Department stores get crushed one by one.
Ecommerce sales in the third quarter 2019 spiked 17.3% from a year ago to $145.7 billion, not seasonally adjusted, according to the Commerce Department. On a seasonally adjusted basis, sales hit $154.5 billion. Ecommerce sales will exceed $600 billion in 2019, double the amount five years ago. In dollar terms, ecommerce sales jumped by $20.4 billion in Q3 compared to a year ago, the biggest dollar-jump in the history of ecommerce:
Ecommerce sales include the ecommerce operations of brick-and-mortar retailers, many of which have built thriving online operations: Among the top 10 ecommerce retailers, behind Amazon and eBay, are the online divisions of seven brick-and-mortar retailers, according to eMarketer, in that order: Walmart, Apple, Home Depot, Best Buy, Macy’s, Qurate Retail Group (QVC, HSN, Zulily, Ballard Designs, Frontgate, Garnet Hill, and Grandin Road), Costco. The 10th in the top ten is Wayfair, an ecommerce retailer.
Walmart, after ignoring the threat of Amazon for years, is now throwing everything at it, including numerous acquisitions and building out its own ecommerce brand and fulfillment infrastructure. Despite many costly flops, its ecommerce sales have been soaring, including by 41% year-over-year in Q3.
Walmart will disclose the dollar amounts of its Q3 ecommerce sales in its upcoming 10-Q filing with the SEC. So we don’t know yet the exact amount. But in its 10-Q for the second quarter, Walmart reported ecommerce sales at its Walmart US division of $4.8 billion. So for Q3, given the 41% year-over-year growth, ecommerce sales at Walmart US were over $5 billion. But with Walmart US revenues rising by only $2.7 billion (to $83 billion), most of that growth came from ecommerce, and growth at its brick-and-mortar stores was anemic.
At its Sam’s Club division, revenues ticked up only 0.7% to $14.6 billion. But Sam’s Club’s ecommerce sales grew 32%, so Sam’s Club’s brick-and-mortar sales likely fell.
Every retailer that is trying to stay relevant is spending enormous amounts on building out their ecommerce business and fulfillment infrastructure. Walmart is way behind the curve, but catching up. Others weren’t as far behind.
At Nordstrom, ecommerce sales already accounted for 34% of its total sales in Q3. When it reported earnings yesterday, it was held up as the shining exception among the recent batch of retailer malaise-reports that included Home Depot and Macy’s. But even at this shining exception, total revenues in Q3 fell 2%. It also disclosed that its “digital” sales grew 7%. But its brick-and-mortar sales fell 7%.
This is the reality retailers are struggling with: No matter how much they hype their initiatives for their brick-and-mortar stores, the long-term trends are moving against them, and only ecommerce provides hope for growth.
Retailers have to invest heavily and smartly in ecommerce in order to remain relevant and not go the way of Sears, which is rapidly disappearing from the scene following its bankruptcy earlier this year, or the way of Toys ‘R’ Us, which has already disappeared, along with dozens of other major retailers that have been dismembered and buried over the past three years of the brick-and-mortar meltdown.
Total retail sales are just fine, powered by ecommerce.
Total retail sales, which includes ecommerce, in Q3 rose 4.0% year-over-year to $1.38 trillion, according to the Commerce Department’s revised retail trade data:
That 17.3% surge in ecommerce sales increased the share of ecommerce to 10.5% of total retail sales. But about half of total retail sales are at these three for now ecommerce-resistant retailer segments:
- Gas stations
- Motor vehicle and parts dealers
- Grocery and beverage stores.
There are huge efforts underway to get Americans to buy groceries online, including at Amazon and Walmart, and those efforts are starting to bear fruit, but it’s a hard slog, and online grocery sales are still only a minuscule portion of total grocery sales. So for now, I still consider them “ecommerce resistant,” though that will change eventually.
Most of the remaining segments of brick-and-mortar stores are getting crushed by ecommerce – those stores that are still around, unlike record stores, which were pushed off the cliff years ago.
Department Stores have been sitting ducks for two decades.
Ecommerce is wiping out department stores one by one. The long-cherished destination for American shoppers is doomed. Sears is just the latest example of a long list of examples. Others will follow.
Sales at brick-and-mortar department stores in Q3 fell 5.7% year-over-year to a new multi-decade low of $33.8 billion (seasonally adjusted). They’ve collapsed by 41% from the peak in Q4 2000 and by 20% from the beginning of the data series in 1992. People who still think that this trend is somehow going to turn around are fooling themselves. This is the brick-and-mortar business Macy’s, Nordstrom, and Sears are in:
Brick-and-mortar sporting goods stores had been able to defend their stores from online encroachment. But then in 2016, Sports Authority was liquidated, and many of their customers switched to online purchases when their stores closed (not seasonally adjusted data; to eliminate the wild seasonality, I used a four-quarter moving average):
The brick-and-mortar stores that are most impacted by ecommerce are what I call the “mall stores” (with sample bankrupt chains in parentheses):
- Department stores (Sears Holdings, Bon-Ton Stores, Barney’s);
- Toy stores (Toys ‘R’ Us);
- Hardware and hobby (Orchard Supply Hardware);
- Book stores (Borders, B. Dalton, Waldenbooks);
- Video stores (Blockbuster); record stores (Tower Records);
- Jewelry and accessory stores (Claire Stores);
- Sporting goods stores (Sports Authority);
- Clothing and fashion stores (A’Gaci, Avenue, Limited Stores, Pacific Sunwear, Aeropostale);
- Electronics and appliance stores (Circuit City, CompUSA);
- Shoe stores (Payless Shoe Source).
Sales at these “mall stores” fell by 2% year-over-year to $155 billion in Q3, where they’d first been in 2005. Over the same period, ecommerce sales have multiplied from $21 billion to $155 billion. That they’re now equal is an astounding metric for people who have long denied that ecommerce will ever amount to more than a niche thingy:
Obviously, ecommerce sales are broader and encompass more categories than mall stores. But this comparison summarizes the trend.
As has been the case over the past 20 years, more categories will be drawn into ecommerce, including sales at grocery stores. This is a biggie, the second largest category in retail, after sales at motor-vehicle and parts dealers. That’s why Amazon is trying to muscle into it, and why Walmart is defending its turf.
Americans still hesitate to buy fresh produce online, but most of the aisles in a grocery store are stuffed with things that come in packages that can easily be ordered online, ranging from toilet paper to orange juice.
Ecommerce will continue to expand its reach. Each time a consumer gets disappointed at a physical store due to lack of inventory, lousy service, traffic, parking issues, or whatever, and each time a store they frequented closes, and they figure out that they can buy exactly what they want online, ecommerce finds a new convert, product by product. That conversion process isn’t tapering off – on the contrary, as shown by the $20.4 billion year-over-year jump in Q3 ecommerce sales, the biggest jump in history.
Amazon’s China team “saw increasing patterns of fraud, counterfeits and unsafe products.” But US consumers have no clue where the sellers are and where the products came from. Read… Murky Business of Chinese Merchandise on Amazon’s US Site
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Couple of thoughts.
1. Iran has shut down their internet for almost a week now, in response to the demonstrations there. How is e-commerce and crypto holding up there? Where and when will this happen again?
2. Amazon is the e-commerce leader. They rarely have the lowest costs. But people have really gotten accustom to their convenience.
3. Walmart typically has lower costs. But their e-commerce stinks. I have problems on about 50% of my orders.
4. Some brick and mortar stores are going “woke” – Dicks comes to mind with their anti 2nd Amendment policies and statements. Going woke in a declining market and alienating half your customers. Fast track to bankruptcy.
5. Watch the movie “Sorry We Missed You” – what is the true cost of e-commerce?
https://www.youtube.com/watch?v=ysjwg-MnZao
6. What/Who is going to survive when the era of cheap and easy money disappears?
Iran didn’t shut down the internet. They only shut down the foreign part. But it was made easy by the American government forcing Iranian companies to not use American service providers. Iranian e-commerce couldn’t use Google etc. anyway so they did not experience big problems.
Digital chain letters us so little bandwidth that they can use alternative methods.
Iran, like many totalitarian regimes, shuts down foriegn access on thier centralized internet connections on a regular basis. However, they have shut down all internet access in the latest round of demonstrations.
“It’s surprising to see the Iranian authorities block all internet connections rather than only international internet connections, because the latter is a tactic that they’ve used in the past. It could mean they are more fearful of their own people and worry that they cannot control the information space amidst these economic protests.”
https://www.wired.com/story/iran-internet-shutoff/
Iran is definitely not totalitarian, it is a managed democracy.
Iranian President Rouhani obtained his Phd in Glascow Scotland from Caledonian University. As George Carlin said, “It’s a big club and you’re not in it.”
That looks like a good movie. I haven’t seen “I Daniel Blake” and won’t until I get around to buying it on DVD and I guess this one will be the same.
During the depression 0f ’29-40 neighborhood bars, beauty parlors, shoe repair shops, and small cafes with basic sandwiches and soups all thrived. And of course movies…which were cheap.
With families doubling up and hosting guests looking for work, people want to get out of the house.
Any of those will not only survive, but thrive. But not the yuppie food, haircuts, wine bars, or modern movie theaters. No gourmet coffee places.
If I were to go with a sandwich and soup place with outdoor tables, I would have egg salad, tuna salad, pimento cheese on rye…beef vegetable soups, etc (goulash) and vegan versions. Dogs would be welcome outside, like in France, with little hooks for the leashes on the table. Sensational ice tea, made southern style.
Sounds like fun to me!! I’m too old now, but I’d love to help cook!!!
At Tyson’s Corner Mall in McLean Virginia a new place opened up in the mall selling Falafel. The price is really cheap, the lines exploded. There is definitely still demand for low cost food even in malls where the clientele is usually very wealthy.
Thank you… I have happy memories of Tyson’s Corner, skipping class in college and going on to the National Gallery of Art.
It was a full service mall in 1970…dept. stores, a movie theater, drug store, dime store, grocery store.
Then came the tsunami of cheap asian-slave clothes and all the malls turned into horrible boutiques.
This sad ending began many years ago with immoral and tasteless business models.
The falafel store will thrive, if it can pay the rent!! Maybe there’s hope for new beginnings!!
Macy’s has started to look JC Penny store of 10 years ago. Von Maur, Nordstroms. Dillards still getting some business from older, affluent customers, while their younger customers shop with them online. I would rather buy Tommy Bahama clothes from their stores, a little online, and alittle from Von Maur and Dillard’s. I think the smaller clothing stores like LuLu, Untuckit, Tommy Bahama among others are hurting the bigger department stores along with online. Jim Cramer said it well this week, “for every good mall there are three or four bad ones.” Wichita, KS ( I live close ) falls into the category—two big malls, one is good the other needs to close.
To me, Macy’s still seems like a premium shopping experience, unlike other department stores such as JCP, Sears, Kohls, etc. Their stores look nice, and everything seem more upscale and trendy, which provides brand and pricing power. This is why people like to give and receive gifts from Macy’s.
For that reason, I bought some of their beaten down stock. I could be making a mistake. Their sales haven’t grown, but they haven’t dropped either, so I don’t see anything falling apart in the near term. “Nothing goes to heck in a straight line”, I’ve hear someone say.
Macy’s dissapointed me back in 2015 Sold me some cheap particleboard furniture evidently from China which fell apart immediately To their credit they issued me a full refund
I had an opportunity in my fall business travels to spend time in a Macy’s and Von Maur at a small Louisville mall, Oxmoor Center. Von Maur was still premium, but Macy’s had slipped a little in comparison. It is why I made the JCP comparison, which used to have nice stores years ago. One or two names will win the department store space–I think it will be premiums like Von Maur and Macy’s. The rest will close over time with the business being lost to internet and a long list of other retailers both online/brick-mortar.
Side story on Oxmoor Center, it was Friday 1pm. Lulu and Apple Store were full of people. Starbucks line was over 10 people. Malls can still generate traffic with the right stores.
Ahh, good ole Oxmoor Center – home of Sears! Lol.
Oh Lordy…shopping! I grew up in 1950s Dallas. My wealthy aunts took me to Nieman Marcus and let me pick out blouses, smell perfume. Mother and I went downtown to Titches and loved their chicken salad sandwiches. Every store had a lovely eatery.
I like to think the slave labor labels everywhere have cursed our stores… that was the ‘straight line’ in shopping for me. I just get a few USA things and old postcards on Etsy. Not a fan of slavery.
It’s not slavery if you pay $1 per day! (sarc off)
If you think this doesn’t hurt US labor markets and the whole US economy:
https://qz.com/1269172/the-epic-mistake-about-manufacturing-thats-cost-americans-millions-of-jobs/
The last time I went to Macy’s the entire store was having a huge sale and despite looking at 100s of pants I only found three in my size. I then went home and ordered pants from Macy’s.com and was happy with the experience. Macy’s.com offers a seemingly unlimited assortment of apparel online.
Tommy Bahama says it all.
As a former JCPenney Co buyer, Texas Texas Texas!
Mr Penney died in NYC, where headquarters was located. Good Luck in Texas!
Shiloh1, here you go – you don’t have to learn Mandarin and guess what the CCP will do next. LEAP Puts on bricks and mortar galore – google “stock screener”. You are on your own, this is not investment advice.
Coincidentally, today I read a 10-Q of a REIT with grocery stores as anchor tenants. It has been poorly managed, had self-dealing CEO (gone) but has an activist – looks interesting. The shares are selling for less than bottled water at 7-11.
So you’re saying the future of all current retail workers is in an Amazon warehouse. Do these workers make more or less than the store bound retail worker? I assume there are fewer retail workers.
P.S – waiting for your opinion on how the new TSLA pickup – (a.ka revamped Delorean) will contribute to the TSLA bottom line. The truck? does not look very practical or even street legal as others have pointed out.
Beach hut Joe,
Yeah, this is tough for retail workers. But it has been already tough because a clerk in a department store doesn’t make much money. A worker at an Amazon warehouse in the same city likely makes more than the store clerk. The Amazon coders make a lot more, as do the people that keep up the IT infrastructure, etc. But these tech jobs at Amazon are not easy to transition into for laid off store clerks.
Displaced retail workers could more easily find a job in an Amazon warehouse or in the delivery machinery, as a driver for example, or as a gig worker.
To speak unwoke
Retail is a women’s job, delivery a man’s job.
Retail can also have status outside the earned money unlike delivery so i don’t really see for a lot of retail workers a future as drivers.
Plenty of women delivery drivers in my country lately (on the smaller vans that deliver packages in inner cities, not on the big trucks that are mostly driven by men from Poland, Romania etc.). But I’m pretty sure most of these are lousy parttime jobs, paying even less than the average retail job of 10-20 years ago.
So, let me get this straight. You’re suggesting, they can become a driver for Uber ( Gig -Worker) which is completely subsidized by hot money. Incidentally, Amazon was heavily subsidized by hot money. In fact, if we pulled out AWS numbers, I’m not sure their numbers would look good. By the way, Walnut Creek mall is brustling with traffic.
What I’m saying is that it’s going to be tough for retail workers who are displaced. And it’s already tough for them, while they work in retail, given the low pay.
Most ‘retail’ at Amazon is these automated-retail fronts, you walk inside, there are no humans, just ATM like machines, you scan your mobile phone, and a minute later your packages is in a bin, where your told to open.
Behind the scenes is all young people, moving fast.
Back in the day you saw older, more un-educated people working at Walmart, or even Sears.
Coders can and are done in India, just as well; Service Technicians that keep the machines running, don’t need much education or pay
IMHO AMZN will keep hiding the people, until there are no humans at all behind the wall, “Take Humans Completely Out of the Loop” is the AMZN Mantra.
Most of the young are gig workers, working less than full-time, so no benefits are paid, and its easier to lay them off.
The real question, is where will the old people work?
I agree, backing to soup-kitchens, and the old style coffee shops that used the same coffee-grinds all day, and just keep adding water, when the cup is only say 50 cents, or less who cares, its a place to sit, and get out of the house and/or flat. These cheap places to sit, and eat/drink will be where the older less educated work.
Amazon minimum wage is now $15HR.
$15 per hour is not much, let alone to put up with -from what I have read – not very good working conditions.
But what is the ‘take home’ that is the question?
City’s like Seattle, just take&take, or like Portland, you got local,city,county,metro, state, regional and national tax collectors that all want their pound of flesh. Then if your ‘self-employed’ ( dare to work for yourself ) they put you into a higher tax bracket, because you dont’ and never did have a lobbyist fighting gov.
IMHO most of these min-wage jobs are part-time, which is why so many kids now do gig jobs, so they can actually gross enough to pay the rent.
That might cut it if you live in Louisiana or Mississippi but would be rough to survive on on most major cities on the coasts Real rough like next to impossible
Warehousing jobs are difficult and will remain difficult. A better choice would be trade school to service delivery trucks, cars, or heavy equipment like CAT, Deere etc. Technicians for heavy equipment making 40 to 60k with benefits, and dealers can not find enough.
How long do you think electrification will take? You need different and probably less technicians for electric trucks, cars and heavy equipment.
I think the electrification of everything will take much longer than most realize. Battery life is still an issue. Recharging, the US electrical will not be able to handle the recharging of everything going electric. Major upgrades would cost money–meaning utility rates go up, government help—they are broke. The oil industry will not suddenly go away. Final guess for 50% of everything electric is 30 years away.
The minimum wage in San Jose, California, is $15/hour.
All jobs revert to the minimum wage over time, which is why the minimum wage needs to be a livable wage.
I look at the UK and I see more and more sales online at a dramatic rate.
With regard to employment; I believe with AI and databases and computers, middle managment will disappear.
People will be either employed in the warehouses, not even doing the picking (that can be automated/robots) but doing returns or being a self employed delivery driver.
One retail shop that can survive is Poundland, where everything is a pound, where delivery cost is not viable. Poundland always does well in recessions.
Maybe you missed it but Poundland just withdrew their £1 for everything signs as even they can’t maintain it.
The disappearance of middle management is the problem. All those delivery jobs are dead end jobs without growth.
it might also be a problem in another sense: I doubt those clever programs are better (able to adapts) at managing the store than experienced humans; especially for more specialized shops.
Ecommerce sales nos? Lots of ficticious activities can goose up the nos. Hire several keyboard operators and get them to bang the keyboards night and day.
Customer, accounts and transaction data? No problem. Create ficticious ones that can sail in the computerised systems using hidden codes.
Order deliveries? Create ficticious warehouses where items are picked by the system.
Then the “orders” are recorded by the system to have been delivered to Mr ABC.
Along the chain of end to end processing for “orders”
it is very easy to fabricate a sale.
The case of one singles day sale. An ecommerce site reported within 24 hours 38 billion dollars of ecommerce sales occurred. Think harder. If everything happens wuthin 24hours window how many people will be using their devices to make purchases. And consider internet latency, strokes latency, mistakes ,system responses, authentication and verification times, this is just a world of make belief. And where is the independent verification?
Ecommerce is one big bluff.
38 billion sounds like a lot until you realize that China has 1.4 billion people
“Singles Day” Alibaba, is much more than 1.4B Chinese, they control all of ASIA ( east of Istanbul to the Pacfic Ocean ) including Africa, Austrailia/NZ, and MENA.
Alibaba is dozens of companys, and they own all the payment processors as well
“Singles Day” like “Black Friday” USA has lots of deals, which brings everybody out.
But I would say that Alibaba’s market is more like 3-4 Billion people, where the USA is more like 200-300M or less, because lots of USA people don’t even have a credit-card to purchase online.
Alibaba companys, about +60% of delivery is done COD, because ASIAN people don’t pay until its in their hand. But just like AMZN it can take 60 days or more before the seller gets his money. So the real deal in BABA is the float.
Real supply chain activities are starting to confirm what you’ve noted. In the US, supply chain will start showing the lack of “demand”. E-commerce still can’t change no-commerce.
The Tesla truck is a joke right? Nobody will buy that.
If you hook a load weighing 2 tonnes to an electric vehicle how far could it haul it – 50km or so?
I am reading the pre-order estimates, not scientific and it only takes $100 to pre-order, but I read anywhere from 45K to 200K of them.
Was that before or after the reveal?
folks. If you are still convinced on the baba bluff.
1.4 billion people? How many on the net at anyone time? And within 24 hours. And in Asianic? You mean there are no competitors in
the region? A website is accesible anywhere if owner permits. Study baba selling model and you know more. Yes China has 1.4 billion mouths. That is wherecompanies countries try very hard to prmote that “we are there” to entice investors with big nos..
The bigger the nos, the more impoosible to verify. Soon telsa will do that.
Sino Forest was a case in point. They claimed they had millions of trees in China. You can go and count.
Another co a seafood listed co once claimed they had millions of abalony in many farms in China.
Perhaps they welcome you to visit.. And every farm came upon is theirs. Can you really know?
Many compaines especially in China will tell you the extend of their wide operations the assets they have and use. Dig deeper. Somehow many of these are owned by outsiders conveniently “borrowed” for the occassion.
38/1.4 =$27 per Chinese.
In China $27 is also not a lot of money. Have black monday deals on TV’s smartphone and game-consoles and you are there.
Battery’s are getting much better, wireless charging system in the future will charge the battery while you wait at the red-light.
We’re at the infancy of this stuff, not unlike auto’s in 1910, that were mostly created by hobbyists, sort of like Wright Brothers making their own airplane.
Right now the deal is infrastructure, China is on the right path, with city’s like Kunming mandated to be ALL ELECTRIC 10+ years ago, it makes sense to put in the charging devices into every place that people park their motorcycle or car. People will not even think about plugging their vehicle into power in the future it will just happen, and battery life will get better.
Trucks too, will completely change, delivery of ‘stuff’ will not be the sam. Ultra high-speed rail for cargo, and local will have many options, but most delivery will be done by local self-serve kiosks, where people will be told where to go to get their stuff.
I agree that the new Tesla Truck is a ugly joke, but that said it looks like something that an American would drive, or want to drive, sort of cross between Terminator & a Delorean
“Gandalf,”
There is already a Gandalf here who has been posting for years. Please add some letters or numbers to the screen name to avoid confusion.
Nobody WANTS to work in a warehouse or in a fast food job. As these jobs continue to be taken over with robots and AI we will all be better off.
I want my merch made by sterile robots and delivered to my door via drone. That’s what manufacturers want to because you get the best quality control, no theft, and at the lowest prices.
Continue bringing on the bots, the AI, and the Guaranteed Min. Income for EVERYONE.
Nicholas W
“Nobody WANTS to work in a warehouse or in a fast food job. As these jobs continue to be taken over with robots and AI we will all be better off.”
Theoretically, if you haven’t a job, then you cannot buy anything and eventually theoretically the ecommerce sellers will have no customers.
That is where the living income is going to have to come about and theat mean more government debt and money printing.
the flip side is more enslaved people, or migrants with no place to live, begging for food, since they don’t have a job, can’t get a job, and can’t find any kind of place to live, and nobody will let them enter their gated communities, that are only systemically functioning according to the software applications that control all activities of residents allowed into the gated communities to work at designated functions as long as they can, until they collapse, and their master don’t feed them, and just kick them out of the gated communities on the streets somewhere else.
Eventually we will have to reach an equilibrium with some B&M remaining in some form. Retail has adapted to change many times over the decades. Part of this process is the disappearance of former stalwarts Re investing it is becoming clear who some survivors will be, but they are all very high priced. You play with fire if investing in the low priced weak performers.
I see Lisa up there has been to Hilton Head, SC……those folks won’t even zone for local small housing for the people that make their dream life happen. Those have to commute from Savannah down a long, dark, 2 lane road 30 miles away.
So have I, several times, all pre-’75 when it was DC Lobbyist City. But at least they haven’t granted the place “Permission to Crenelate”…….yet.
Oh boo hoo! A loooong dark highway? Come on.
I can’t see buying groceries online. I like to pick out my produce/meat, and check the expiry dates on other products. I wonder if crows get into the porch boxes, or dogs and racoons?
Tools are sometimes okay to buy online, but the fit and finish must be seen on major purchases, imho. I bought an Hitachi mitre saw with CC points and it was a piece of crap.
Normally I wouldn’t think folks would buy groceries online, but then I flashed onto current tv adds for meal kits, including directions. I find it mind boggling that people think a meal kit is actually cooking. It’s about as close to cooking as paint-by-numbers is to art. But here we are, losing life skills by the minute. My sister cannot find the next state without her GPS. Unbelievable.
I think the online ordering for groceries is succeeding with customers picking up the goods curbside at stores like Target and Walmart. I think you are right, groceries on a porch still present many problems.
I agree. I like to see what I’m buying and will gladly pay more for the privilege.
I agree on the expiration dates. Grocery stores generally operate on a very slim margin. It’s to their advantage to send you the oldest stuff with the shortest use by dates to avoid spoilage. Nope. I’ll continue to drive to my nearby Kroger, Walmart or Costco to do my shopping checking the use by dates as I shop.
BTW you mentioned Porch Boxes. Heck, I’m old enough to remember insulated milk and dairy boxes on our front porch. What’s old is new again I guess.
Check out grocery store secrets on CBCs market watch show.
They mess with meat like you wouldn’t believe to make it look and be labelled fresh, when it ain’t.
If you don’t know that CBC show out of Ontario, you are in for a lot of surprises and fun watching!!!
All I remember about that era was me and my sister got in trouble for checking ice cream on the little blue list in the empty milk bottles.
Long time ago.
Totally agree. I don’t want anyone else squeezing my tomatoes nor avocados…you just don’t know where those hands have been….also, now that I am semi-retired and work for myself, I enjoy grocery shopping with my wife. We always have cooked from scratch and all fresh/organic, and it is just fun to try new things.
There are still people like us who will shop, and enjoy it. Unfortunately, our numbers are declining. My wife and I are in our 40s, but some friends in their early 30s invited us to a cookout with several other couples in their early 30s. None of the couples have any kids, but we were only people who still went into grocery store. The rest of them were curbside pickup. I can understand pickup sometimes if you have kids, they are sick etc. I think there can be a good mix of brick and morter and internet, but I am starting to have a little more doubt.
I can’t fathom the upside of ordering groceries online.
How does the grocer profit from paying someone to pull inventory off the shelf?
How does it enrich the consumer’s life to spend half an hour on the computer instead of 5 minutes in the store?
5 min. in a supermarket? That is only possible if you only buy one carton of milk.
Produce/meat/bread is not 100% of the gross of a supermarket. The danger is for supermarkets to loose the packet stuff and become a greengrocer/butcher
Supermarkets seem to make their money on processed, “fun” foods. Chips and crisps and sauces in a jar and so on. Even the venerable Kraft Dinner was just 5c worth of elbow macaroni and a packet of “cheese food product” that probably cost 15c at most to make, and the whole thing was put in a pretty box and sold for a dollar.
Yes, in my country many supermarkets compete on “fresh” products like vegetables and meat in order to attract customers. They make money on all the other stuff people buy on the sides, with much higher margins.
The “grocery” business has almost always been like that. The “fresh” item sections like meat and produce and some dairy were the true quality competitive departments. Canned good can be purchased anywhere. And today we can add good deli sections. I see some medium to large chains are expanding their “cooked” items departments like chicken; adding tri-tip, ribs, smaller chicken parts. U can watch them cook in special departments. During my decades long experience in the fresh food business it was almost a iron clad rule back some multiple decades that “….Californians will never go for packaged fresh produce!” And, look at us today! So much packaged fresh foods in meat/produce departments.
Too many lack the fresh cooking/preparing skills of yesteryears. Eating so much “prepared” foods is literally killing people. “Convenience” is not always good.
I’m spoiled. I grew up (and raised our 7 children) in the “fresh” produce world and cringe at what so many people eat today…..never knowing what is in their food!
I share your concerns about the produce. However, you know they will treat us right because they want people to be happy. Also, your bananas are more likely NOT to have been thrown around on a big store display when they are safe in a warehouse.
I’m sure requesting a delivery time would be best way to avoid thefts by critters.
Actually, meal kits IS in fact ACTUAL cooking. There’s a recipe. The only difference is someone has pre-measured the ingredients.
Life skill of using your tablet to order groceries. Many older generation people never had that skill. I don’t think it’s fair to say they lost it.
Agree, I see the same trends in Netherlands but I don’t like where this is going myself. I shop at the local market where I can check if the food looks fresh enough. And maybe in 10 years we can buy more fresh produce directly from the producers just around or even in the cities? I’m working on a “food forest” myself; in my country over 90% of the cost of “fresh produce” in the supermarket is packaging and (cold) storage, not what the farmer gets. And that’s without calculating the huge cost of all the plastic packaging.
The only cooking that many young people here do is operating the magnetron, and maybe attend some social cooking classes a few times a year just for fun. Sad …
I don’t see robots harvesting, sorting, cleaning all those vegetables and delivering them to the customers in good shape for a good price. All this technology has a cost and if you read what they are spending on e.g. dedicated harvesting robots for more delicate products I don’t see much potential there. Besides, for many people it might again become an interesting job working outside with food and learning some new skills …
As to the GPS, I remember from about ten years ago when there was a huge pop festival in Belgium (next to Netherlands) where many Dutch women were visiting. At the end of the festival there was a problem with the Tomtom GPS systems and countless women could no longer find the way home the traditional way (maps and road signs), police and emegency services were overwhelmed. I’m sure it is even worse nowadays, and not only for women …
That’s known as “learned helplessness.”
Somehow, I have a feeling it’s something the Overclass is eager to encourage among the rest of us…
How will anyone make new friends or find love or enjoy chatting?
I live in the deep south and love chatting with black people…no electronic gadget can ever replace their expressions and humor.
nhz:
Having spent many years in the “row crop” farming world I’m amazed at the new kinds of equipment that is used today to harvest (let alone prepare/seed/raise) small items like radishes, green onions etc. Used to be harvested all by hand.
The trick is in the scale of acreage farmed today; large chains to sell to or affiliated with.
There is a continuing technical evolution going on in the harvesting of our fresh produce.
Interesting to be able to follow all this on utube videos; amazing stuff watching how “floral”/plant planting production for house plants. Truly amazing stuff. Instead of hundreds of workers a whole plant can be run by a small handful of employees.
It works for planting and harvesting of more sturdy, easily identified crops, but not for more delicate stuff or fruits/vegetables that are more difficult to identify as “ready to harvest” for a robot. Technically a lot is possible, but at what cost? And also, at what human cost …
My little part of the world is specialized in growing onions (and sugar beets) in addition to maize, which is only grown because it can accept loads of pig manure. Most of the crop business is fully mechanical now, relying heavily on pesticides and fertilizers. The onions cost next to nothing, what the machines don’t harvest is let to rot on the farmland. From time to time the few remaining (big) onion farmers need huge subsidies to survive because of a boom-and-bust cycles (it seems they are also involved in money whitewashing, which is attractive thanks to large overseas transactions …).
I see a clear downside to these “economies of scale” :(
Maize, the whole plant is grown to feed pigs not to harvest corn. For that the climate is to cold.
Paulo,
Love your posts. Have learned a lot from you and this website. It’s an oasis in the desert IMO.
My wife and I recently started using Dinnerly. Their kits work out to about $13 per meal for the both of us (including shipping). That is a very reasonable price to us. I can barely eat at Burger King for less than $6.5. We get 3 meals per week. Yes, it is cooking by the numbers, but the quality of the food is seriously good. What we like is that it gives us ideas to cook with later. We still cook on our own the rest of the week.
Having said all this, I can’t see how companies like this will survive in the long run without increasing prices and losing a lot of their customers in the process.
Thrift stores are flourishing on unfashionable streets in cities all over America. So B&M is still being supported by consumers.
In NYC they are proposing rent control for commercial space because the landlords are killing stores on all the major shopping streets. It has even affected the value of the building housing the iconic Saks Fifth Ave, whose value was just halved, from over 3.5B to 1.7B.
No other word for it than CRIMINAL. They are destroying NYC. Poor Central Park is half in the dark shade of apartment towers.
When we combine these trends with Wolf’s recent article on how Amazon has been flooded with counterfeit and substandard merchandise from direct sellers in China, it appears that it will not be long before our goods based economy is the equivalent of the carnival at the county fair. Ordering will be like stepping up to one of the games of chance to see if you get the plastic Tchotchke or the sawdust stuffed animal. But at least with the carnival you could leave when your money was gone, but from this new “Online Carnival” there will be no escape. Except for making your own stuff at home I guess.
3-D printing for the win? Not totally far-fetched although the ones that do ceramics, metal sintering, and experimentally multiple materials are way out of reach. For now.
I’m several kinds of engineer and have the software and workstations for the work here. Multiple WS’s. Cost of the printers the stumbling block.]
Cost of the printers need not be a stumbling block if there are advanced 3D printing services in the area that will handle outside jobs; most people only need such a printer 0.01% of the time …
There are many challenges but over time they might lead to huge changes in the economy, like making repairs more attractive (3D printing basic spare parts). My impression is that for now there is too little demand for these 3D printing services (because simple plastic parts are of little value in real life) to make them profitable but that can change with the printing of glass, metals etc.
Even more when 3D printing for e.g. homes takes off. In Europe some small companies are experimenting with homes 3D printed from sand and glue made from ocean water, producing something similar to sandstone/marble that allows beautiful and strong buildings. In my country the first free-form homes are 3D printed now using special concrete. Very experimental for now, but within a few years they hope to add “printing” of wires, pipes etc. and then housing could get much cheaper (it needs to, because building costs are totally insane over here; even without all the cost increases caused by the government).
In Holland land-cost are normally a third of the price of a new build so i don’t see that much savings.
@char:
You are right, land prices have to come down first. But they can, if the easy money dries up and local governments are forced to change their policy of ridiculous price increases for land.
Technology enables homes to be partly or completely off-the-grid, making the current 5000% or so price increase from farmland to building land visible like the extortion it is. It’s ridiculous that in some areas you have to pay 100K-200K for a building permit and mandatory connection to the grid even if you don’t need it, with the government doing close to nothing for all that money.
BTW, with the average newly build home my impression is that land cost and government fees is now more like 2/3 of the price, and for the remaining cost of the home itself over 75% is construction wages; materials is less than 10%.
correction to post above:
the price increase from farmland to building land is not 5000% but around 50.000% nowadays; it’s the main money source for many Dutch local governments. Just 20 years ago the markup was more like 5000% (still ridiculous IMHO …) in the less populated parts of the country. Politics is the only factor behind the staggering increase in land prices.
Land price is after making it build ready which in Holland is very expensive. Putting a meter of sand on a bog is simply expensive. Also the new roads etc are being paid with this money so it is not that great of a deal for local government. In fact it is often a lousy deal
Real-estate agent: “Land is a great investment. They aren’t making any more of it!”
Dutch engineer: “Hold my beer.”
@char: I don’t believe for a moment that the cost of making farmland build-ready has gone up by over 1000% in the last 20 years, as reflected in the building land prices.
Nobody is going to build in a bog (hopefully) and in my area very little work is required for building unless you want a high-rise. Much of the money goes to local politicians and well-connected farmers who profit on the side when the local government acquires new land or changes the destination.
@nhz
Noord Holland, Zuid Holland and Utrecht was a swamp before we dyked it in”. From West to East there is a 10 km zone of sand and than a peat bog (laagveen) until you reach the Veluwe. There were lakes in that peat bog but most of them have been pumped dry. But because that land is much better farm land it is not often used for building. On lake bottom land you can with a bit of luck build a road without laying a thick layer of sand but you still need to drive piles into the ground to build houses. If it is a peat bog (laagveen) than not only do you need drive piles for housing but you also need to deposit a thick layer of sand to build a road.
ps. You may be right with calling the ‘land” on which Amsterdam, Utrecht and Rotterdam a bog. For that it contains way to much water and floats. Lets call it a watery bog.
@char: you may be right for big chunks of Holland and Utrecht, but in much of my area (Zeeland) – especially near current cities – there is clay with sand below and no special foundations required. Most of the roads are on/near old riverbeds. But still the land prices went up tremendously (tracking what happened elsewhere in the country I guess, just because local government could get away with it); just like in the (south)east part of the country where building is relatively easy too.
Have you checked out the costs of metal powders for 3-D printing? The health hazards? Metal printing will always be for pros.
A carnival has fun rides, Amazon does not.
I think online sales will continue to grow. As Wolf points out, many of the top e-commerce companies like Walmart and Costco make billions of profits. So, they will be fine.
However, you have companies like Wayfair that sell primarily online and their margins are awful. Compare Wayfair to RH. While Wayfairs stock is down about 50%, wall street continues to keep giving them money.
I’m guessing this will end within 12 months.
I have experience selling to Wayfair. They will well below their cost on products. They are good merchandisers but not always the best business people. Much of their staff is 90 lb twenty somethings that speak in exclamation points.
they’re also dealing with supply chain issues that the consolidating process of Walmart and Amazon aren’t. Wayfair is picking up all the difficult supply-chain and logistics based on more specialization and heavy weight individual product shipping. Walmart and Amazon are pushing the heavy shipping costs off to the independent vendors whether manufacturers or warehousing depots. Logistics is getting fractured by the selection and consolidation by Walmart and Amazon to the quick profit high turnover, easy “stuff”. Food is a whole other story…..
Are Walmart and Costco making money online?
I predict that a massive bubble will pop as far as ecommerce is concerned. This bubble will result in a massive 90% decline in ecommerce sales in one year and that there will be a new department store bubble coming up that will be born from the liquidation of Amazon.com.
I am just using the old adage “What goes up, must come down.” That’s true for everything in life as we are currently seeing a fall from grace for the NFL while attendance is down in baseball after years of World Series ratings falling. In business, it is just as bad or even worse. Remember the video game collapse in 1983? Or how about the collapses of Enron, WorldCom, and Lehman Brothers, within the last 20 years? Remember the dot com bust?
While Wolf may be bullish on ecommerce, which I respect, everything that is taking place is going to be falling sooner or later. I predict sooner because Amazon is ripe for a 90 plus percent fall as people try to diversify their shopping. All I know is that Tesla Motors will soon be insolvent over today’s disaster of an unveiling for an armored glass like truck.
Dunno…many have been predicting the fall of TSLA for several years.
Elon keeps pulling the rabbits from the hat.
Read an article the other day (sorry can’t find it) saying Tesla isn’t about sticking an electric motor under the bonnet of a Morris Minor[1] and a battery in its boot. That may well be what traditional car manufacturers are doing but not Musk. Tesla is designed from the ground up but it’s not just the car. There’s the infrastructure too. Recharge stations will be a good revenue stream. Not sure, but there may be other guaranteed sales of stuff like replacement batteries? Anyway, Musk is no dope, albeit he might smoke it.
[1] UK’s equivalent of Ford Model T (well, sort of).
MA : Personally I think Elon was doing oregami when this truck was designed……….after doing a few tabs of LSD. ;)
Do you see the return of buggy whip manufacturing and pay phones on the corner as well? (Where does superman change clothes now?)
When society and economics go through a paradigm shifts there is no return to the status quo ante. You can’t go home again.
Exactly. Very well put.
It’s like saying even though the telephone has existed in one form or another for a century, there is still that ever present threat that we will all decide one day to throw down our phones and go back to smoke signals and the pony express. lol
We should ask if Tmoble and Verizon have a back up plan for when that happens. lol
I somewhat agree with you, but almost no one foresaw the return of vinyl a few years ago. On that note, maybe we see the return of buggy whip manufacturing on a limited basis as buggy racing becomes the new it sport. But I doubt payphones make a comeback even if we get rid of smart phones.
As for ecommerce, it is here to stay in some form, but no doubt there will be a great fall from grace for sales. The message in my original post was that the growth was unsustainable.
I think a lot of current ecommerce (growth) depends on bad incentives like free money from the stockmarket or government subsidies. If I look at webshops in my country it’s unbelievable how many stupid ideas are around, many of them unable to make money but existing nonetheless because of subsidies.
In my country a few years ago every small company could get 50% of new e-commerce activities subsidized by the government. So every physical shop asked their nephew to make a new website for 20K euro’s or so, arrange that the nephew returns half the payment under the table to the shop owner and the government pays 10K subsidy. The result: free money for the shop owner and nephew and a many totally useless webshops that disappear in a black hole a few years later. But the government can boast about huge ecommerce success because now everyone has a webshop (including many government departments …).
For the larger companies, it is sad that most of them exist on only one factor: undercutting competitors with free money from the stock market (or from the government). Along the way e-commerce does improve and new tricks are learned, but even now many of the largest retailers exist just from undercutting the competition which cannot work in the long run unless you can get a real monopoly (like Amazon etc. are trying, but I don’t think that can work in the long run, in a free market).
So yes, there will be some massive cleaning down the road; probably when the current free money train comes to a halt.
You are delusional.
Ecommerce is NOT a bubble. It’s the new reality. A lot of the people using ecommerce have never shopped in a mall. They aren’t just going to stand one day and say “lets go waste time and shop like the did in ancient times. lets go to a mall.”
I am talking about unsustainable growth and it clearly shows it in the graphs supplied by Wolf. Eventually something is going to give, and the thing that will happen is that ecommerce as a bubble will pop. Everybody knows that a ton of the growth is due to Amazon’s monopoly and for “closing” stores. Also, read my reply to roddy6667.
@Nicholas W.
I don’t think anyone is saying ecommerce is going to go away, but that its growth is unsustainable and likely will decline before leveling off. As others have pointed out ecommerce stats can easily be fudged, and it wouldn’t surprise me if there’s more than a few outright frauds out there.
And malls aren’t going to die. People never went to the malls just for shopping, there was a social experience which went along with it. I don’t think the future is going to be everyone staying in their rooms all day buying whatever they want on their computers. In fact, Gen Z has started going to malls again at a far higher rate than other generations currently do. A link to an interesting article on the subject. https://www.bloomberg.com/news/articles/2019-04-25/are-u-s-malls-dead-not-if-gen-z-keeps-shopping-the-way-they-do
There are people who do not like going out for anything, and I am happy e-commerce delivers to them. I can go to brick and mortar retails, malls included, and see the full age range of people. I got two shirts delivered this week, the entire experience was boring.
Here is the joke of e-commerce–FEDEX delivered a package to my house in nowhere Kansas yesterday afternoon. An hour later, different type of FEDEX delivered a gift from a friend. E-commerce is not saving any fuel, and it is causing more vehicle traffic.
Andy Fanter:
Made on-line purchase of ink cartridges for my printer. Can u (or anyone else on this site) believe it will take FedEX 5 DAYS from receiving the article form the shipper to my residence only less than 100 miles away from the FEDEX terminal???????? Unbelievable! (U learn these things by utilizing the “track your package” addition.) This is from Sacramento FedEX terminal to the Sierra foothills. LOL!
Sierra 7, yes I can believe it. I have seen similar tracking packages from UPS, FEDEX, USPS. Ink cartridges are an item almost only way to get them is online, OfficeDepot/Max carrying fewer in store.
2 things:
Much of the warehouse & shipping is contracted out and full of mistakes that cost the customer
Cheaper knock offs from China are all over Amazon, with no guarantees.
When we have to choose between electricity and paying shipping and risky choices, we will be happy to “waste time” with real human beings in local stores and come home with something in our pockets toward the bills.
“What goes up, must come down.” You are more likely talking about brick and mortar stores, not E-commeerce. The US has 4X the retail floorspace per capita as countries in Europe. It is massively overbuilt. This is a necessary and healthy correction, and it has only begun.
This difference is probably because the US has primarily large malls while Europe has primarily small shops (excluding traditional supermarkets). By definition those small shops are far more efficient with floor space.
What is interesting is that there doesn’t seem to be much future for most US malls when they run out of tenants. In Europe many shops will probably be converted to housing, something that has changed tremendously in just 10-15 years due to e-commerce. In my city around 2000 (I was already running a webshop then, but ecommerce was irrelevant in general) most physical shops in the city center had empty apartments above the shop. The rents for apartments were so low compared to the huge rent/lease for the physical shop that they didn’t bother to rent out the apartments. Fast forward to now and many shops are empty, or only a storefront pretending to be a shop. Apartments above the shops are rented out for top dollars even if they are in bad condition and many are being converted to luxury apartments. Twenty years ago the building owners made their money from the shop lease, now they make their money from renting out the apartments above.
Even in Cupertino, where housing costs are sky high, they can’t turn the dead skeleton of Vallco mall into housing due to extreme nimby-ism of the “I got mine jack” crowd.
For the record, there are factors that conspire against brick and mortar stores. Plus there is the fake news lie saying that we are over-retailed. The globalist deep state wants us to be suck in our little ruts while texting on our smart phones, and buying from Amazon with credit.
Yes there is the possibility of overbuilding, but that has been under correction even before ecommerce. In fact, there were dead malls in the 1960’s to the 1990’s while stores failed left and right. Everybody knows that the biggest and most famous failure was Dixie Square Mall in Harvey, IL. That mall was beset by crime within its borders.
The truth is that the journalists are not doing their job. If they do their job, then private equity would not only killed off, but the debt incurred by retailers would be eliminated. As far as the reported ecommerce bubble is concerned, it will pop sooner than later.
Attendance in sports will decline, it is another “brick and mortar” experience that many want to avoid. However, teams will remain and “viewership” will do well, but have some declines particularly for baseball. Camera numbers and quality, and commentators have made sporting events better to view on tv or streaming. Watch the fans attending games, they are glued to their phones.
eSports is getting big in the USA, though I doubt it will compete for eyeballs.
I sure hope that something like that happens… so, on a positive note- enjoy all the pie we can this Thanksgiving.
Brick and Mortar stores have two primary enemies. The local tax collector with inventory taxes, business license taxes and local regulations and again the local tax collector with property tax, building use tax. Building use tax is based on the profitability (highest and best value) as estimated by the tax collector as you must show your tax returns and add back the salary or draw of the “highly paid” employees. So the local hardware store cannot afford to keep in stock anything without a quick turn as taxes would cause a loss after a very short time of sitting on a shelf. Computers and other business machines, furniture, fixtures, and in Fairfield CT they taxed on the “average amount” of copy paper I had in inventory. To their credit they did not tax the toilet paper.
So you can imagine why the local store has minimum anything but can “order it in”. Of course, most leases are what is called “triple net” and based upon your gross which means you as a lessee pay all expenses related to the building but cannot vote on the government costs and the cost covered landlord largely does not care. Local government is IMHO is the biggest driver to online as they begin to pluck to the last feather the goose of golden eggs.
It will only get worse. Municipalities have growing expenses, unfunded liabilities, and underfunded pensions to pay. Their only source of revenue is usually taxes.
I live in CT for 65 years and moved out about 7 years ago. It’s hard to be retired on a fixed income while expenses grow every year. Plan your exit.
You got out just in the nic-o-time as they say Rodster Things have only gotten worse in Ct from what I hear
Hahaha. I am retired in Fairfield Co., Connecticut and we raised all our kids here. Yes, the taxes are crazy. But why do you think people like Dalio, Cohen, etc., have their hedge funds here? Living here and in neighboring Pound Ridge NY or Westchester area is actually very pleasant especially if you have kids and are growing a family. At least you have “nice” (however you want to define it) neighbors. The only problem is can one afford it, and the occasional coyotes and foxes.
Yes, you have to be in the top 2% these days to have these things.
Seems this was a lot better in my country in the nineties when I ran a computer company :) Tax officers “knew” that computer gear depreciated quickly, so we were allowed to mark down the huge inventory to very low values and grow the business while paying relatively low taxes (and of course, you start paying more taxes if after some years you have better profits, but that is a lesser problem). Of course you had to manage the inventory, if not the depreciation starts to bite and many computer shops went bust in the nineties because of this problem, especially those who purchased lots of inventory on credit.
As for the building tax, I had the yearly discussions with government lawyers because they wanted to tax my office/stop building based on some arbitrary external measurements like size of the pavement or rebuilding cost (it was a 17th century mansion, so rebuilding estimate was about 10x what I had paid for it …). This was a lot of hassle but the high estimates were proven wrong every time again. BTW, later when I had just a webshop they tried to have me pay huge garbage taxes and even bigger taxes for upgrading the shopping district pavement, while my company had no local customers and produced almost zero garbage due to good packaging recycling etc. Guess local governments have to learn new tricks …
It’s ironic that taxes for on-line purchases were ignored for many years. That helped Amazon et al, and helped destroy the B & M outfits that had substantial tax payments.
Consider what will happen if autos all go electric, or worse, if people share car ownership: dramatic reductions in fuel tax revenues, personal property taxes on car ownership, new and used car sales revenues, license fees, etc. The list goes on.
People really don’t consider that house and car ownership have hidden (or not so hidden) “leases” that they pay annually. “Home ownership”? Stop paying your property taxes and see who “owns” the house.
I don’t mind paying the taxes on our little post war house….what I mind is the corruption downtown.
There are many white collar people desperately trying to “keep up appearances” with private school fees, SUVs, and even pools. They are clawing so much with their feckless debts. Many work in local bureaucracies.
Honest people are learning from online and prayer how to reduce their lifestyle…and take pride in it.
I don’t have time to do much other than say that your experience with goobement is uncannily similar to mine.
They do have new tricks such as setting up an “Arts District” in some nearly condemned buildings. After expensive reclaiming of the buildings they were open for business. After two years of complete vacancy they found a marginal sap that was willing to go with the heavily subsidized rent, but only lasted eleven months. All have been empty for ten years.
I am still in their special taxing district with no customers within eight hundred miles and I got nothing at all other than thousands in assessments over the years. I pay for all of my limited trash collection but have no trash collection from the clowns that doubled the taxes for same.
The closest thing we got for goomint services was when Obama came here and they closed all access for miles so that his forty Escalades paraded back to the Milwaukee airport. I had to walk to get to a place wherwe I could be an observer to flip off all of them from start to finish as I hated them all but didn’t want to miss Obama’s truck.
So you’ve been to Savannah, GA….!!
Sounds familiar; we have some real services every few years when Dutch or American royalty visits my part of town and all streets are thoroughly cleaned and checked by men in black raincoats. Closed roads, plenty of big luxury catering trucks and menacing guards are part of the deal too. After that it’s back to normal. Sadly, much of the public loves this circus :(
I do wonder just how much of the e-commerce success is due to enormous delivery subsidies plus their accompanying “gig” worker FICA evasion scheme.
We’ll get to find out soon. WeWork has webvanned this bubble – it really doesn’t look good for “sell $1 for $0.60” cent businesses.
yes, puzzling subject …
I can order stuff like small camera or computer gear from China for around $1 including shipping, or a bit more for larger items. When I ship a small package to a city 5 km from here, I pay around $8 for a very small package or $30 for larger packages. Big web retailers get significant discounts on these shipping charges but you really have to wonder how any e-tailer can compete with this without shipping subsidies – the shipping cost within my country is often higher than the margin on the product and there is no way to compete with some foreign suppliers (and for expensive products it can be even worse because of tax cheating etc.). And for services of course it helps that this is a way to get around minimum wage etc. by letting foreign workers do the job while pretending to be a native company (many examples of this …).
Ordering direct from China on Ebay for small items is dirt cheap though it takes a few weeks for shipping. For example, Chinese woodworking router bits that are sold at Home Depot for $10+ go for only $2 including shipping. Same with industrial diamond blades and bits for tile work. There are thousands of items. It’s the same low-quality stuff from China sold at Walmart and Home Depot with a 500% mark-up.
You’re right – I get all my sandpaper through eBay for pennies on the dollar.
However, especially with their earnings miss last week, I’ve been questioning their online strategy. They can’t compete with online prices, and their clientele don’t need that middleman.
The construction guys, the hardcore DIY guys, the re-modelers … they aren’t going to be bothered with online ordering – and for what point? They go in and grab a 2×4 because they need a 2×4. They move 20 steps verses messing with a phone and account info and finding someone once you get there and … ? It doesn’t make sense, not to mention it’s only more work and expense for HD to pull and store the order!
My sump pump failed a few years ago and my basement flooded. I immediately jumped in the car and headed to the store. I didn’t need a online ordering middleman. I went to the sump pump aisle, compared them, and got one. How does it help HD’s revenue if my eyes are glued to my phone all the way to the store and it’s waiting for me when I pull up?
Yes, brick and mortar is dying, but I see HD (laughably) as a service that is hard to replace. For the confused lady bringing in toilet flapper asking what it is and how to fix it, for the guy with the stripped nut who needs to find the size before he can order, for the visual people shopping a ceiling fan or sink or tiles, for the guy whose basement is flooded and needs a new sump pump or appliance asap.
I think that is coming to an end. It was a dumb thing the USPS signed into. Although I love getting my small electronic parts from China so cheap :-( The bigger stuff all comes via DHL and is pricy to ship.
Amazon has new vans like UPS or Fedex. Walmart has in store pick up of some
e-commerce items, no delivery charge. Ebay may offer lower prices on some Chinese imports.
Think yourself lucky… The UK is already up to 20% of all retail being online in H2 2019. Double the the US ratio. Some segments, like music headsets, are over the 50% level. Online is reaping a whirlwind of carnage on the British highstreet. Shops, malls and department stores across the UK look like Detroit, closing down and boarded up. UK is a small landmass, with dense population, perfect for online logistics. What makes it worse is that almost all the online winners are American firms, not British. The big British retailers (like Woolworths) are being replaced by big American e-tailers (such as Amazon and eBay). Jobs get lost, and then the profits get sent outside the country. A double whammy! It is a perfect storm of disruption and destruction.
The situation is the same all over Europe: online retailers are serving their brick and mortar competitors the proverbial well-deserved beating.
Why I say well-deserved? High prices and poor selection, often coupled with a cavalier attitude towards customer service.
British high street retailers are notorious for this attitude: they still live in the late 80’s/early 90’s when they had no competition and could charge how much they wanted and the customer was at their mercy. I won’t shed a single tear for them and their staffs.
Like I won’t shed a single tear for mall operators: more people living in the past and being kept afloat by a system that rewards financial living fossils. Our friend “nhz” would easily recognize the financial zombies he so often writes about. ;-)
This morning I picked up the newspaper and they had a full page advertisement for a 120 store mall plus hypermarket opening up next weekend… with three similar monstrosities in a five miles radius, plus a fourth one which is already flirting with insolvency a year after opening (don’t worry: it will be bailed out).
Amazon is so big here they are planning to open a new logistic center about thirty miles away: yesterday I rode past a row of Amazon Lockers freshly installed in an industrial area to allow people to pick up their orders on their way back home from work.
I have the lingering doubt the people financing all these clinically dead malls and retailers either act under strict political orders (don’t want to get there) or live so much in the past they think Amazon is this new US startup selling books to a bunch of nerds on the Internet. ;-)
well, there are a lot of financial zombies among the big e-tailers too.
In my country you can see a staggering buildup of foreign warehouses and logistics centers, sometimes running for miles (many Chinese I’m told) catering to e-commerce companies. It is also clear that this is causing lots more delivery traffic in the cities.
As to brick-and mortar stores what I hear is that there is another problem (might be specific to Netherlands though): the middle class is disappearing and much of the shops catering to them – offering good products, service at competitive prices – as well. What remains are the “dollar stores” with rock bottom prices for mostly junk (like Action, often cheaper than Ebay/Amazon etc.) and a few luxury stores for the elite with outrageous prices, for people who don’t care about price. What was in between was a thriving market until 10-15 years ago but many of the larger retail stores have disappeared or were taken over by foreign companies like US private equity firms (often without success and with huge cost to the Dutch taxpayers).
The stores with rock bottom prices might be safe for now because of shipping cost and times, and the absolute luxury stores are probably safe too because e-commerce simply cannot provide that experience. The battle is in the area between them and there e-commerce seems to be winning.
So the trickle-down theory was something short of a real theory? Wealth trickled up. They just had the directional part of it wrong.
The big problem for online retailers is their profits and hence margins aren’t exactly comfortable, and they are shrinking: Zalando, the German fashion e-retailer, had pre-tax profits 3.7% in FY2017 but of 3.2% in FY2018, and that’s despite a big bump in revenues (18% or so). In short business is booming, but at a price, and that price is shrinking profitability to beat the competition on lower prices and/or better customer service (free returns, cheap one day delivery etc).
Traditional brick and mortar retailers moving on to e-sales will find they are great for revenues but much less so for profits: investors that won’t keep this in mind will lose a ton of money if they don’t spend their money wisely and/or don’t keep their fingers on the “Sell Now” button. Unless it will become legal to trade stocks of bankrupt companies. ;-)
@MC01:
yes, that’s exactly what I am reading and hearing, both for the big e-tailers and for the smaller brick-and-mortar shops adding a webshop. It all looks very fragile for when conditions change – and they will.
It would be interesting to hear how the retail mix has changed for different people.
About 80% of my retail purchases are now brick & mortar, including food, clothing, household, and auto goods. 20% of spending I do online for household stuff, books, small tools, some gifts, and specialty goods that aren’t adequately stocked at stores.
If you look at the trajectory of my on-line purchases, starting about 7 years ago you’d see a gradual increase in on-line purchases, from zero to 20% currently. In the future, however, I really don’t seem my B&M v. on-line mix changing. It will remain 80%/20%, simply because I get better value in the B&M stores for most purchases. I don’t care so much about having things delivered to my door for convenience. In fact, I am somewhat environmentally conscious and don’t appreciate the additional boxes, packaging, and the blue gas cloud the UPS truck leaves outside my house.
If there are more people like me, Amazon’s growth over the past seven years might be starting to stall out about now.
I think the remaining B&M stores have upped their game to the point where the transition to on-line will be slowing, although I did take note of the recent increase in Wolf’s graph. My own spending habits apparently conflict with the graph.
I doubt it. Next day delivery was a game changer for me, just to damn convenient. Even if I need something right away from home depot, will order it online and pick it up in a locker in the front of the store rather than wander aimlessly through the behemoth.
yes, undoubtedly this is a big factor. For many people in my country, visiting a store costs far more time (stuck in traffic) and money (parking charges etc.) than ordering online. If you have a regular job, only the Saturday is suitable for visiting shops and that day will be extra busy. So for products where you more-or-less know what you will get, online is a good alternative especially now that delivery can be quick and delivery times can be specified (so you don’t need to stay at home the whole day, or have to collect your package from some faraway distribution center).
How much of the increased traffic is due to delivery vans and ride share vehicles clogging up the road everywhere?
@c1ue:
Dutch roads were already clogged before e-commerce took off seriously. Delivery traffic probably increases the problem nowadays, but IMHO that is only a big factor in the historic inner cities that are not designed to handle heavy traffic loads.
When you buy it from the locker, that is a brick and mortar sale. The item is being pulled from the store inventory. You just don’t go through the check-out line.
…which brings up another point. Brick and mortar is adding all kind of conveniences to slow the progression of on-line. Automated check-out and pick-up options have been added at most stores. I rarely have to wait in line more than a minute at a store anymore.
Most importantly, the stuff I buy at the store is much cheaper than the Amazon price. Many store that sell staple goods are consistently beating Amazon prices by a noticeable amount.
I’m not buying people are changing their shopping patterns all the much. They are just flat broke, and choosing the cheapest means to purchasing goods: On-line. Also, you never mentioned the predatory behavior of the private equity firms. Private Equity should be greatly limited.
Agreed Tony, I met a retired man who moved here (Missouri) from Illinois yesterday. Very rare individual who is observing current events with a watchful eye. After a long conversation I asked him what his thoughts were concerning talk of a coming recession. He replied, “I pay little attention to charts and numbers that can easily be manipulated. We are already in a depression, look around you.” I appreciated so much to hear him say that because I couldn’t agree more.
Ron Paul and Chris Rossini said recently concerning CPI, and I can not give an exact quote, but they both basically said, do not believe that garbage, and again, look around you.
I am just a country boy with a high school education but I meet a lot of people everyday in business and I know what I am seeing. From well to do, to the very poor, everyone is hurting. My two pennies, from M. Everett
You may only have a high school education but you obviously have great wisdom and common sense And you are spot on M. Everett Your friend is correct about the statistics Total propaganda and deception
A sincere thank you Frederick, great to be around men such as yourself who are watching. Very knowledgeable people here.
To get a day to day outlook on regional conditions I talked to the tttttLTL truckers that come to my shop twice a day. While not always accurate, most of the time they were good predictors of manufacturing activity in the region. They were certainly better than the FED regional predictors.
Most of them were hardly the high brow’s stereotypes of incorrigible blue collar stupidity and ignorance, and being more enjoyable and better mannered than the loutish college girls and boys.
I wish for a way to edit text errors once they are posted.
Above should read, “LTL truckers”. My last sentence needs edits for grammar and clarity.
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As an aside nzh is on a roll on the tread as are several other favorites. I thank you for pitching in your views and commentary.
That proves the need for edit capability. I butchered nhz from my lack of typing ability on the first try.
@Erle:
I guess being a non-native visitor I’m allowed far more typing and language errors ;)
No college teaches common sense….
There are many wealthy retirees here in the south. Their grown children and grandchildren are being subsidized by their parents pensions…Discover cards are being paid off every month. Boomer bashers need to grasp this system of economic support that percolates through the society. We all need one another.
When the market goes down the parents will have to move in with their family, because those gated monstrosities don’t allow families with children. Personally, I would enjoy seeing those gated places bulldozed.
I have seen some economic charts for the Midwest states that support your position of a “recession”. The smaller towns and cities across Illinois, Missouri, Kansas, Iowa to name a few are dependent on the success of agriculture. Ag started to decline in 2013 and has continued through 2019. Here in Kansas, 2018 was a drought year, 2019 too wet first half of year, now return to drought for much of the state. No good changes for agriculture in sight for next 18 months, maybe longer.
Walmart is a hypermarket so the numbers are even worse. The supermarket part should* have grown in line with the growth of the supermarket sector so their B&M mall part of their stores should really be shrinking a lot.
*) It is likely that hypermarket are growing slower than normal supermarkets as the long distance clients who came to buy something from their “mall”part of the store and because he was there picked up groceries is not coming because he bought it from “Amazon”.
So where do new college business degree grads go to for their first job since the post of retail assistant manage is gone?
The US will need to foster an industry of making stuff like China has done, whether by hand or 3d printer. A world of Etsy, not Ebay or Amazon. Fresh veggies, meat, dairy, granola, eggs, and custom designed clothing, furniture, and even Cuban style used cars since automobile companies make junk epitomized by the Tesla Delorean, and all the designer pickup trucks selling over $100,000.
Learn to code is a fata morgana. For example, Windows 7 does everything just fine and could work for another 20 years like XP. Bottom line, code lasts a long long time, and longer now with the limited change in computer architectures. We do not need a lot of coders, but with AI essentially replacing coders, we will need an occasional data entry clerk.
We need to make things or grow things, or we will not be able to pay for our gruel. Dance or sing for your supper.
Yeah, because with a freshly printed business degree in hand, what 20-something wouldn’t run to their nearest mall to work in management?
Where do 3,892,494 fresh college graduates end up each year in America?
Nearly 4 million additional college grads. Each year, every year. Pretty soon they’ll be running to the mall to apply for an unpaid janitorial internship.
AI is not replacing coders. I don’t think you know what you are talking about, especially if Microsoft Windows is your go-to example for software technology.
AI is not replacing coders not, but that is the target.
A simple example is the former construction of a webpage with HTML or Javascript tools, done by coders. The same things can now be done with simple interactive graphical tools that do not require coders.
The addition of big data makes a lot of work done by coders, to be done my higher level tools. I think of AI as a buzzword for higher level data entry tools, eliminating what formerly was done by coders. This will be a technology plateau, the same as typewriters were from 1920 until the 1960s. I did some assignments for my dad using a 1920s typewriter in the 1950s.
I sometimes look at this automatically produced code and notice it is 10 or 100x bigger than the far more reliable html code I could have written, and full of all kinds of nonsense. I guess that is progress ;(
Will take quite some time before we get to the stage where – like in genome evolution – most useless or erratic code gets automatically eliminated ;)
Sometimes it’s good to talk to old people to get a perspective. My dad is 90. He grew up on a self sufficient 20 acre farm. No electricity, no internal combustion engine, no money except to pay taxes basically. Horse drawn plow. Everything heated by wood. No chainsaw. Grow it or you didn’t eat it.
Most everything we have today is not a basic need. We are kind of spoiled because we were born into a firstworld standard of living. I guess everyone has heard that creases in pants were there so clothes could be folded for the retailer and was for awhile a status symbol because it showed your clothes were not home made.
Old School:
Having just had my 89th birthday I really relate to your story. We lose many skills each generation. I too have vivid memories of growing lots of our own foods, mostly vegetables. As a child of Italian immigrants and living in SF, CA so many of our neighbors had back yard gardens. Some grew so many varieties of vegetables that you can only find some in the stores today. And, of course many raised chickens. You walked mostly a good mile to the nearest shopping area. And, you did it with shopping bags……..either walked or rode the “street cars”.
We had a wood furnace that had to lit every morning in the cold; we had a kitchen wood stove that was really warm once it got going!
We had skills (and retain those as long as we live) that are lost on too many today. Just like previous generations all over the globe.
I always say that when an old person dies, a whole library dies with them.
Most Americans don’t know how much money they “waste” by not knowing how to cook and most importantly; how to use leftovers!
Enjoy your father…….
No time to cook, too busy working then have to deal with the traffic on the way home.
But first, Americans have to grow up. They are the first on earth to go to the poorhouse with a smartphone.
I predict the revolution will be towards practicality and enjoyment of nature and other people. Already youtube is ending the battles of idealism this Dec. 10.
We all agree the world is a mess and institutions are riddled with corruption. That agreed upon, we will rediscover practical, simple living.
Sad…..this next generation will work from home……shop on line…….play video or stream entertainment…..live in apartments that do not require lawn work……. learn online…..talk to their doctor/lawyer online…..receive pharma products online.
So when will they say…….Hi Neighbor!……I guess they will not……goodbye interacting with people……what a lonely life.
You just pointed out the good life. Why would you think it ends with socializing?
Look at all the social apps.
We’re socializing right here.
This is not socializing, this is sending telegraphs. Socializing is having a conversation at a Starbucks, bar, restaurant, cookout.
Yes, but you can’t smell my lovely Jean Nate cologne and I can’t see your smile…
Deanna Johnson Clark—I enjoy your intelligence and views on life. I wish I could have an in-person discussion with all on this thread. It has been very interesting “telegraphing” with all of you.
I just had an idea. How about totally online services usually supplied by funeral homes? Uber takes your body to a crematorium, the service is livestreamed online, and the “gravesite” is a division of Facebook.
Can anybody imagine being eternally intombed with Zuck because it sounds like pure hell to me
Maybe Musks new truck would make a good e-hearse
roddy6667, that is an heck of idea for a WeWork business. Just get some bandsaws to dismember the corpses and use the provided for microwave ovens and build a funereal pyre in your parking spot.
Word of mouth and social sites would make your business instantly famous with having to blow a wad on Google and Facebook ads.
I wondered when Walmart was going to start that one…
I disagree.
The internet has made the world smaller and brought so many people from all over together. I have online groups where we have chatted daily for over 5 years! We have even met in real life when the opportunity extends itself. Without “online” platforms, I would never have best friends in Chicago, Canada, Tennessee…
You live in one of the nation’s most populated counties yet you seek relationships online daily? fred is “on point”.
I think you missed “the point”. I *am* lucky to live in a populated county and do participate in plenty of social activities and have plenty of friends here. Indeed, online platforms complimented my very natural ability to be social and make friends. I have been able to make friends where I wouldn’t otherwise have them…and this is also the case for people that do NOT live in populous areas. They can befriend a lawyer from NY or a web designer from SF or a homemaker in Chicago. This is truly a blessing. Certainly, those with that aren’t able to physically leave their house to socialize IRL benefit from online paltforms.
I mean, I can’t imagine a life without a Wolf disagreement with JSRG.
You must be very young or very lucky….most of the big problems in life call for a nearby heartbeat and a warm hand.
I am very blessed. I have both online relationships and close friendships in real life. I feel very lucky- and young! (Young being relative, right? Lol ;-)
OC — today is the oldest you’ve ever been.
¯\_(ツ)_/¯
No question the E-commerce growth has been impressive, and will likely continue. But I wonder what would happen to the paradigm if oil were to go to a higher level? Has anyone done any analysis of that. (BTW – I’m not suggesting that oil will spike, only asking. . .)
Well, ecommerce allows you to skip the drive to the mall. Instead of having 50 people in 50 cars drive to the mall, and burning gas, a van on a route delivers 50 packages to 50 customers. That saves a lot of fuel. I think high gas prices would boost ecommerce even more.
I’m not sure the comparison is correct.
The question is how much people buy per visit to a physical store vs. with “free delivery”.
The van doesn’t automatically save fuel or time if it is delivering fewer items per delivery than when people shop at a store.
The US’ gasoline consumption doesn’t seem to be moderating either – even though consumer “miles driven” is flat to down.
That’s the theory. The reality I see (slightly exaggerated) is that instead of 50 people driving in 50 cars to the mall and visiting 10 different shops there, we now have 10 delivery vans from all those shops visiting 50 different addresses all over the area and spending a lot more fuel along the way. For purchases from far away the situation is different of course because most people would probably not go there anyway.
I don’t think high gas prices will cure this issue. It could be cured by smarter distribution e.g. smart hubs near the cities dispensing packages from all the different shops to a few electric delivery vans that go inside the city. But despite lots of talk about such solutions (for at least 15-20 years) it isn’t happening. My country is said to be extremely advanced in logistics, and you can see this in the big warehouses with robots keeping inventory and loading the trucks. But at the other end of the retail chain no sign of smart solutions yet.
There are AFAIK only three big packet delivery services in Holland so the 10 vans is not slightly exaggerated
I see 10-20 different package delivery vans in my area every day … much is delivered by small “contractors”, even some of the stuff that enters the country from overseas through PostNL. Also, it seems that many of the big contractors do not have just one van for a certain area, but employ at least 2-3 shifts because you see different vans at different times of the day (or maybe those are vans coming from different distribution centers??).
Here in the UK we were once notorious for being a nation of shop keepers, with millions of small shops selling everything we needed. The first part of what we endure today started with the repeal of retail price maintenance, where once everyone sold a product at the same price, set by the manufacturer; from then onwards it was possible to sell anything at whatever price imaginable. That first stage destroyed almost all stores that could not afford to compete against a large group store with many outlets. Now we have the introduction of the destruction of the large group store.
Then add that at the same time, it became almost impossible to start up a new business that needed a small capital input; through the introduction of venture capitalism; where the new investor was only interested in a substantial investment that would always be amenable to being quickly sold on into a much larger conglomerate. That in turn dramatically reduced direct competition simply by the recognition that competition was always going to be “bought in” to suppression from the conglomerate.
Now we are seeing the end game, a good example, not widely recognised, well demonstrated on a few seconds of TV news time when someone in the BBC showed us a vertical bar graph graphic of the size of different aspects of the UK economy where, furthest away from us on screen was by far the largest vertical bar with underneath it the title describing the costs of welfare to support the low paid. That bar chart showed those costs to be equal to the combination of almost all other costs in the economy; born by government.
So we are in an economic end game where modern employment does not provide anything like sufficient income to support any national economy; instead it has introduced a new form of feudalism; where the majority are now serfs to support a very small minority at the top of the economic pyramid.
This was forecast by myself back in the 1970’s when Investors Chronicle gave my evidence to the Wilson Committee a full Business Page, May 1978 issue. Again I returned to this debate in the early 1990’s which became the creation of the debating platform; The Capital Spillway Trust; where I have set out detailed rules for the re-introduction of local community free enterprise equity capital investment into new very small start-up businesses.
The only clear way forward is to allow millions of individuals to set out to try to create new employment using their own ideas of how to go about competing against all other employment. Yes, many will fail. Where I see the way forward is that by such direct and immediate competition we will find a way forward that will serve to raise both employment and, through the competition for the employee; raise direct prosperity, eventually, back to levels that will serve to cover every cost within any economy.
One huge advantage that large corporations have is that manufacturers provide double the discounts on large purchases of inventory – aka, economies of scale. The only way small businesses – ones that provide products made elsewhere – can compete is through “convenience”. And online/same-day-delivery flattens the small store owners on that score.
In a global marketplace, middle-class members will inevitably move to lower-class. Unless you can get the cat back into the bag, there will be no joy in Mudville.
An even bigger advantage they have is that most large corporations pay almost zero taxes, while local business – whether brick-and-mortar or small webshop – pays 25-40% income tax. Unfortunately my country plays a major role in this worldwide tax evasion game, and for sure our politicians are not going to do anything about it (except making it difficult for small companies to use the same loopholes by setting up fake companies abroad – like some small villages in UK did recently).
It is impossible for small business to compete against such huge tax-evasion advantage unless you can sell something that large corporations cannot sell (like good service, but I don’t think most customers will pay 25-40% extra just for better services with their purchase …).
P.S.: that 25-40% profit/income tax difference is for most of Europe, don’t know about the rules elsewhere.
Check out Target’s quarterly report. It did very well in the 3rd quarter and can, of course, expect to do even better in the 4th quarter. It has a multiple-front strategy which may keep it very nimble, regardless of future challenges. We shall see, of course.
yes! I have been seeing a lot in my newsfeed on the success of Target. And just my opinion based on discussions with my friends….all us shoppers with young kids, busy schedules, and budgets LOVE target! I do shop Amazon when I can’t find what I’m looking for at Target. I had been really missing Toys R Us for my kids and then I discovered someone came up with a match made in heaven with Target and Toys R Us. Toys R Us website is linked to Target!
I wonder why Target isn’t mentioned in Wolf’s article? (are in-store pickups considered eCommerce?)
Target’s ecommerce business isn’t big enough to make the list, according to eMarketer.
Generally “ecommerce” is defined how the sale is originated (on the internet), and not how the merchandise gets into the hands of the customer.
The stock market is looking for surprises with some “pop” like Target and Norstrom’s. Walmart, Ross, TJMax did well and the market shrugged them off. Caterpillar and Domino’s Pizza missed their quarters and their prices had gains!
There was a story out of LA a couple of weeks ago about a smash and grab attack on an LA shoe store. 3 car loads of ‘youths’ smashed the store’s glass front and made off with all the Nikes they could carry. One getaway car crashed and killed three of the four occupants. Trying to find out if the fourth thief survived or died in hospital I later googled the store name and ‘robbery’ to find out. What my query revealed was a list of robberies at this footwear chain all over America. Who knew selling athletic shoes was a dangerous occupation but it is.
As stores harden their defenses against shoplifting ‘smash and grab’ attacks or mob invasions are becoming the new underclass m.o. to steal merchandise. Actual shoppers will avoid malls or even famous shopping venues like Chicago’s Michigan Ave if they feel unsafe by roving bands of ‘youths’, homeless people and drug addicts. The deterioration of American society will force these people to shop on line.
Shopping in physical retail stores carried more risk in the 70s and early 80s. High inflation, high interest rates, start of bigger drug problems, fuel shortages increased shoplifting, pickpockets, fuel being stolen while you shopped, food stolen from your home while you shopped. People are coming up with reasons to stay home and the internet provides reasons and alternatives. As someone mentioned earlier in this thread, I am going to be 80 percent stores and 20 percent online.
I will not trap myself into “too busy” with work, streaming, and kid activities ( we do not have kids). Today’s kids and all of their activities are contributing to the time/retail problem. I grew up in the 80s playing soccer and baseball, but today’s kid is playing 3 to 4 games per week average to my 1 or 2 ( 2 being a makeup due to weather ). The traveling teams are crazy, parents not doing good job of accounting for travel expenses in total hoping for future scholarships, my Generation X made this mess.
Thank you…very good observations.
Gen X is the Hyacinth Bouquet generation. They are obsessed with Keeping Up Appearances at any cost to their parents or children…emotional, financial, spiritual.
My children have never ridden a bus or bought ‘old fashioned’ coffee…I hope their snobbery is outgrown someday.
The 2011 riots in London were, despite the attempts of the Left to portray it as ‘political protest by hopeless youth’, essentially about raiding stores.
TV’s, phones, beauty products for blacks, sports shoes……
They did well for themselves, with just a touch of arson thrown in – thankfully, no deaths.
Same story for the more recent riots in many French cities (I’m not talking about the Yellow Vests but other groups – not going to mention them because my post might not get through …).
The good thing then was that the Courts did a remarkable job in getting all the cctv evidence pronto, introduced obligatory overtime for the judges, and prosecuted a massive amount of robbers with extreme diligence.
So next time thieves decide to attack en masse, they will know there is a big enough net to sweep them all.
Many months and years in jail? Yeah, have some of that.
Free food, roof over your head and all their friends are already there. Plus I’ve heard from sources that drugs are just as abundant inside the jail as out on the street corner. They don’t even have to pay until they get out. It’s win win.
Here is one subtle thing I have noticed that pushes me and others into online shopping. Let’s say you buy clothes or shoes at a department store. Since those stores rotate “styles” every so often, you go back to buy the same thing as before, and it is gone. So you go online and find it again, and buy it. We have started buying food online too for this reason. The chain stores continuously push out independent brands for their own store brand, and they are sometimes no where near the same, so I go online. Online shopping defends you against the continuous force of by marketers.
Be careful with expiration dates. At the store, you can easily check them. Twice I have received food products from Internet purchases with very little time left before items reached their best use by date.
A large department store played the rotating styles game with me years ago. I found exactly what I wanted from a shoe store in Florida with a very good website. I rarely go back to that department store these days.
Wolf, you really hit a button with this one! Great topic but I don’t see any discussion of EBay at all. How are they doing in comparative other e-commerce retailers
eBay is the second largest ecommerce retailer in the US, behind Amazon, and ahead of Walmart’s ecommerce business. The list is in the article, 2nd paragraph (below the first chart).
Thanks Wolf! Getting old and my eyes are getting dim!
Interesting .. even if not surprising. There is a SEGMENT of the whole Market .. you have not considered: The Small Local Grocery and Household Utility Shop.in suburban Neighbourhoods. In my opinion with a HUGE POTENTIAL in neighborhoods who have reasonably INTELLIGENT POPULATIONS. Populations who understand the value of having a Shop within walking or cycling distance … invaluable and timesaving in everyday Life .. worth a considerable Premium ..if the shops are adequately stocked …Even increasing the value of any purchased home …In my country Denmark these kind of shops are logistically serviced by Chains but are individually owned and the owners KNOW their customers individually and can accomodate their preferences to a certain degree ..another great bonus !
I think the problem is that in much of the US including the suburbs this doesn’t work because of too low density. In Netherlands these are also highly valued services, but while they were present everywhere until maybe 30 years ago, they have disappeared in most villages and are now quickly disappearing in most of the bigger cities too. Some of this is compensated by migrants who start their own food markets (I think they have their own supply lines?) and often also cater to other locals, but with a bit different product mix.
During FC I was laid off from a management position and took a temporary, I thought, non-salaried management job (years, 60% hit on income) with a big box with 20-25 million annual sales. I worked both front end and back end. With certainty I can tell you the three things where ecommerce work relative to B&M are labor, location and inventory management.
For example, the staffing models run by computer are backward looking and penalize store management and customer service – if you sold $500k week 39 last year but this year had weather events Monday-Thursday the computer tells store management to cut hours based on lower sales (projected $115K, lower margins) generated M-Th. Weather is good F-Sun and sales return to mean and you have cut all associates hours for weekend – no restocking, no customer service, barely enough cashiers, and lot loaders to bring carts in from parking. Some customers leave and shop competitors, etc. By Sunday at closing the store is a mess and has to be dealt with by opening staff on Monday – new week, new labor hours. This labor model has plagued retail since the 1800s and they still haven’t figured out how to anticipate staffing (to a degree when Wall Street measures comps – everything is compared to or projected from the past). Add to this the constant underlying home office goal of reducing labor cost to $0 in one way or another.
This does not occur in an Amazon warehouse where inventory is always available (here or ships from nearest DC), x% of “staff” is an X,Y,Z grid controlled robot, and, the goods are shipped direct to customer.
Walmart is now using X,Y,Z scanning robots for inventory control and shelf maintenance punch lists.
As an aside, I shop in ALDI 2x/wk and it’s a curious thing to now see the instacart pickers filling a basket or two every time I’m there.
You really think inventory is always available at an Amazon warehouse?
Well, my AMZN purchases are “ships from and sold by Amazon.com” or “fulfilled by Amazon” so, yes, in single multi-item orders sometimes a product is sent from a different Distribution Center than the one in my city. I have never received OOS notifications from Amazon just separate packages.
OTOH, shopping B&M at Lowe’s, HD, WM, etc – Yes, they have been out of stock. Then you track down an associate for re-stock from overhead if you can actually see the item above (too often) or ETA in-stock from their DC or use your own smart phone to check inventory at nearest store, call have associate leave at service desk. Go get it.
Demographics, the age of people shopping online is equally interesting. If boomers and Gen X order only 20%, the millennial and Gen Z shops more than 50% online. The main reason Amazon acquired whole foods is to target these generation. Young people went to BM malls to hangout, meet and date but now, smartphones can do it. Movies, music and books are from amazon. Food, sex and entertainment are now available through the phones. Why should anyone find BM appealing.
We need the “affordable housing” contingent to get into commercial real estate.
You mean, like, convert and fill the abandoned malls.
For sure, I don’t know why there isn’t more of that in the States.
At least, the malls near hospitals, where hospitals could offload the perpetually returning non-medical or vaguely medical patients.
Like BM but hate Costco BM. Recently ordered online Costco
and it was fine.Looks like it will be a mix for me.
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I have a crazy but plausible theory on the next steps in retail on brick and mortar. Or a good Idea…The line between madness and inovation is a thin line.
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Instead of having shops, the large vendors will have shoping salons. There will be only one item (of each size if it’s clothes), and a barcode next to it. Once you try or look at the product, you will scan it and it will be delivered to your home.
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The individual companies ca pay for advertisers (individuals) who will promote the products within the salons.
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I know this sounds crazy but it’s devoid of logistics, cashiers, storage problems and exposes the customer to new and potentialy interesting products. You need less space to store the products and can focus on marketing them to willing buyers.
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The shoping of the future?
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This is almost the same model that Service Merchandise used. They were a catalog showroom and America’s largest jeweler. They had one item of each on display. If you wanted one, you wrote down the number on the card you picked up at the entrance. The item was brought out from the back room by conveyor and you paid at the door just like any other retail store. Your idea is a more modern version that could be operated from a phone app.
The Zimmermans founded the company, but turned it over to their middle aged son. It later floundered and failed. The product mix had become strange. When you walked into the store, you would ask yourself “What kind of store is this?” It was like the buyers were on drugs. They had no idea what the American consumer wanted.
Argos in UK? You walk into a shop full of catalogues, With small pictures of merchandise. You pick your items’ code, take the codes to the till and pay for those that are in stock.
5 minutes later the goods descend from 1st floor warehouse. Job done.
I have been watching 4 companies for possible investment that are in retail in different ways:
PETS- online pharmacy, it got too cheap and I bought and made money when it surprised on margins.
DLTH- on-line going to multichannel. Stumbled rolling out stores. Currently 58 stores. It’s too expensive for me right now.
MED- Direct marketing healthy diet products. It’s cheap but not sure of sustainabily of growth. Probably should buy at current price but I can’t pull the trigger.
SKT- Tanger outlets. Bought it because it got too cheap. Even a business in a No growth sector has price at which it is too cheap.
I had lunch today at a Tanger Outlet. The ramp to get off the highway was backed up 1/4 mile and the place was packed. I drove by at 10 A.M. and it was packed and again at 1 P.M. and it was more crowded. It’s not even one of their premium outlets. Pre Black Friday is looking good.
I was surprised reading their numbers. If I remember correctly their clients average about $350 in sales per sq ft per year. That’s a healthy number I think pretty close to what Lowes and Home Depot do.
HOME was a good one for me this year, bought in 7s and sold 10s. There are some good plays in retail stocks if you do the research.
Outlet malls might be a fantastic investment before the talking heads confirm the recession/depression the working man has been experiencing.
No one has said this (I read all the comments):
The three growing industries are under attack also
1. We have two electric cars. We charge at home for free (we have solar and batteries) as do many of my neighbors. This will become far more common. Gas station sales will peak in the next 12-24 months
2. With electric vehicles you need 200 parts vs thousands for an ICE vehicle. You also need far less service. Dealer parts and service will peak soon too. Dealers are fighting this change as hard as they can. Customers will figure out how much electric saves vs ICE and the change will be rapid
3. Not sure about food sales…lots of technology is being thrown at this
Keep the dream up for electrics, it is not practical for many in the US. Electrical grid upgrades, not enough charging stations, battery limitations. I agree the market share is growing, and in all of my personal and business contacts I know one person who owns an all electric.
Agree; in theory Musk has a good vision, but in reality it isn’t practical (yet?) in most of the world. In my country charging your EV from your rooftop solar is impossible for almost everyone. In reality most EV’s run on subsidies and not on clean power.
Personally I see more promise in small scale bio-solar, basically producing your own fuel, because it can be more efficient and solves the storage problem. Which could mean back to small ICE’s (and lighter cars). I worked on that decades ago, but unfortunately my government stopped all alternative energy development in favor of fossil fuel and nuclear :(
I finally hit the end of the comments. I think this article and all the comments are one of the best that I have ever read on Wolfstreet. Personally, I am pretty concerned about the consolidation of supply chain as a basic logistic system for any production at least in the US, where I live. Point A to Point B is really starting to look like everyone is placed exactly where they are at, with hardly any option to go anywhere. If you have a lot of money, if you use ground travel, it takes forever, and it can be high-risk due to territorial variances. If you don’t have much money, you’re lucky you have food for now, and a place to eat it. Those two extremes have a lot of slack as to how long the predicament changes from A to B. However, the time factor is making it increasingly difficult to change individually by your own free-will, any of the variables on a personal level. Who’s free and what’s free? Who owns what, if anything? We all need clean water to drink, and fresh air to breath. If we don’t have or can’t get those two items, the rest doesn’t seem too important. Who owns who? Who owns what? If you don’t own your own land (metaphorically) who owns you? There’s a lot of gray area between the state and the individual that is getting sold out everywhere, and not to the masses of people living and working on the same land.
Kid born today is owned by the oligarchy on Day 1. The kid gets a welcome package, that includes a $65,000 personal share of the national debt, insane housing prices, and $134,000 personal share of SS and Medicare under-funding.
Welcome the new world! Now, please put on these shackles and let us scan your face.
agree with you
Kroger has released their own method of combating the shift from B&M. They have instituted a graduated service fee on cash back in the stores. That and the 1990s style bar code scanner for pricing as u fill the basket. They are clueless….