cab from the airport and was subjected to partially cleaned vomit in a unionized cab.

          People are going to Uber because all forms of unionized public and private transit are corrupt and generally filthy.

      • Just Some Random Guy says:

        Is that the mall itself or the city forcing it on the mall? I can’t imagine a mall operator purposely keeping people away like this.

      • Dale says:

        1. Mall operator: I’ll charge for parking! That way I don’t have to provide adequate parking facilities! I’m brilliant!

        2. Retail shopper: Oops, no way. I’ll check online.

        3. Retail store: No more customers! I wonder why. I’ll reduce selection to focus on the more profitable items.

        Go to 2.

      • roddy6667 says:

        When I met my wife, she lived in NYC. On our first date, we had lunch shortly after meeting. Lunch was $23. Parking for one hour was $23. That was in 2001. Now you leave your first born and a major credit card.

  8. Fernando says:

    Many times I have looked at items at the store then decide to buy online from home, so for me the physical stores serves a purpose…
    I bought some pants recently at a store, went home and bought several more once I was sure I really liked them…
    Maybe their focus should be to become more of a place to showcase stuff…

  9. nicko2 says:

    Most shopping malls are sad, empty, dilapidated places. New shopping malls (especially in mega cities) are far more innovative, becoming destinations unto themselves. The fact is, the mall-centric mass consumption culture of the past fifty years never was sustainable. Let it die, something new and better will replace it.

  10. Bob Johnson says:

    From an old guy: This site is by far the most accurate and balanced site of which I know, however it is easy to look at a large body of statistics and not see other trends that are also large – human nature probably.

    Something that isn’t seen/sensed by urban dwellers is that a large percentage of the “lower income class” lives in still-non-urban areas – the number is significant.

    For that population e-commerce has been a godsend at whatever price. There is no nearby mall, there is no nearby store, and there is no nearby corner to walk around and get your DVD or whatever, period. And in case you haven’t noticed, gasoline and travel expense is significant, leaving the still-large population of not-urban dwellers with no alternative – there has never been one until now. We are talking about millions and millions of people, not a small number. These are new, not existing customers. You can bet that Amazon, et.al. know this and have paid very close attention.

    As a consequence the growth in e-commerce has not only taken away from brick and mortar stores but it has also added a new category of buyer that has never before existed. The technological sword has two
    edges: if you work at Macy’s in an urban area it’s not good, but if you live in a non-urban (as opposed to truly “rural”) area you are the beneficiary.

    Bob Johnson – yes that’s really my name…

    • TooSoonOld says:

      What about the old Sears catalog? The non-urbans made good use of that, didn’t they?

      • Bob Johnson says:

        Yes they did, but you generally still had to go get it somewhere. My family used the Sears catalog and remember that it had other, uh, “uses” than just as a catalog. Been a while though…

        Bob Johnson

    • NoEasyDay says:

      @Bob Johnson–

      >Something that isn’t seen/sensed by urban dwellers is that
      >a large percentage of the “lower income class” lives in
      >still-non-urban areas – the number is significant.

      Walmart certainly identified this cohort.

  11. Michael Engel says:

    E commerce is B2B + retail.

  12. Michael Engel says:

    E commerce is a bubble.
    As long as AMZN stay on the left hand side of the bubble they will be fine,
    but on the right hand side, AMZN & friends will plunge.

    • Wolf Richter says:

      E-commerce stocks might in a bubble. But e-commerce per se is not a bubble. It’s a way of doing business that is becoming more and more popular.

      All major brick-and-mortar retailers that are still around and thriving today have figured this out years ago and have spent billions of dollars on their e-commerce strategy and fulfillment infrastructure while closing physical stores one after the other.

      • Juanfo says:

        I read Amazon delivery is heavily subsidized and pays a negligible amount of taxes. Do not have the source anymore.

    • Michael says:

      I believe what enables e-commerce is the low price of shipping. Higher energy prices would be a headwind.

      • Paulo says:

        No, I will respectfully disagree Michael because every article has to shipped, regardless. Just because a product is bought online does not infer an immediate marshalling of transportation to get it to the buyer or more expense, rather, the product just piggy backs onto existing infrastructure. For example, when I buy something online it goes to Canada Post which costs me less than 10% of what a trip to town does. Plus, Adelle…stops in for a quick chat. She was going by the driveway, anyway, on her rural route delivery rounds.

        For those that dispute the stats, just look around. An example is a local mall in a nearby city to where I live. They have actually expanded it and now call it, “Indoor Storage Solutions”. It is full of RVs, boats, etc, most likely owned by the new condo dwellers who don’t know anyone with a garage. There are hardly any stores left and they probably want to give them the heave ho.

        Funny, I was just going online to look at something at Cabelas, but thought I would stop in at WS on the way. Go figure. I know what I want, know what I need, and this will save me driving, parking, and two hours out of my life. Instead, I’m fixing two bicycles so we can go for a ride today. Right after we finish kayaking.

        • gary says:

          Sorry Paulo, but having something delivered will always cost more than getting it yourself since there is an extra worker involved. As for using “existing infrastructure”, my local Walmart is on the way to and from work. And when you say Canada Post, and think you are referring to Amazon. There’s plenty of controversy about that. BTW, you neglect other issues, such as returns, when calculating cost.

          Of course, there’s always an appropriate time and place where delivery works better, just not always.

        • roddy6667 says:

          A car costs 50 cents to a dollar or more per mile to drive. Picking it up yourself is seldom cheaper than any shipping charged by the e-commerce retailer.

      • gary says:

        Exactly. Much of the hype about e-commerce fails to take into account the subsidized nature of it. What is the profit-margin for Amazon?? (excluding their AWS)

        But as Bob Johnson brilliantly points out above, e-commerce is fantastic in high-density urban areas (since lower transportation costs), and even creates a new market:

        It’s been demonstrated that low-income people have a “high-propensity” to spend their marginal dollar. So, they can’t splurge on a new car, but they can certainly splurge on paying for delivery.

        • wkevinw says:


          I keep thinking Amazon may be the epicenter of the next bear market. Kind of like either CSCO or INTC (?- don’t recall)- ~2000. Seller financing got exposed (buyers couldn’t pay), so the .com stocks got killed. (Note CSCO, INTC, are ~-40% on a real cap gains basis since then…!).

          Amazon web hosts a bunch of the money losers (UBER?-others?); if those can’t pay, then Amazon’s biz model is kaput- as will be their ecommerce/retail pricing.

          An avalanche might be started by something like this?

          It will certainly re-price a large part of the tech and retail sectors.

        • Clete says:

          We live in a semi-suburban area: most of the big boxes are available, but by the time I spend an hour and two gallons of gas plus a bridge toll to go find out they (a) don’t have what I need or (b) are clueless about what I need, I can have Amazon deliver it the next day for free. Hard to beat that no matter what.

  13. The rise of materialism in my lifetime is quite remarkable. The 60s was the final event. Money went from being something you needed to buy something, (and there wasn’t that much) to an existential purpose. Dystopian culture has laid the groundwork for a rollback in mercantilism, the end of neoliberal policy, leading to collective government agencies running these things. At the end of the day why do you need the internet f you aren’t shopping? If you don’t have a job why do you need a cellphone? I sort of like what is going on in China, I just wish it wasn’t the Chinese government who was doing it.

  14. David says:

    Sometimes you are forced into e-commerce. I needed a power cord for my five year old Mac. I went to the local Apple store in the biggest shopping center in the DC area. The clerk’s look said it all–you are still using a five year old Mac. Bottom line is they didn’t carry the cord so I had to order it on line.
    Sometimes, e-commerce is just an excuse to carry less, older inventory at stores.

  15. robt says:

    I remember Ted Rogers, now deceased, the namesake for Rogers Communications in Canada and cable TV, saying that people would be doing all sorts of things online in the future, especially shopping, using their TV set and remote. That was before the internet, and he pictured it happening on cable TV.
    He was almost right … and of course he did get into internet service.

  16. MC01 says:

    Mall REITs have long been a Godsend to pension funds, private wealth management and the like because they have good yields and are very safe: malls rarely close down.
    But how long will these mall REIT be able to pay over 5% every single year to yield starved investors?
    The whole mall business model is built on selling goods at high prices and in large enough quantities as to be able to pay big enough rents to REITs which can then give high enough returns to their investors.

    So far mall retailers have managed to muddle through but that graph is simply awful: inflation alone is eating the whole business from the inside like a giant wood borer.
    Mall retailers are still mentally stuck in 2005: many of them have shifted to lower quality products they can sell at a higher margin and big yearly price hikes are the norm. Each time they do so a few customers just pick a different place to shop. Gutta cavat lapidem, the waterdrop eats through stone.

    Even thriving malls often hide a less than spectacular truth: big benefits like ten months free utilities or the possibility to renegotiate the rent downwards if some metrics isn’t met are common, and they eat through REIT profits.
    Malls are expensive to build and expensive to operate: the giant Westfield Milan Unibail-Rodamco-Westfield (URW) is building is already running late and over budget, with the Paris-based group estimating a final €1.5 billion price tag, and that’s without all the mitigation works URW pledged to do. How URW plans to fill the planned 380 stores and 50 restaurants (you read that right) when the area is already seriously overmalled is an interesting question, as is the idea of a “luxury section” less than five miles away from one of the biggest concentrations of luxury stores in the world.

    Local government authorizing these monstrosities in the name of employment/pumping money into the local economy/whatever my secretary can come up with today should be held accountable when it’s discovered the promised benefits for the area are limited to the construction companies which made off like bandits but that’s another story for another day.

    • GrassRanger says:

      MC01, you beat me too it. A lot of Mall REITs are or will become mall rats if they don’t change their focus.

    • Juanfo says:

      Down here a new $100.000.000 mall opened late last year within 5 miles of 2 other ghost malls and a zombie mall. Hundreds of strip malls in between with occupancy rates of 20-40% at best. I have not been to this new mall and have no desire to do so. Collapsed perpetually gridlocked infrastructure takes hours to drive a few miles. After a decade of double digit unofficial inflation, a third of unemployed working age able adults and imploding economy. Down here driving for uber is considered a successful career. The hundreds of thousands of Venezuelan refugees claim we are not that bad yet but on the way. Rampant crime and violence but the weather is nice and the palm trees sway in the tropical breeze.

  17. ft says:

    E-commerce, which my family uses a lot, has spawned a new lowlife element called porch thieves. In our East Bay neighborhood they often follow so close behind the delivery trucks that your stuff doesn’t last five minutes. They are not deterred by security cameras.

    • GrassRanger says:

      That kind of thievery is very obnoxious but I would NOT recommend you follow the Dallas PD solution.

  18. concrete guy says:

    Self storage units seem to be doing very well. Buy-Use-Store. America loves stuff. The mistaken belief of possessions equals wealth.

  19. Anon1970 says:

    E-commerce in the US got a big boost in its early years by the quirky sales tax rules that varied from state to state and a Supreme Court ruling that was handed down during the days of catalog shopping (the Quill decision). Since Congress had not addressed interstate shopping and sales tax collections, the court ruled that businesses did not have to collect sales tax from customers living in states where the business had no physical presence. This ruling was a big boost to Amazon which served California customers from a warehouse in Nevada.

    Last year, I was informed by a shoe retailer in Florida that it was now required to collect California sales tax because it had met the sales threshold set out in a recent law passed by Congress.

    Malls are not exempt from financial failure. Two failed malls which I am familiar with were torn down in recent years, namely the Midtown Plaza in Rochester, NY and the Northland Mall in Southfield, MI. Changes in the sales tax rules will help brick-and-mortor retailers compete but changing demographics and the relocation of businesses will still have the final say.

  20. fred flintstone says:

    Wolf is the best.
    Both approaches will eventually have a place. Folks that need to try on/examine clothes, shoes, makeup, furniture etc. will favor in store clothing even if the price has to be a bit higher. The big run in e commerce may still have room until the mall stores balance out. Having Penney, Sears, Macy etc etc selling very similar goods within a few feet means someone has to go. Also rents will eventually move lower.
    Still not sure what happens when the US postal service stops printing losses and adjusts its pricing to break even. Amazon is not making much money on its retail operation.

    • Javert Chip says:

      Dear Mr Flintstone

      Don’t you worry your poor little head about how our stupendous losses are covered.

      We, in fact, make it incredibly easy: we just take it out of your taxes (or at least that portion we don’t have to borrow).

      Best wishes,

      USPS Post Master General

  21. Hg says:

    Amazon used stock options as compensation for employees and executives amounting to $10B last year. This dwarfs the 3B profit from their only profitable sector AWS (ironically, the infrastructure and hardware that services this whole ponzi) Then, through stock buybacks, they are allowed to effectively book wages as profit by paying employees on the back end! wow. You conceed these stocks are bubblicious, but the sky-high valuations are the foundation on which the structure stands. Weaknesses inherent of this mode of commerce, à la ‘porch thieves’, will metasticise in the coming downturn. What emerges on the other side will be hybrid and decentralized.

  22. Old Codger says:

    As the wise man said, “If ya can’t beat ’em, Join ’em?

  23. lisa says:

    RE: your-“The strength in e-commerce despite the weakness in the rest of retail sales is part of the historic shift that has been going on for over two decades and will continue for many more years until the shift is finished. It didn’t happen overnight, and it won’t be finished overnight.”

    Quite valid. However, the shift is not allowing for any equitable shift back to small entrepreneurial online businesses. Why? Do note that simultaneously, AMAZON is competing and usurping marker share, and eliminating any profit level for businesses that are subscribing to the predatory monopolizing that AMAZON is using as the ultimate take-away for just a few of the real stakeholders.

    Supply-chain inequities will be earth-shattering for any small vendors. They won’t even be allowed to enter the “free” market-place????

    • Wolf Richter says:

      Retail is always tough. But there are millions of small online retailers out there now, and small manufacturers and makers of things — entrepreneurs all of them — that sell via the internet, some of them on the Amazon platform (or on eBay or other third-party platforms), and some of them on their own platform, and some of them on all platforms. E-commerce has given them a channel by which to sell their stuff across the country or the world. So there are lots of small businesses selling successfully via e-commerce. Many of them do it from their homes, which keeps their costs down.

      There are some commenters here that have this business model.

  24. Michael Engel says:

    Suppose I am a mfg with a dozen chain store as customers.
    They carry my products in each of store and online.
    When they click sold, – either by a salesman or online – my computer activate a signal to replenish fast by FedEx or UPS and send them an invoice. Love e-commerce. e = energy.
    High turnover of the top 20%, the winners is priority
    But when I smell recession, like now, that will turn my customers into slow payers, or even go BK with my pcs, I will definitely slowdown and reduce risk, to survive.
    From pushing winners and testing new items, I will reduce inventory in house and in the hands of my customers My number one priority is to get rid of slow moving/ bad items Payroll cuts and the skeleton that stay will work for fewer hours –
    food vendors will get less traffic fall, some will shut their doors.
    The bottom line : In a recession people spend less and the mix of goods is getting worse.
    B2B fall, same in the malls.

  25. Trinacria says:

    This is good info as usual which supports the anecdotal. Last week, my wife and I took a vacation in nearby central Oregon. Stopped in in the Bend outlet stores. Approx. 1/3 of the spaces were empty…did not expect that in an outlet center. Cascade Village which is a larger mall, also had empty spaces. With the exception of the Trader Joe’s, activity seemed less vibrant, and the merchandise selection much less. In the Portland area, there seems to be (again, only through observation) many new mixed use buildings where the bottom area retail spaces are empty. I know of a number of establishments choking under the current rents. Some with multiple locations will close some and scale back once leases are up. Again, anecdotal info sharing with other fellow CPA’s . Also, last year my wife and I went to central coastal California and saw a number of empty retail spaces in different locations, but particularly surprising were the ones in Solvang, CA of all places. Wasn’t the case before 2008 with retail space seemingly at a premium with a vibrant feel to the place. And so the story goes.
    On another note, I do buy somethings on line, but not all; especially shoes or some clothes that need to be tried on. Plus there is something about occasionally going out with my wife and getting lunch, coffee or something similar along with the shopping experience.
    Finally, just on principal I have never and will never purchase anything from Amazon. They seem to not treat their people very well, the culture – from what I read – seems predatory (employee spying on employee). I would rather pay more and support local or companies that have a better reputation of treating their employees. And then you have that weird guy in charge who looks like the bad guy in an old James Bond movie petting the white Persian cat that wears a diamond necklace. The seem to sell everything under the sun; even tiny houses now I read – how ironic. When will someone in gov’t finally get the courage to apply the Sherman Anti trust Act to this company. I believe that patronizing Amazon is directly proportional to our freedoms – the more resources people allocate to Amazon, the more money that weird guy has to spend on causes not in favor of the middle class and wants to put people in space capsules and ship them into outer space as that seems to be his solution to the population problem from what I have read.
    Lastly, as the eldest son of immigrant parents who were kids during the depression, and a naturalized citizen I simply cannot believe the amount of debt many folks are carrying. Less is truly more…simple but I guess not an easy concept for too many out there. Thanks for letting me ramble.

  26. LouisDeLaSmart says:

    So the question here is , to a certain extent, will the habits of the consumers change? People love E-commerce because it’s simple, has a great overview of product pricing, and a significant number of partially or fully unbiased reviews. As Wolf has shown with data on multiple occasions, only niche retailers will be able to survive. No jobs there…
    So can the service industry provide local employment?
    One aspect of the manufacturing business is that you design the product to be expendable. The limited warranty and shorter lifetime of products, is designed to reduce cost for the manufacturer and enhance profits. This then comes back to the buyer in form of a lower quality product. These products are unfixable and unrecyclable, and they are designed as such…on purpose.
    One way to give some hope to the service industry is to mandate a minimum (there are sites out there that analyse and grade each product based on “repairability”) level of repair with a legal requirement. Things need to become fixable and reusable again. And that is where it all needs to start again.

    • Wolf Richter says:


      “So can the service industry provide local employment?”

      Yes, as seen by the boom in warehousing. These “fulfillment” operations, as they’re called, are now around every major population center. In addition, there are now small delivery companies sprouting like mushrooms. Amazon is pushing this. I see them deliver stuff all the time — taking the place of USPS, UPS, or FedEx. There are many other specialty jobs that come with this e-commerce infrastructure. So in effect, classic retail jobs are being replaced by these order fulfillment jobs, warehouse jobs, warehouse construction jobs, drivers, etc.

      This does not count the tech jobs, marketing jobs, customer service jobs (yeah, good luck), etc. needed in e-commerce.

      Here is the data from the nonfarm payrolls report about warehousing and storage employees. Over the 18 years since 2001, they surged by 140%, from 500,000 to 1.2 million persons. These are all very “local” jobs:

  27. W Gary Johnson says:

    My hot take is that some brick and mortar retailers have succeeded in incorporating e-commerce into their business model. I prefer to shop online and pick up my purchase at the store rather than have it shipped or going to the store and finding they don’t have what I want. This also makes returns simpler.

  28. chip says:

    In your article, you state:

    (E commerce) “is killing others while it is leaving other retailer categories essentially unscathed, such as gas stations, auto dealers, and grocery stores – though that may change in the future”

    I don’t understand why/how C Store with Gas sales could possibly be impacted by online sales. Can you tell me why this may happen in the future please.

    Thank you and I enjoy your articles very much.

    • Wolf Richter says:


      You’re right about gasoline sales not moving online. But EVs are taking off, and people charge them up at home with cheap night electricity. This won’t be felt because the numbers are still small – and that’s what they said about department stores in 2000, and 2 decades later, look where they are. So be patient :-]

      As EVs become a larger part of the fleet over the next two decades, sales at gas stations will start to look similar to sales at department stores over the past two decades.

      Grocery sales are already migrating online in other countries. In addition, most of the stuff US stores sell has nothing to do with fresh fruits and veggies, but with processed and packaged goods, from cereal to hair-care products, which are prime online merchandise. Meat has been bought by phone and online for decades (shipped on dry ice). So this shift is coming to grocery stores too.

      Fresh fruits and veggies may be a laggard, but everything a grocery store sells is already available online. Safeway has had an online service with delivery since the dotcom days. More recently, numerous other companies have jumped into it, including Amazon, Google, Costco, and Walmart. It’s just a matter of when consumers are starting to feel comfortable with it. And some consumers are already feeling comfortable with it. But this too will play out over many years.

      But I think small corner stores for fill-in stuff can be successful.

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