One customer at a time. But I doubt there are other options.
Here is another example. I swim in the San Francisco Bay and need something to keep my goggles from fogging up. Once you figure out what gets you through your open-water swim without your goggles fogging up, you stick to it. Some people use baby shampoo. Others spit into their goggles. Others buy specialized products. There are lots of choices. I have one that works for me, and I’m sticking to it.
So last week, I drove to my nearest sporting goods store. It’s a good distance away; the store in my part of town closed years ago. The store carried two types, the one I buy, and the one by a big-name company that I tried but didn’t like. When I got to the store, I found out they don’t carry my brand anymore. They only carry the big-company brand. I’d wasted time and gasoline. Once back home, I ordered it online directly from the manufacturer in the US. It arrived via USPS in my mailbox today. And this was likely the last thing I’ll ever try to buy at a brick-and-mortar sporting goods store. I’m not the only one:
The chart above shows sales at brick-and-mortar sporting goods stores as a rolling 12-month total (to iron out the enormous seasonality). From the 12-month-total peak in July 2016, sales have now dropped 13% – and it’s not because people suddenly stopped buying sporting goods. It’s because they’re buying them increasingly online.
A few years ago, I walked to Macy’s Men’s Store by Union Square to buy the same brand and type underwear I always bought there. But they didn’t have it anymore. They’d cut their inventories. And staff was nearly absent. The cost cutters had taken over from the merchandisers. It was obvious. And they’d wasted my time.
Once back home, I went online, found a new brand, and bought from the company that makes them. It took five minutes. And that was the last time I tried to go to a brick-and-mortar store to buy clothes. Our last effort to buy sheets at a brick-and-mortar store ended the same way, online, with the best sheets we’ve ever owned, at about one-third of the cost of the prior set. None of these deals involved Amazon.
Cost-cutting by reducing inventories and getting rid of staff is the fastest way of killing a brick-and-mortar store.
The Macy’s Men’s Store was shut down and sold to an office developer recently. The City, trying to keep some retail in what used to be the retail center of San Francisco that draws a lot of tourists, specified that the first three floors would have to be retail, including restaurants, otherwise it would all have been converted to office. We’ll see how that turns out.
The internet has an unlimited inventory, and what took two hours and often without success, now takes five minutes, success nearly guaranteed. It’s not even necessarily a matter of price – though comparison shopping is infinitely easier on the internet. But it’s just so much easier and faster. So here is what is happening to sales at department stores:
Nordstrom reported quarterly earnings this week. It’s the only major retailer I know of that started reporting enough figures for its “digital sales” to where you can calculate the actual dollars (on a rounded basis). Other retailers keep that a secret because it would show just how terrible their brick-and-mortar stores are doing.
And this is where Nordstrom was with its “net sales,” which include everything but revenues from credit-card interest and fees:
- Total net sales: -3.5%, to $3.35 billion.
- Digital sales: +7%, to just over $1 billion. Digital sales accounted for 31% of total net sales.
- All brick-and-mortar sales: -7.5%, to $2.3 billion.
So digital sales jumped 7% and brick-and-mortar sales fell 7.5%. It doesn’t take long before the stores are toast.
This has been going on for years. During the quarter of the holiday shopping spree, 33% of Nordstrom’s sales were digital.
Just about all retailers include their digital sales in what used to be called “same store sales,” but are now called “comparable sales.” Walmart started to include its website visitors in what used to be called “foot traffic” at its stores, but is now called “traffic.” Other retailers have followed.
These retailers are trying desperately to obfuscate to what extent dollar revenues at their stores are slumping. But they do want to brag about the online sales successes. Hence the twisted metrics.
Walmart, in its quarterly earnings report, said that its “eCommerce” sales in the US soared 37%. This is a huge increase. But total net sales in the US, including eCommerce, only rose 3.3% to $80 billion.
So let’s do a little speculation because Walmart refuses to supply the data: If just 15% of its US sales are eCommerce, so $12 billion, and if they’re up 37% from a year ago, eCommerce sales increased by about $3 billion. And its brick-and-mortar sales would have fallen by 0.5%.
But if the proportion of Walmart’s eCommerce sales is similar to Nordstrom’s at around 30% of total US sales, Walmart’s brick-and-mortar would have plunged. There is a reason why Walmart only brags about the percentage increase in its eCommerce sales, and makes it impossible to calculate what is happening with its brick-and-mortar stores.
Macy’s reported last week that net sales fell 0.6% to $5.5 billion, despite “double-digit” growth in its digital business, which is all it said about it. It’s up to you to guess whether its digital sales grew by 10% or 37%.
Target also reported quarterly earnings this week. It said that “comparable digital sales” soared by 42%. It didn’t indicate dollars, but it said that digital sales growth was responsible for 2.1 percentage points of the 4.8% growth in its total “comparable sales.”
All successful retailers spend enormous amounts on building out their e-commerce operations, including the brick-and-mortar component of e-commerce, the fulfillment infrastructure.
At the same time, they’re cutting cost at their brick-and-mortar operations, trimming inventories and staff and closing stores, and making it more inconvenient, more time-consuming, and more frustrating to buy at these stores.
Each time a disappointed customer ends up buying online what they’re looking for, only to discover just how easy it is to buy shoes or defogging liquid or a dishwasher or a couch or an armoire online, retailers run a good chance of permanently shifting this customer to the internet. No Amazon Prime required. The choices are endless.
People have often asked me how long this shift to online can continue, and some people have suggested that this is a bubble that will eventually implode and revert to brick-and-mortar.
But in reality, it has become a self-fulfilling prophesy: As more people buy online, retailers cut their expenses at their stores by cutting inventories and staff and letting their stores deteriorate, which turns more people off and sends them online, and so retailers respond with more cost cuts at their stores, including shutting stores, which sends even more people online.
Other retailers go bankrupt and get liquidated, and many of their loyal customers switch to buying online rather than trying to find another store. And so it goes. Each time a consumer buys more online and less at the store, retailers respond by making online better and by making their stores worse or by getting rid of them, and it just speeds up the process.
There is no telling when this shift in how Americans buy will reach some kind of logical conclusion, and what will be left of brick-and-mortar stores that can thrive in another 25 years, because that’s how long it has taken to get this far.
Retail space asking rents in Manhattan plunge as landlords try to fill scores of vacant shops. Charts by shopping corridor. Read… Brick & Mortar Meltdown, Manhattan Style
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I just got back from picking up, from the local Amazon Locker, a neat-O Iwatani brand butane 1-burner stove, because my little Proctor-Silex 1-burner hot plate is pretty lame. I paid $42 for it, and chose it because it’s CSA approved for safety.
Before going and picking it up, I poked around in the kitchen ware area of the Vietnamese market downtown and Lo and behold, they have a CSA rated butane stove, plus it has a neato ceramic honeycomb deal like a ceramic heater does, and it’s $23.
I think I’ll keep my Iwatani though because flames are cool.
I think it’s really neck-and-neck. Buying clothes online is a disaster unless you’re buying EXACTLY the brand, model, color, etc that works for you. Some things, like the cookers cited above, are cheaper in person. Others, like the electric kettle I bought for almost $40 from Fry’s than found it cost half that online (or for a similar one in the Korean market) are better to buy online.
Mostly for me, I buy online because it can’t be obtained locally.
Hi Alex, curious as to why you use the Amazon box instead of delivery to your home? I use them, but i live abroad and when in come back i have a ton stuff sent to five or six lockers each time because it is the only place i have. I’m a buyside manager and I’m asking as investment research.
Amazon deliveries to homes are subject to theft in many neighborhoods in the US. Someone mentioned that issue a few days ago on this web site.
(if you’ve ever read Alex before, you wouldn’t tell him you’re asking for research. he’s about side stepping or jamming such “research.”)
You’re a tiger today! :)
Kitten – why would I “sidestep or jam” research? I’m always explaining my motives and methods and why certain things are done certain ways for the non-top-10% because you guys need an outside perspective.
you’re right, Alex. you’re an enigma.
actually maybe not.
It’s riveting, akin to a yakuza turf war story and there’s romance as well: a meek boy falls in love with a tough girl after seeing her shove a piece of broken glass through another guy’s cheek with her tongue. Goading the street fighters as the film rolls, complementing them by saying they’re awesome just to keep the action going a little while longer.
I believe Alex lives in the bathroom of a large factory building he works at. As such, he really has no “home”. Guess its better than a van down by the river.
oh man if i was drinking milk i would’ve actually spit it out my nose! that was hella funny.
Heff – Geez people, I have a loft over the office.
I live in the building I work in, and it’s a plain old R&D type building, an office and a large warehouse space with a roll-up door. It’s a rough area so anything left out front would disappear immediately. If I’m not here when the delivery is, they can either leave it out front to be stolen or hang onto it and try to deliver another day.
I can have it delivered to my legal address, my boss’s house, but then he’s got to take it over here. Some things, for some reason, aren’t “eligible” to go to the locker, so that does happen but I try to keep it to a minimum.
The locker allows Amazon to deliver it to a safe place, where I have a 3-day window to come and get it. So say it comes on a Wednesday but I really don’t want to go downtown until Friday. I can do that.
The lockers are actually a system developed by the German postal system that Amazon adopted. I’m really happy with them.
I remember going to the Union Square men’s Macy’s a few years ago during a week day and the place was deserted. I’ve been using a particular name-brand shampoo for years. Ran out and went to Target, didn’t have it, went to BB&B, nope, then went to Walmart, nope. And you can’t even ask anyone if they still carry it since no one would even know. I checked the website and it’s still being made so I ordered it from amzn and received it in two days.
There are a few factors that aren’t being considered that could reverse the online vs. bricks and mortar phenom. 1) Leases for retailers are punishing and may go down dramatically. That is, after numerous landlord bankruptcies, they will be charging rents that retailers can pay and still see a profit on the sure-to-be fewer national retailer’s footprints. So, the shrinkage of retail will continue until the landlords get religion. Also, the enormity of the retail floor space will likely diminish as the retailers re-scale their store sizes. 2) I can’t imagine that online alone will compete, over the long haul, against a blended and balanced version of b & m and online. The overall staffing costs may be a bit cheaper for the online warehouse workers (and robots), but there are advantages of real people to deal with at stores. If, for example, you need some electrical help, you may go to Home Depot, get the advice, then either pick it up there or buy online, but the price will be competitive because the landlord’s take will be much less of a base cost to H D. How-to youtubes are very helpful, but a give and take with a knowledgeable rep is better.
Different retailers will probably end-up with a different online/b & M balance, so one size won’t fit all. But, the novelty of the current online business, and the increased automation of services, may cause a reversal where people will actually recognize the value and need for social interaction in commerce and re-populate the now more customer-advantaged “malls”.
Bottom line, both the online retailers and the b & m ones will probably get whacked as the middle class disappears.
HowNow – The biggest problem retailers have isn’t necessarily rents, but inconvenient locations. Why go out of your way to go shopping anymore when you aren’t even guaranteed to find the item you are looking for. Retailers are losing foot traffic because most stores are out of the way for consumers.
Shopping at brick and mortar is a waste of time and money. It is much more efficient and cheaper for me to buy everything but groceries online.
The rental rates are already plunging. Even if rental rates go to zero, i can’t imagine anything but a grocery store, gym, or restaurant could possibly survive. Maybe plant or flower stores? I’ve had bad luck shipping houseplants.
Its hard to buy clothing online too. Even if you manage to have digital “try on apps” using your real body, you can’t replicate feeling the material on your skin.
Food, clothing, perishables, gyms, restaurants.
One brick and mortar that might be worth researching is MUJI. There’s one right downtown and I’ve bought clothing, a pillow and pillowcases, all sorts of things from them. Their T-shirts are nicer and a bit less expensive than the Fruit Of The Loom ones I was buying from Target. Same goes for the pillow and pillowcases,
The downtown San Jose one is excellent, and the staff are very attentive, it’s a Japan level of service. The one in Palo Alto in the Stanford shopping center has very indifferent staff, so this is is probably a function of who’s the manager.
But they seem to be doing well. Another store of this type is Daiso.
the home depot reference is telling. you cite home depot as a place you go to for advice. i have to laugh because every time i go there, i think about how much i miss the advice i used to get from local hardware stores and how little the hd folks know in comparison. eventually, home depot will become a literal depot where you will pick up what you ordered online in effect becoming a giant amazon locker. retail is dead because not enough people are willing to pay more to support it.
Okay, HD ain’t the place for advice it once was. Early in their ascent, they had expert retirees from each trade that in my local stores: cabinet makers, tile setters, plumbers, framers, etc. Yes, the Ace Hdwr. stores still have patient, very informed people. And it’s a shame the small stores were mostly blown away by the two biggies. .
Returns are never a problem, which is a big plus. If you’re not sure how much of something you’ll need, or the size of fittings, and such, you can buy all you can carry out and return what you don’t use. If you have to travel 50 miles to get to a store, obviously, that’s no help.
I’m not arguing FOR b & m and AGAINST. online. I wrote that a balance of the two is what we’ll probably end up with which will benefit most customers. But, ultimately, the reality of a vanishing middle class will be the biggest hit for retail – and you may as well include all of Western Civ.
@hownow i see your point but i don’t think that we will end up with more than a tiny amount of b&m retail in the long run. it will only exist like pockets of old growth forest that were too rocky or remote for the lumberjacks to bother cutting down.
For me the biggest drawback to online shopping is the shipping costs.
I now buy clothes online and never thought I would
but I order 2 different sizes and return one of them
sorry but amazon is great for that = ie return easy
I really wish people would stop doing that.
Twice the emissions per purchase used in shipping & returning, all for the sake of convenience.
Versus driving to a store, back home, then back again to return and go home again?
Versus visiting the store once and trying the clothes on before buying.
While Amazon subsidise it it’s great.
But Amazon is increasingly feeling like a store front for Chinese junk.
If you can find good stuff in there that’s great.
But mostly I find decent brands are no cheaper on Amazon than going to the shop any way.
“Mostly for me, I buy online because it can’t be obtained locally.”
Me too! There’s stuff online that admittedly is overpriced but I find value in the well made vintage items long out of production.
Take a look at the new USB-charging electric stick lighters though, they’re like a mini Taser designed to reach over a burner for igniting. I use one of these now with my Coleman 502 picnic stove and they work great even in windy conditions.
Hey Wolf, just to even it out a bit. How about an article of all those online retailers who are increasing sales double digits but loosing money or barely breaking even in their reapective online businesses? Returns and inventory management tend to be huge money loosing endevours for online businesses we never seem to hear about.
AMZN would lead the list once AWS is taken out
As much as I would love to be the first to grace this message board with a story of how I have transitioned to shopping for clothes and accessories online, I’ll have to tell that story another time as I have to run off to pick up a new pair of shoes from an Amazon locker.
Hopefully not running off barefoot! ;)
Learn your European shoe size. Shoes are all marked with their European size these days and you’ll find it’s very consistent.
I’m with Wolf. The only retailers I visit are bookstores (on the account of being a bookworm) and small restaurants where I can listen to people’s stories (many of them fascinating). I haven’t set foot in a department store since early 2000’s. The efficiency of online shopping is impossible to match by brick & mortar shops.
I’m mostly in your camp, and have been since 1995. But a year ago I had the opportunity / misfortune to visit a Macy’s store. Squalid and with lacking inventory. Yet somehow analysts were still saying they were great; obviously, analysts only look at what the companies say rather than what they do.
My husband needed a new pair of nice shoes for church and we visited a large Macy’s near us on Good Friday afternoon, admittedly bad timing. He found 2 different pairs he liked in the $100-$150 range and wanted to buy both pairs if they fit.
There was only one sorely overworked shoe salesman who kept telling everyone I’ll be right with you. After waiting 20 minutes to tell the clerk his selection to no avail, we walked out and drove to a local discount store. Big sale, nice comfortable black shoes for $49 out the door. No waiting.
Goodbye Macy’s.
Old dog – you nailed it. This is the absolute best time in history to be alive. Every single inconvenience of my early adult years is now gone. The extreme efficiency by which I can now live (never leave more than 1 mile from house on a daily basis, don’t own a car) has enabled me to save an insane amount of time and money over the years.
The death of the consumer economy and liberation of all enslaved workers will happen in my lifetime
The consumer economy is what got rid of all those pesky inconveniences and addled your brain. Maybe the first free service we can provide in this brave new world is a free helicopter ride for you and your ilk.
I was at Fred Meyer (Kroger) today for groceries. Now they have these annoying discounts for produce and groceries that you can only get by loading the online coupons on your phone. If you forget your password or don’t have the app on your phone, you cannot get those discounts.
Worse, most of those discounts are only for pre-ordered groceries that you pick up or for stuff they deliver to you, not for stuff you go to the store and buy.
I used to shop there regularly. Now this convoluted process just ticks me off.
Why wouldn’t they offer these discounts to regular shoppers and why are they goading them to use their delivery or curbside pickup service? Doesn’t make much sense to me.
That’s a typical method used to push customers into buying what the company want and/or how the company want. Honda has long been notorious for it.
It’s likely those “online only” discounts are considered part of “online sales” by Kroger, and reported as such in their quarterly reports. Investors will be dazzled by such a novelty and there will be a lot of pats on the back and perhaps even some bonuses.
It would be interesting to see if Kroger is pushing this method only in areas where they have a large and faithful customer base that is unlikely to be impacted by such shenanigans or if they are trying it everywhere they are present.
Safeway also tries to push customers into certain products with its Just for U online coupon program, which they change every Wednesday. On average, Safeway prices appear to be higher than Trader Joe’s or Costco.
My Macy’s story relates to Rockport Pro Walker shoes. I have found them to be very comfortable and not very expensive. On a shopping trip to my local Macy’s about a decade ago, the snooty salesman told me that the store store was no longer carrying that item. It only took me a few minutes at home to find an online merchant in Florida that had exactly what I was looking for. By buying the shoes on Thanksgiving Weekend, I save even more.
Kroger.. FMeyer is 20 years behind. Just rolled out self scanning w hand-held readers in 2018 and thought that’s cutting edge. WMart has taking a giant step forward with eCommerce recently. WFoods still doesn’t get it. Amazon cannot make up for some of the dumbest people ever…. Rant off…
DATA, they are collecting DATA, which they can also monetize, by selling, and doing direct targeting to you the ocnsumer.
While I completely agree about the shady methods used by many Internet company to treat customer data I think most haven’t got a clue on how to monetize them. I mean… I buy truly a lot of music CD’s from Amazon so they should know a thing or two about what I like and still they keep on recommending music styles I have never shown any interest in.
I suspect Amazon bases those recommendations not on the data they have gathered (which are probably gathering dust in a server somewhere) but on old fashioned payola.
‘It’s likely those “online only” discounts are considered part of “online sales” by Kroger, and reported as such in their quarterly reports. Investors will be dazzled by such a novelty and there will be a lot of pats on the back and perhaps even some bonuses.’
This makes sense. They are turning some shoppers off with these shenanigans. At Costco, members get the discounts automatically without any of this nonsense.
Yes, but at Costco we pay with our time and our dignity.
It’s Soviet-style shopping: you stand in long lines to show your papers to be allowed in, you don’t know from visit to visit whether they will have the same stuff they had last time, you stand in long lines to pay, you stand in long lines to be strip-searched on the way out…
By the way, I mentioned this theory to my Bulgarian-born doctor, and she laughingly told me I was right.
I object to being asked for a charitable contribution at the checkout line. Vons Supermarket also has a screen on the CC pad that asks for a donation with the $5 tab right near the no thanks. I go there as little as possible now. Also, when they have meat on sale, they cut the steaks really thick. If you want a thinner steak or one not in a Max Pack, then you pay like a $1/lb. more. I complained once and the meat dept supervisor said I was wrong. Such b.s. I rarely go there and the center that once had a CVS Drug Store as a second anchor now has an indoor mall with lots of little boths selling everything imaginable including a barber. This is part of the reason the inline space is rarely 100% occupied.
“I object to being asked for a charitable contribution at the checkout line.”
This has got out of control. Every store has some sort of charitable thing now. Would you like to round up your purchase to the nearest dollar to help such and such cause? And of course if you say no, you look like the biggest asshole in the world. How could you possibly NOT want to help children, right? But luckily I don’t give a f**k what people think of me so I always say no thank you.
“Not this time” works for me
Me: “No, I don’t want to make a donation to your store’s favorite charity so that your store can get a tax deduction. I’ll make my own donations to my own pet charities and get my own deductions.”
I don’t really say that because the explanation is too long.
The strangest situation is the solicitation of items for charities after the supermarket checkout. They want me to (1) first pay the retail price for the items (rather than the store’s wholesale price) and (2) I do not get a tax deduction; the store does!
Most of the items are non-perishables for food banks. But for a smaller number of items (such as non-groceries going toward a shelter for the homeless or battered women), there is also sales tax on that higher, retail price!
I prefer to write a cheque to food banks or shelters: The charity issues me a tax receipt, and they can use the cash to buy whatever items are most needed, at wholesale prices, including perishables.
If they continue giving me the befuddled look after a “not this time” or “I did last time”, then I resort to the long winded explanation of how they get to pool everyone else’s charitable donation and claim the tax refund as if it was their money to begin with. Then they tend to look surprised.
I do so via a Fast Food/Buffet Chain – every time I go there for Lunch, etc.
It’s not much; but it goes to a Regional Children’s Hospital.
I respond to similar requests at other Venues that I give through other means – most stop asking again unless the Stores are running a Seasonal Campaign.
Is tjat lovely drli still in that little lane behind Macys in Union Square? It was a great place for lunch!
India has the best solution. Amazon are welcome there but only as wholesalers. They have to sell goods to shops and not the public.
I have sold online as in Amazon and Ebay mainly, at gun, car, and motorcyle shows and was once a big fan of the old school swap meet era decades ago…
Caveat about online is that you will notice often on Amazon that the prices will be higher than you can get at stores in more and more cases… And this reality appears to grow more common as the brick and mortar is a price point baseline most compare to…So I ask, when brick and mortar is gone what will you do??? What will you compare to???
The online is full of sponsored ads and cheap chinese which is my competition. How do I beat this online commerce model?
I sell a pet product and sell it at excellent pricing to show what each item size will get in the online market place.
And this is what I do to use ecommerce against itself:
1. I go directly to stores and sell the items at an outrageous discount price that makes me good money because I A) manufacture the product and I B) sell the product with no paypal, ebay, amazon or any other cost in between me the the sale other than cost to make ( under a dollar) and cost to drive in my Prius to deliver.
I am hard core in marketing and will go multiple times until people try free selling samples and it is going well.
I am about to take it to the extreme by max out what I can manufacture at my ranch and it will succeed as my pricing is cheaper than Chinese as retailers have confessed this to me.
I am retired and recently considered starting a company manufacturing construction gear but at 64 no way.
What do you see when brick and mortar is gone? I don’t see anything good about it…
Bravo. I have also noticed that Amazon prices are increasingly uncompetitive. It’s a bad trend, especially as all other PCE costs have grown. I suspect there that there will be a retail rejuvenation, though likely it won’t look much like today’s brick-and-mortar.
Loyal Prime member here and I agree. I willingly paid $1.50 more a can for some foot powder because it looked like Target had stopped having it in stock. When Target got it again, I bought it there.
My little butane stove is almost 2X the cost of a different brand but still CSA rated for safety at my local vietnamese market and $12 or so more than the ones in the local Korean market (not sure if CSA rated).
The basic model of online is it will cost more because you’re paying for convenience, or because you can’t get it in your area at all.
I’ve noticed that Amazon seems almost to have stopped its once recurring promos. Flash deals are much more random and hard to sift through.
Retail is still a great place for schmucks like me. Some of the coolest stuff I have is the result of me rolling up to a retail location and saying “help I need ‘X'”. I get it, I could have spent a bunch of time on the internet looking for the right size suit or the best pair of fancy shoes (these are awesome shoes btw), but I’m not sure I would have reached the same conclusion, because I needed to be surprised.
There’s magic in real personal interaction, and I think in our heart of hearts we all know it, and I think that’s a part of going to the store.
For basic commodities though? The internet is the jam! Do I care what the guy working at Wal-Mart thinks about a particular brand of paper towels? Hells no.
If I know what kind of boxer shorts I like, why would I just not order them online?
But… what if there are better boxer shorts out there and I just need somebody to tell me they exist? Somehow product reviews don’t compel me.
Yup, you’re bringing up a great problem for online:
Discoverability.
In all of Wolf’s examples, he cites products he had already used and liked, from buying in store.
What happens when there are no stores to discover products? Given what we know about online reviews and ratings, they’re not a good solution.
Also as this article makes clear, a big part of the problem isn’t B&M, it’s stupid management and (probably) too high rents.
Amazon reviews are great for discoverability. Once you research a product, you can probably find another retailer who sells it cheaper.
Amazon’s edge is the ease of returns.
Wait till Amazon starts charging for returns
Lest we forget, Amazon cannot stop being a Ponzi. Either they will start charging for their operational costs or drown in losses.
Walmart has a place near the front of the store for an online customer to pick up an order. This system is robotic. It can scan a bar code from a person’s smart phone, then the item is sent down the tower to the delivery bay. I bought Walmart black out curtains online with free shipping and used their in store pick up system for the first time with help from an employee. It was cheaper than Amazon. Walmart has a wide variety of discount groceries. Cheaper to buy food from a store. People do not buy frozen food online.
I have started ordering online if available or calling in an order when I find something at a b&m location that I need. If the online options are better I will go online, but with stores being gutted of inventory I have started taking steps before driving to the stores so trips aren’t wasted.
Funny you mentioned that because I was looking online for underwear and saw a 3-pack of Fruit of the Loom underwear for $10.99 in big and tall sizes but saw an 8-pack for just a dollar more. Of course, I could have paid an extra six dollars to have it delivered to me at hlme, put pickup at the store is free, and it was available the next day.
I went to buy a dehumidifier the other day into a large brick and mortar electronics shop. The first instinct was to buy online but than I told myself: ” nah, I know nothing about dehumidifiers, better go to a specialist shop where i can get some expert advice.”
So I went to the shop, asked a sales assistant for some help, start shooting questions, he has no clue what I am talking about as he has 0 knowledge of the products I am inquiring about and he ends up checking online the reviews for that product seeking the answers to my questions.
He ends his pitch on a brilliant note: ” the product has 4.6 starts and loads of reviews. It must be good as many people are buying it online.”
My last beam of hope in brick and mortar died in that very moment.
Ended up buying a different product online.
Definitive.
For me, I will only buy ‘well-defined’ products online.
By well-defined, I mean something where one knows exactly what one gets and how the thing works. Books being the iconic example, from the ISBN code one knows Exactly which book it.
Products where it will not take one forever searching, browsing and then comparing similar, but very different in some small hidden detail, items.
I ‘d never buy “complicated items” like consumer electronics, shoes, hiking shoes or running shoes online. For those, it is much faster and safer just going to a physical shop.
The shoes offered online are usually of the China-to-Landfill quality and I detest that stuff, I want good shoes that are repairable and look better with time, not cheap shoes.
Many consumer electronics product are half-way fakes because the OEM-manufacturers will produce crapified budget versions specifically for the large chain Web-shops to make sales on. It just takes way, way, too long to check whether the online offered version of something will be the regular product or the crapified one (usually the serial number or product ID will show this in some proprietary way …). Too hard, I go to a specialist shop.
Last night I finished a short course in small-gas-engine maintenance, given at a shop here that does warranty service for the major gas-engine appliance manufacturers. The teacher/owner confirmed what you say: the “product” has become a very slippery thing. A special promotional price may also involve a special promotional product that’s been cost reduced to sell profitably at the low promotional price. Shopping gets more complicated, and there’s a point to be made for being there and seeing the thing that you’re going to receive.
I like to touch, look, squeeze and feel the merchandise.
I like to be around women while they do shopping in Macy.
I like to be near father & son in Dick Sporting Goods.
So I went there, I think in Feb, because in Feb, when its freezing, u buy a soccer ball.
I need a smooth, light weight soccer ball, because I am old.
I touched them, compared their weight, and got an Adidas.
for $29.99. A lot of fun. It used to be around $100 few years ago.
Went to the cashier, – she was nice and didn’t ask me if its a gift for my grandson ==> the price was 19.99.
Have a good day, thank a lot.
This ball stick good anti parabola at the upper corner and good to my corrosive joints.
A soccer ball is not a commodity for me, I will never buy it online,
Dick Sporting Goods for me, even for $49.99
Interestingly I had the exact opposite experience fulfilling an identical need! After various health ailments I need to build back up, very slowly, to kicking a real ball. I decided to start with lightweight cloth balls, though still inflatable. I searched 5 sporting goods stores in the Seattle area (Seattle, no less!) and found nothing that worked. Found them on a school supply site in 20 minutes when I got home. Arrived the next day.
Best of luck with your continued kicking!
Exactly…
There will always be items that are purchased in person rather than on line. BUT those are exceptions that prove the rule, not the rule itself. And the further one gets from Union Square the more important the rule becomes: buying on line is faster, simpler, etc. Travel expense and time count for a lot with the majority of people.
What we have been witnessing for the last ten or so years is an incremental change in retail, but now the incremental change has become a step-change so that it’s apparent to everyone, urban, sub-urban, and rural. Step-changes rarely reverse themselves.
Bob Johnson
This is why I don’t worry about ‘BABA’ I live in ASIA. When I want to widgit I go online “Lazada”, which is owned by alibaba, aka tao, aka jack-ma.
I can get anything next day in home country, and if I order from China using alibaba, I get second day, almost always free shipping. I might add that I’m paying 30% of what the same widget would be sold on AMZN, and when I say ‘widget’, I’m talking any tangible solid object, just ordered a telephoto lens for my NIKON a few days ago, 1/3 the best price of AMZN from manufacturer
I still order books from AMZN, but its only because no choice and most often the shipping is more than the book, e.g. $10 for ship, $10 for book, but book still cheaper than if I went to Powell’s and bought off the rack.
I reckon with Lazada having 3 billion potential customers and alibaba have several billion that eventually they’ll leave AMZN in the dust in terms of volume, we’re talking trillions here.
WRT to food, people still do what they do, grand-ma grows veges and sells them at 3am at the market, and pigs get slaughtered same, but it’s social to hit the AM market and load up, but for stuff/widgets ‘online shopping’ rules.
Lastly, one last fear in WEST is returns, with lazada ( all of south asia ), when I ask a return they just return my money and say ‘keep the widget’, nobody even wants the stuff sent back, costs too much to handle return, the seller eats the loss, not BABA.
BABA on 20% sale, double down before it’s too late, only 2.6 billion shares available.
Haha eating the loss…. that’s what we do on Ebay unless it’s something large and expensive. “Aw, just keep it’ 95% of the time.
I saw the handwriting on the wall and took my distribution business online. This about 7 years ago. Note; we only distributed our own brand products. Anyway, it’s been a tough row to hoe but rewarding and sales have soared since I cut the retailers loose. Billing issues disappeared because retail customers pay online before we ship, so chasing net-10 accounts that slip to 30 or 60 days is a thing of the past (and a relief). It’s quite nice to receive retail money for products instead of wholesale money. And the slippery sorts who abide by pricing agreements only to break them with ‘deals’ like free shipping, or coupons for $20-off after spending $100, which ticked off my other dealers royally, are history as well. Overall, going online has been a boon for manufacturers like us, as well.
Agree with all of this and we have seen much the same in our business. The collections and billing issues alone make the transition worth it. Also agree that it is hard work to cut out and work around traditional distribution – didn’t win us a lot of friends at first, but it sure helped our margins!
Stores can’t carry lots of brands because they can’t raise prices. They can’t raise prices because of wage suppression. Companies lobbied DC to get policies that allowed wage suppression. Just like medical/health-insurance industries and Obamacare. Benefited lobbyist and company bottom lines immediately and then everyone sees the long term effect twenty years later. Bible: “The fathers have eaten sour grapes, and this has set the children’s teeth on edge.”
Regards WalMart, I can seem the doing well on both ends, or even 3 ends.
I’ve done some regular online – delivered to home – comparison shopping there.
I’ve bought some big items, such as tires – delivered to store – to save on shipping.
But mostly, I buy groceries – and all sorts of knick-knacks in one go: plants, medicine, bath mat, christmas lights, stationery supplies, etc.. Stuff I most likely would not buy online – or won’t need to, since I’m getting them at WalMart, because I’m at WalMart, because I can get a lot at WalMart in one stop…. Kind of circular, I know.
Thus, I think WalMart has sort of nice tripod foundation.
My last two online purchases are Walmart. Wasn’t searching their site but a Google search lead me to them…best price for what I have as looking for and free shipping. Composite deck post caps and an outdoor table. Walmart will give Amazon a good run for their money.
Strange clash of Walmart brick-and-mortar vs Walmart online. I wanted a fshing kayak. The one I wanted was available from a variety of sporting good stores (for example, Cabela’s $549) , but my local Walmart store sold the same boat for hundreds less. I could buy it at my local Walmart for $278. But, if I could wait a week, I could get the exact same boat delivered to my home for $218 by Walmart online! I did and it just came yesterday. I saved $60 and Walmart delivered it to me, even though they had dozens of them on hand. Someone figure that one out for me.
Walmart corporate likely get 100% of profit online and does a bit of inflation to prices on location to cover expenses(wages, rents, power, water taxes, etc). So the item makes corporate $218 online and makes corporate $218 in the store, since it likely loses 20-25% of it’s sales to the expense accounts. The exact amount of savings passed on to you for just buying direct, nice to see a company not too greedy for a change. It was hard not to say something rude about Walmart, I am still not a huge fan of them but this is one thing that is a plus.
Thanks Prairies, makes sense. I never considered that. It was interesting tracking down the supply chain, they handed everything — sale, transportation, etc. — to third parties. And they even delivered it a day early!
Me too, not a huge fan. The wife is. But I learned a long time ago to search for “coupons” on line before buying, and this time it paid off too.
I notice that in each case you say you bought online but not at Amazon and it was very quick. Perhaps you could have a column that indicates how you did that? The vast majority of people I talk to think that buying online must be done at Amazon or 1) one will pay very high prices or 2) the process will be multiples of what it takes at Amazon. Amazon is excellent to discover what customers of a product have to say, and about its specs but one can buy from others online.
David Morris,
I don’t think I will write a column on it because I can summarize it here:
Just Google (or DuckDuckGo or whatever) what you’re looking for and see who all sells it. And then compare.
Also, I have gotten screwed on Amazon by one of their third-party vendors who wasn’t an authorized seller of the product. The product had a bad battery that you cannot replace, and when I wanted to get the maker’s warranty to cover it, the maker said that it wasn’t under warranty because I’d bought it from a vendor who wasn’t an authorized seller.
So I don’t buy tech products on Amazon anymore. It’s too hard to figure out if the vendor is an authorized seller of the product.
There are many superb sites out there. And my experience with them has been excellent. I think Amazon is largely a great site, and without Amazon, we would probably still be in the stone ages of ecommerce, so kudos to Amazon. But it’s not the only place, and for many things, it’s not the best place.
But I do use Amazon for comparison shopping. And I buy some stuff on Amazon. But it’s not my knee-jerk first choice. And almost every site offers free shipping (with some stipulations, such as a minimum order) if you don’t need the product immediately.
For the purposes of this article, I wanted to make sure people understood that “online shopping” is not equal to “buying on Amazon.” It’s far broader. Amazon is the biggest player, but far from the only player, as you can see by the retailer data I included in the article that shows how successful these retailers are in growing their online business.
IMO, one of the keys to not buying on Amazon is having an efficient/ easy to use password system for non Amazon sites, so that it isn’t too painful every time u leave the Amazon ranch to make a purchase.
Yes. This. If the price is the same, Amazon wins. Personally, I’ve never had a problem with anything bought on Amazon but then I mostly buy children’s toys and books . . . pretty safe online purchases.
Canadian Tire Online:
Look online the day before a town run. Buy online and request the instore PU option. Stop in on the way to an appointnment and voila…2 minutes. If they don’t have the item they bring one in overnight from another store.
However, if you want to shop in person the online catalogue compares and contrasts with customer reviews, tells you what aisle the product is located and how many are left? Then, you can actually do the squeeze and feel routine. What’s not to like about online? It works for both options.
I use spit in my swim mask. I didn’t even know there ‘products’ out there. Long sleeves for sunscreen. :-)
My wife plays piano. We gave up old heavy one when we moved recently. Now ready for electric one. She spent a week trying to find a store with a few in stock to try. We live near several metropolitan areas. No one stocks them.
So this am, I ordered one online. She has 45 days to see if it is the one for her and if not, we return it and try another one.
Not optimal for us, but….
Happy holiday weekend to everyone.
E-commerce is like the all-powerful Thanos (in the Endgame movie) saying to all the dying bricks & mortar characters fighting him: “I am inevitable!”.
This has been evident to me for some time. It started with office supply stores (which is irritating because I often buy there when I need things immediately and don’t want to wait for shipping). I now do much of my shopping online for the reason Wolf calls out. It’s frustrating to find a product I like only to have it discontinued in the store and have to turn to online sources to keep buying it.
The one thing I can’t figure out is online furniture purchases. To me buying furniture is extremely personal and I like to see it, sit in it and touch it before I buy it. Returning furniture doesn’t sound like fun.
The other thing I look for is online dealers who offer quick order fulfillment and shipping. I ordered regularly from Walgreens and always received the orders within a day or two until recently. I sung their praises in reviews and online. Yet the last couple of orders have seen fulfillment times of 2 weeks or more. I had to cancel one order due to the timing.
Having the internet at my fingertips has been enormously efficient and time saving for me.
And the supply chain for online evolves and improves on a number of fronts. Amazon prime with one day shipping sets a new standard for competitors to try and emulate.
Automation is coming to our ports. Bloomburg just had an article about it w testing at Long Beach I believe. Cycle times and lead times will drop further as the ports can load and unload 24/7 w robots and the actual time to pull an empty container off of a truck and put a full one on is going to drop by nearly 90%. Same story for offloading containers from the ship.
I still buy most of my stuff at stores. I know, I’m a weirdo.
The best retail stores right now are the discounters. You have an idea of what they carry but you never know what they have. The prices tend to be good as well. It’s an adventure of sorts. I tend to try more new things when I shop with them, while stocking up on brands I use anyway.
The most interesting retailing, to me, are the internet platforms that curate their merchandise. In Europe they have well known platforms that only deal in certain brands, certain products, etc. This is very efficient, eliminates all the stuff you don’t care about.
Here in America, retail platforms want to turn everything into a social media event, create a community. Really annoying.
@petunina
Social media event / community? Such as Etsy? What are other examples?
Poshmark and Instagram.
E commerce is mom & pop plus B2B.
Inflation expectations and higher tariff fill warehouses.
When the warehouse is full, trains & trucks run empty.
When merchandise is piled up, covered with dust, prices fall.
When suppliers devalue currencies, there is no more hope for inflation expectations in US. The $ will rise, test the previous high @ 104 ==> and oil will fall.
The process is old. Fridrich List wrote about it in his book : “The national economy” from 200 years ago. First edition in 1848, and for $9.99 from Amazon, get better education than fro R/R Stanford. He made America great again, after the civil war, when tariff were imposed (until 1896)….
Can’t rely on Vietnam, because China spank Danang.
Production should should be shift to US, beautiful people of P.R. Santo Domingo, Brazil, Argentina, Cuba, or Venezuela, for just in time.
Neither China & Mexico shouldn’t dominate US.
The battle between Communism & Americanism is over 100Y old.
– This comment should be edited, for the next 10 – 15 min, after I click “Post Comment” on Wolfstreet…
inventory and staff reductions are key as many of these stores have been through the financial buy-out cycle. I see little difference between e-commerce today and the Sears catalog back in 1890 as the catalog brought wider inventory to the consumer. e-commerce is also world wide, I purchase speciality sports equipment from Japan and Europe on-line the flip side is those items are not manufactured or custom made in the U.S. as a result.
My expectation is every retailer owned by a hedge fund is headed for bankruptcy and closure.
Nordstrom, Macy’s and a couple of large specialty fashion retailers in rapid decline blew out their balance sheet with an insane out of debt last quarter.They obviously know that the future has almost insurmountable challenges. Retailers very seldom turnaround once they show an extended pattern of operating margin decline.
Looking 5 years out : The best case scenario for Macy’s and Norsdtrom is that their stock trade sideways. Worst case, they go the way of Sears and J.C Penney.
I guess they will use brand new fresh debt to buy back their moribund stock.
The executives will get richer but there is no way on earth any stakeholders will see anywhere close to a satisfactory return on that debt. Huge risk, huge waste.
This is exactly what happens when there is no skin in the game and no personal risk on the part of the decision makers.
Looking at Macy’s balance sheet, I see that they have paid down a substantial amount of debt each year for the past five years. If this continues, they will have no debt at all in another few years. The stock is trading at about 50% of book value, which is mostly real estate, and at about 5 times cash flow.
I believe you mean “PE Fund” but your point is well-taken regardless (and I agree).
I do a lot of backcountry packing and used to rely on outdoor magazines for gear reviews. Then I would go to a store to look for the gear. But those have gone so far downhill. It will be a “special issue” with a dozen one-sentence blurbs and 50 full page advertisements.
Now Amazon has begun actual gear reviews. Field-tested products with clear side by side comparisons. So that’s where I look for new gear options and I often end up buying from them too.
Related to that… I have bought from REI for years and still do for some things. But the last few times I asked technical questions at the store, I got shrugged shoulders. The in-store learning experience is declining rapidly.
This is evolution and Re Balancing – New systems and Technology enable new systems. Adapt. It is worth noting that hidden costs for “Free Shipping” and Free Returns (Endless…) Lower the net profit of E-Commerce. No discussions or analysis is complete without thinking about these issues…
In addition, The “Serendipity Factor” is mostly left behind… Walking through the store and encountering other items, special sales.. End Caps with “Deals” and on and on…
Amazon is the leader in replicating and enhancing these processes and Up sell experiences online…
Let the Games Begin!!
I’m making cherry pies this year and I load my browser and searched “cherry pitters” and it was on my door step the next day. $8.99
Now I just need a mango pitter and I’ll be set for summer.
Can all that commercial real estate be converted to office space?
“Can all that commercial real estate be converted to office space?”
In terms of the former Macy’s Men’s Store, it is now surrounded by scaffolding and fencing, and they’re doing very serious work inside and outside. Redeveloping a property like this costs a lot of money. But it’s in a superb location and worth it. Other retail locations, such as some suburban malls, may be hard to redevelop profitably into offices.
A Sears store is turning into apartments. I remember reading of a Macy’s store turning to condos somewhere as well. I can see them turning to warehouse use as well. They’re just big hollow buildings, really that can have a lot of uses other than retail.
https://www.independent.com/2019/05/09/santa-barbara-could-be-getting-more-rental-units/
Kasadour- Tech is rapidly eliminating the need for retail and commercial office space. There is no way around the upcoming wave of vacancies across the country. The entire country will look like Detroit within 20 years. Millions of vacant buildings will cover the landscape coast to coast. It’s going to be crazy how quickly everything will come apart.
I haven’t had to go to a doctor’s office for the past two years because the basic appointments have been replaced with video chat. Email the doc a description of the problem, responds back in two hours with a diagnosis and prescription if necessary. My family has saved at least 20 hours this year by not having to go to the doctors office. We both work remote now.
I believe you. We are already seeing it here in Portland, OR. Lots of vacancies at Center Pointe in Lake Oswego as well as Pac-West.
Where do you think primary, sustainable, real productive economic growth will come from? It can’t come from the tech industry.
Kasadour-check. I often feel that the arc of tech over the last 30 years (perhaps 300 years) has resulted in a situation where our tools are now more important than the mission-does the machine truly serve most humanity, or does our future existence rely on most humanity serving the machine (and I include high-flown economic thinking and trading as part of the machine-thank you again, Wolf, for your tirelessly honest perspective and forum regarding this segment). The center no longer holds, and the answer to the destruction of sustainability seems to be “…who knew?”. Still, let’s all keep looking and working for that better day.
You obviously have not had a serious medical problem.
If someone does have any of a number of harder to diagnose but rapidly evolving illnesses (e.g., prostate or breast cancer) and the exam is video chat, they are dead.
No reason it shouldn’t work for psychiatry.
We have a hardware store here within a couple of miles of a Home Depot and Lowes. Part of the True Value network. It has maybe 2% the footprint of these big boxes as it doesn’t sell the bulky goods that they do. I shop at the small store very frequently. Why? The second you enter the door there are two employees who meet you and ask how they can help. And they know their stuff, usually much better than the staff at a big box. Also, they have brands and goods that you won’t find at a big box. I will patronize this local store even if I have to pay a bit more. Good service, in certain cases, will trump price.
Well-run hardware stores are an exception for now because they offer a SERVICE: Much needed knowledge. Knowledgeable store employees can suggest what you need to fix your problem, and they can also give you tips on how to use the product to fix your problem. This is a service they’re selling (or giving away for free, actually). And as long as they don’t bring in the cost cutters, hardware stores will be among the survivors.
But once the knowledge base leaves the store, the store has to compete with online vendors (they have how-to videos, reviews, and how-to articles but they’re a little harder to navigate).
A lovely ACE Hardware just opened on “The Alameda” (part of El Camino Real that goes from Diridon Station northward for a mile or so) it’s a short walk from Whole Foods and while it isn’t huge it’s got a lot of things and attentive employees. I hope they thrive. They have everything from cheap bike tires for poor folks like me to Green Egg barbecues (or whatever those things are) for the affluent.
Another store along there that I really like is La Dolce Velo, a bike shop. It’s small in the front but the building is actually large, when you go in. They have plenty of high-end bikes, and thrifty ones too. I’ve had plenty of work done on my bike and I’m always surprised how little they charge. And they’re always nice! They’re not making a lot of money from me, but they’re making it up on the people with $1000+ bikes.
The last two times I was in Home Depot:
1. At checkout, there’s a camera in my face and a screen showing the recording. I gave it the finger.
2. Checking out in the last hour, there were no cashiers – only self-checkout – a wand for you to do your own scanning. I told the monitor guy, “I don’t work here.” He shrugged.
Next time, I’ll order online.
Yeah, I asked the monitor how much the hourly rate paid for me to check, bag and load my own stuff.
Don’t you know there are thieves out there trying to beat this system any way possible?
How do get a knowledgeable contractor type to accept / settle for a retail wage vs what he can make as a contractor? Barring folks too old to work outside/ in the field anymore?
You don’t.
Right now, tough. Soon, easy.
I went to Home Depot the other day to replace a lighting fixture. Asked the guy a pretty basic wiring question. His response was, “You think I’d be working at Home Depot if I was an electrician?”
On the other hand, the little Ace Hardware near me is just like the store you described. Right when you walk in someone is there to help and direct you to the correct place. When you get to the aisle, someone is waiting for you to answer any questions. Ace seems to be doing pretty well with their online system too. They offer store pickup and ship from store along with regular delivery options.
Interesting. My son moved away for a couple of years, his “time out” before going to college (he’s in school now, and loving/hating it). One of his jobs was at Home Depot, where he cheerfully supplied advice, based on management’s direction even though he didn’t have any significant understanding and certainly no understanding provided by Home Depot.
If you don’t know exactly what you want at Home Depot, don’t count on getting useful information there. I have personally experienced exceptions, but not many over 25 years.
I (we) have the same experience here in the Sierra foothills; Lowe’s and Home Depot may be doing “gangbusters” during the good weather season but I and many others still patronize the one store left, Ace Hardware. As others have commented too many times I’ve gone to Lowe’s and looking for something in particular and get the “1,000 yard stare” from an employee. That’s not to say all of them are that way but too many. And, if they in turn ask for help it takes 1/2 hour to get someone else to help.
Ace Hardware; the way to go. At least in my county area.
When I enter a HD or Lowes and encounter someone in a red or orange vest who asks me if they can help me with anything I always reply,” I seriously doubt it.” I have remodeled several houses over the past 20 years and spent a ton of time and money at both places. Their inventory control is especially irritating. The plumbing and electrical parts most commonly used are often restricted to just 3. They commonly restock on a weekly basis. I have had to wait a week for toilet flanges and tile board. I dream of a face to face with the bean counters.
I loved Orchard Supply in the Bay Area and Ace Hardware where I live now, but if you are a DIYer, the Internet is the best.
I just took out 2000 sq ft of grass with a manual sod cutter (made in the USA) that I got direct from the manufacturer online for $299. I would have paid a lot more to a landscaper, plus I can resell the sod cutter on Craigslist after I am done.
When we remodeled last year, we got 1500 sq ft of 3/8 inch solid maple direct from the manufacturer in Canada and installed it ourselves. Material and tools put together worked out to $7 per sq ft. We were quoted $18 sq ft by contractors.
We got almost everything (except tile) online – bathtubs, shower stalls, sinks, light fixtures, furniture.
Saved tens of thousands of dollars and got better quality than what was in the local stores. The key is to try and source direct from the manufacturer if you can.
I have seen some data lately to indicate Gen Z finds physical retailers a novelty, because of the whole experience of getting ready and going on a physical adventure. Internet shopping is old hat to the under 20 crowd – been doing it from day 0. Would be interesting to see if there’s some push back. Some retailers have been having some success with this.
Millennials I think are pretty split – student debt and no houses/families make our spending patterns strange. Restaurants are still popular with some crowds, though I see more people quietly agree with me and are saving their pennies to try and pay their debts off or save. The whole experience over possessions thing is I think misunderstood – if you have $1000 left over in your yearly budget, you could take 1 awesome (budget) trip a year. It’s not really going to change your loan situation, and may as well have some fun while your knees still work.
I don’t think Gen Z will be able to save the bloated retailers in time (they got no money either) – but in their ashes, we might suddenly see a mainstreet resurgence and a new culture around it – assuming the rents drop.
The whole thing reminds me of Neal Stephenson’s The Diamond Age – complete with rising neofeudalism, generic products on demand, and a rise in the fashion and value of handcrafted custom goods – in a world of commodified needs being met – the only way to have something really unique is custom.
“value of handcrafted custom goods”
The future question being who, or what sets the value?
Virtually all assets – stocks, bonds, property, art, fine wine, custom goods, collector cars, etc. etc. All have had their values massively inflated into bubbles , thanks to money printing and credit expansion.
Shopping, whether online or in store, calls for payment. These are now +95% digital by swiping, or better yet – tap-and-go! Only 2% of the total supply of “money” is composed of actual paper cash and coins.
An indisputable fact is that physical gold is the only money which has survived throughout history. Paper assets may have outperformed gold in the past 100 years. The problem now is, these inflated valuations of paper assets, can only grow with more credit expansion.
Eventually the bubble explodes and the economy, along with the inflated wealth of paper assets, collapse.
I think he/she’s referring to something more along the lines of buying Amish furniture, wyrmwood gaming supplies or an Ariel Atom, for example.
There is an intrinsic value there, it’s a human thing, not something out of an econ textbook. If there’s a value there it will be valued, it has nothing to do with its exchange value.
Intrinsic valuation has no intrinsic value.
The value TheDreamer is referring to has nothing to do with “the barbarous relic” and similar nonsense. It’s not exchange value, and it’s not a store of value — it’s personal or social value as determined by the individual or community in question.
The taxes and regulations on human labor play a major role in the comparison of online vs local retailers. Employers must get into the retirement business, the healthcare business, the insurance business, the federal and state taxing business, and open themselves to liability claims for injuries and bigotry/unfairness claims, real and perceived.
This of course “nudges” businesses to replace the employee with a machine (capital), foreign workers, and of course getting the customer to do what used to be expected customer service. I wonder how online would compare to brick and mortar if the taxes were taken off of people and were put on the machines instead.
Great post!!
Wolf – have you tried dive shops? I use Johnson and Johnson Baby Shampoo (the knock off equivilents seem to not work as well, only the real J&J stuff) but dive shops usually have products like Sea Gold and Frog Spit and the like.
I will be leaving work early to hit the local dive shop for tanks and co2 absorbent for some a pool session tomorrow actually.
Ethan in NoVA,
I now have several years of supply of my favorite product, so I’m all set for a while.
If you’re a diver and love to hang out in dive shops and talk equipment, I get that. I used to do that with my bike shop (when I was still riding). These places become hangouts. You can get all kinds of good info in this manner. And maybe that’s one of the things that keeps them in business.
But I’m just a cold-water swimmer. I don’t need a lot of equipment: a Speedo (or similar), a thermal cap, ear plugs, and goggles. And in terms of equipment, there is not a lot to talk about.
So for me, the idea of spending an hour or two to go to a dive shop and check out the defoggers and then go back, when there so many better things to do in life, just doesn’t appeal to me.
Admire your zest for dipping in SF Bay waters! Used to do that off of Coyote Point decades ago……very, very refreshing after a very very stressful morning of work! Was interesting to observe back then there were many “older” individuals who had “protective” cloth barriers to protect them from the every present winds but wouldn’t hesitate to head into the cold bay for a dip!
I like the idea of buying from local or specialized U.S. websites that by-pass Walmart or Amazon altogether, making the product lower priced and well made.
Seems to me also, local entrepreneurs could develop their own delivery services in ways that could profit, staying away from corporate control.
I think the fall in sales at sporting goods stores correlates to the huge run up in fire arm& ammo sales towards the end of the Obama administration and the crash in sales with the election of Trump.
Fire arms are difficult to purchase online, maybe in the future they will be the only brick & mortar retail stores.
Disagree on the firearms difficult to purchase online thing. Some of my best purchases (financially) have come online. All you need is a FFL guy around to have it shipped to. Most online stores already have that info loaded in their database (no pun intended)
As a person who dislikes to go shopping, I rarely go to stores for cloths anymore. When online buying started up I had been buying from LL.Bean for years via, paper catalog, phone and credit card, once I trusted on-line, I use it all the time now. All I do is when its a new product I just usually buy a couple of different sizes, and return the ones that don’t fit. If you use the LL Bean credit card, return shipping is free. But 90% of the time I buy the same types of cloths, just different colors. Easy.
As for shoes I went to my local Sporting Goods store ( Sports Authority, now bankrupt) and found the walking shoe that fits me the best and order directly from New Balance for the same price or less. Online they have a much better selection of, color and size of the same model,
standard widths, 2 wide, 4 wide. With a size like 12 1/2, 2 wide, now try and find that at a Sporting Goods store!
All though I still go to the REI brick and mortar store.
With all that said, a Macy’s, here since the 70’s, just closed down in my town, a bit sad to see it go, even though I rarely used it, but my wife did all the time. Before they closed down, the salesperson there said they were still profitable but there lease ended and the landlord wanted to tear it down and build something different. Probably another “Mixed Use” building, (condo’s on top, stores on the bottom). This Macy’s is currently surrounded by new mixed use developments. Sleek, trendy , underground parking and stacked five to seven stories. “Mixed Use” that is the new developer/ investor buzz word. That is all they are building in the S.F. Bay Area now , mixed use, office building and hotels.
Cheers!
There was some analysis some years ago comparing the psychological difference between buying in store and buying online. From what I remember, the conclusion was that the “rush” or dopamine fix is significantly higher when you buy online because:
1.) You get two fixes when you buy online. Buying and receiving. Whereas in the store its only one fix.
2.) Anticipation with an impending delivery. Looking forward to your product arrival has a significant psychological impact.
There was another analysis talking about the impact of research on purchase enjoyment. The conclusion here was that the more time you put into researching a product prior to purchase, the more meaning, value, and perceived enjoyment you gain from that product.
Brick and mortar as it exists today is in a death spiral. I think there is significant room for a company that can combine a 1st rate store experience with access to online reviews and warehouse inventory. Haven’t seen it yet.
Someone should come up with an app that shows an image of funds draining from your bank account when making online purchases, plus a graph of medical and education inflation. No more dopamine high to worry about.
I bought a pivoting mirror on Amazon for $15 + shipping & tax but it was broken and they refunded my money. The packaging showed Ikea so I drove to the store and found it for $4.99 + tax.
I believe Amazon acts like a car salesman by flashing different prices for your searched items. Convenience, maybe, but shop accordingly.
Amazon is a good place to shop but not buy. Long-sleeve Tshirts: it’s an Amazon reseller, so clear browser cookies and go there direct.
One thing that is rarely mentioned in this discussion of online vs. bricks is theft. I worked retail as a manager for a family owned sporting goods store as well as “package” stores in sporting goods and hardware. Shoplifting was always an issue, cutting into the total profits by 2-3%. In my last store I made the mistake of pointing out that the $1-2 MILLION we were losing every year to shoplifting and theft would greatly increase my staffing.
Thieves have a good game going for them in corporate stores. There’s rarely any loss prevention staff, what there is is usually inept, and the company is more worried about a lawsuit and law enforcement knows they only play catch and release so there’s no incentive to enforce the law.
Online sales restrict this markdown considerably, and that’s pure profit.
In the major metro areas physically going to a store also entails issues with vagrants and panhandlers, property damage, parking fees, traffic, tourists, the cost of fuel, etc. The opportunity costs are deeply offsetting the pleasure of physically inspecting prior to purchasing.
oops
Cutting into profits 2% or sales?
Online retailers also have to deal with theft issues, namely, thieves stealing packages from front doors of customers. That’s probably why Amazon set up lockers in various locations (including my local Whole Foods store) where orders can be picked up.
Your litany of complaints about major metro areas include all the reasons why I rarely go to downtown San Francisco to shop anymore.
As others have pointed out retail is in decline primarily because they lack the inventory online has, not because there’s that much difference in price.
For instance the local Kroger has cut several products I want forcing me to buy online even though I’d rather buy locally. I suppose this saves them a little money, but every time they do that it’s just one less reason to go there.
I’m thinking of starting an online cocaine & heroin outlet. Running into some obstacles. Any suggestions?
s/
Reach out to Eddie Lampert ?
Accept Bitcoin. All the other vendors do.
I cannot get past that first sentence “I swim in SF Bay.” Attention grabber. And I live here. Much more “outdoorsy” than I’ll ever be.
There are two big swim clubs here :-]
Mike B – You want “outdoorsy”, check out the channel “Outdoor Chef Life” on youtube. Basically he’s a sushi chef in SF and he goes out to the beach etc and finds stuff and cooked it right up there on the beach, at his camp site, etc.
The problem with eCommerce is that Amazon dominates the search results. If you do a Google for “webcam stands” you’ll see that 9 out of 10 organic search results point to Amazon. That’s not fair for small retailers. It’s really a monopoly and I wish that either Google would offer more choices or Uncle Sam would break Amazon up.
I agree. The important part is in how it should be broken up. What Amazon has done is create an infrastructure for online sales that, at this point, no one can compete with. What Bezos has done is spectacular and kudos to him. But the opportunity for manipulation of both buyer and seller is simply too great.
Amazon should just be turned into a platform for online sales. They shouldn’t be allowed to sell anything themselves, but just have a regulated charge for having the ability to sell your product on the platform. Amazon just hosts the platform, and collects and distributes the sales income to the seller. Physical product distribution should be a set of separate companies that contract with both the seller and Amazon, again at regulated rates.
I don’t claim that this is a perfect solution, but might be a good start for discussion.
It would help to deny acquisitions as well. Companies like Amazon, Google, Microsoft, Apple, and others use their profitability to buy out potential competitors at an early stage, thereby restricting competition. If these early stage ventures had a chance to grow and be disruptive, the economy would benefit. Jobs would grow.
Funny, how nations go forward, forgetting their past. If not familiar with American history of the late 19th/early20th centuries, one might find interesting reading about Theodore Roosevelt’s ‘trust-busting’ of the corporations developed by those earlier market disruptors Carnegie (steel), Vanderbilt (railroads) and Rockefeller (petroleum)-I now rarely meet anyone who learned of this era in their high school U.S. history. Also interesting to trace the history of the FTC/SEC from their initial missions of maintaining of a well-regulated (in the Adam Smith context) ‘free market’ to where they are now-seeming to rarely see a merger they don’t like (cui, indeed, bono?). Again, may we all find a better day
SF and Seattle at bubble peak, E commerce is so great.
QQQ, monthly bar, on Apr 1st, is a higher high, a new all time high, built on hope in Apr fools day. It is a high quality green bar, with a closing at the top, but on lower volume.
Next came May first, red, bearish.
Its high was at the open, it’s length exceed Apr bar. One big red, for sure on higher volume, and this month isn’t over, yet.
Unless it popup sharply all the way to the top, it’s a lower quality bar, one big red.
If in May or in June / July the QQQ < 150, the downtrend is confirmed.
When the FANG brake, becoming a painted target, all markets in an sudden take down.
Target just put out their quarterly report and stated over 40% yoy gain on online sales and and 4.8% yoy same store gains. The same store gains include the online sales!
Hide the sausage. My money is on same store sales increases to be actually negative yoy. Target also is committing several billion to upgrades in their bricks and mortar stores. I have a clue for Target. Cut the store upgrades, and put it into online purchasing, which at present is grossly inefficient and poorly organized logistically.
We used to shop only at the stores, and last year my wife simply quit going. Period. Nothing will get her to the store. Not even the vaunted food items. Everything is ordered online, including minor food items. Store shopping is as much of a memory as typewriters, tail fins on cars, encyclopedias, department stores, 5 and dime stores, chain bookstores.
Everything in the future for shopping is not about the store experience. Costco leads the way with a crappy shopping experience, and the way forward because all you need is a warehouse for your online shopping needs.
Sorry Wolf but I’m going to disagree with you (slightly).
What we’re seeing in the UK is that, particularly in fashion retail, customers will go in to stores to browse, then go home and order what they want online. In this context, moving to a low-inventory business model isn’t a short-sighted way of losing customers, its the new business model.
I’ve been a catalog shopper all my life; e-commerce is just a modern version.
Lowe’s has a nice feature on their website that tells you exactly where in the local store your item is located. I use it often, saves me a lot of aisle searching.
Long time reader, first time poster. Let me say I love all your articles Wolf and about 80% of the commenters. First complaint is to leave the political stuff unsaid.
Here is my .02 as being part of the shrinking middle class, (flyover state) that is about all I have left. (though I have left you several online beers Wolf!!) I’m an end of class Boomer (1962′) whose habits are hard to switch. I am a shopping hybrid though as I shop online and B&M. I’ll save the reasons for another day as this will already be long.
1- I never go to a shop/ scan my own lane. They don’t give a discount if I do, and that is one less cashier needed. If you remember banks in the 80’s when THEY wanted to force ATM card use. First put in the machine, then cut the number of tellers, make it a long wait, show you how to use. Presto. less employees, more ATM use, more fees. Now the digital only coupons…
2-Prefer clothes at B&M. Even knowing my exact size can put you in different size jeans/shirts/ from the manufacturer. UGH.
3- Candyman was on to something with DATA collection. And those pesky online only coupons…
4-I know there is a chasm between what THEY say the economy is doing and reality for each of us. The end of the day is though many things are out of our personal control. Always ,always do the right thing regardless of what the other guy is doing.
5- I agree with those register charity collection complaints. Let the store do it’s own contributions. Leave me to do mine. But there are some people who that is their only place they give, so it is their only feel good moment.
Enjoy the weekend everyone. Keep those comments coming! Just leave out your political/destroying the environment ones….
Anti fog for swim goggles… Try rainX or car wax…. I alternately use both.
I do a huge amount of online shopping, but some things can’t be purchased online (bottled water, soda, juice, fresh food), others are much cheaper if you can find them at Walmart or a local store (e.g., a Rubbermaid gallon juice container was $5 or more online, $2 at Walmart, and an 18 inch high plastic shower stool was $20-30 online, $9 at a Chinese grocery store).
Poor inventory is what kills both physical stores and online operations. For the last 30 years, I’ve purchased button down oxford short sleeve shirts from JC Penney, at first from the stores and then from their online ordering. For the last year or more they have not carried one of my favorite color patterns. Still waiting to see if this item comes back. Have not found this shirt and style anywhere else. If it does come back, I’m going to buy ten of them to stock up for the rest of my career in case JC Penney goes belly up
I don’t shop online all that much – the occasional purchase once in awhile. But I often buy gifts online for people who live far away, and have it shipped to them. It’s very handy for that. But for most of my own shopping, I still prefer going to the store and browsing items in-person.
But I think people are bringing up a good point about the inventory issues. Have noticed diminished selections at stores for various items, especially clothes.
Browsed Scottsdale Fashion Square owned by Macerich yesterday. Macy’s had a lot of nice women’s merchandise. Several fitting rooms were closed and found a store associate who pointed way off in the distance where fitting rooms were located – no signage. The merchandising throughout the store was tacky, chaotic and looked like their Last Act clearance area. Think on that? What was once a premier department store chain is merchandising new clothing about the same way they clear out the old stuff. Macy’s has given up. Sad.
I don’t follow retail business stats, but the reports are that US retail sq footage has been overbuilt for decades. Online “disrupted” this (competed with it). Maybe this is “mean reversion”/was predictable-the spark was just unknown.
For “technically critical” items (think certain hardware, auto parts), which also may be time critical (e.g. same day- also want local returns), local shopping method = look online and go grab at the store.
Longer term- big box + small boutique look like the two winning models.
Now I can understand why my clothes never seem to fit comfortably and have an odd home-made boxy look!
I believe Wolf’s comment is part of the picture, but not the primary driver.
My view is that there are 2 primary drivers for the bricks and mortar apocalypse:
1) Skimming off of the highest margin goods outside of ultra-luxury. Whether TVs, perfumes or sporting goods – online retailers can take advantage of the combination of brand recognition, limited numbers of competitive products and lower costs (fewer employees, less stocking issues) to pick off the highest margin products. The bricks and mortar stores are left fighting to survive on the low margin products like clothing.
2) Skimming off of the higher income consumer base. Particularly programs like Amazon Prime – these both self-identify the higher income/higher spend consumers and accelerate the adoption of buy and then inspect vs. inspect then buy, by making shipping a flat rate cost (which in turn is cheaper, the more you buy).
In a nutshell, the former is the Fedex model vs. the Post Office while the latter is a large scale variation of what “new age” retailers like Warby Parker or Everlane.
The only brick and mortar store that I visit anymore is Tiffany & Co. There service is still excellent and they have a good selection of top rated items. Restaurants on the other hand are all about the experience… which has sadly declined at many restaurants, so I find myself dining out about every two months.