First posted at https://www.washingtonpost.comf
Author: Sarah Halzack
For more than a year, the biggest names at the shopping mall have cast a hopeful eye on the declining jobless rate and low gas prices, betting that it was only a matter of time before consumers snapped out of a cycle of tepid spending that has left many retailers grappling with weak sales and declining store traffic.
But, with the likes of Gap, Macy’s and Kohl’s reporting this week that they rang up surprisingly dismal sales this spring, retailers — especially apparel chains and department stores — are facing a troubling reckoning.
The economy is bouncing back, and customers just aren’t hitting stores or filling up digital carts like the shopping giants thought they would.
“There seems to be some more macro issue, given both performance of ourselves and our competition,” said Wes McDonald, chief financial officer at Kohl’s, on a conference call with investors Thursday.
“There seems to be some change in consumer behavior.”
The uncertainty is lending fresh urgency to the challenges facing old-school stores, whether it is adjusting to the reality of online commerce or watching their customer base shift from big-spending baby boomers to the more cautious millennials.
The industry is suddenly awash in talk about being “overstored,” too many physical outlets chasing too few shoppers.
Macy’s profit plummets 40 percent. The department store operator says shoppers have cut back on buying apparel, and foreign tourists have curbed spending. It cut its earnings outlook.
“My personal view of the retail real estate industry in the U.S. is that it is over-retailed,” Sandeep Mathrani, chief executive of General Growth Properties, told analysts this month. “The primary reason retail properties have closed and will close is obsolescence.”
The rise of Internet shopping appears to be reaching a new threshold. Once, it was thought that the online universe might be perfect for selling electronics and books, but things that people need to touch and try on, like clothes, would endure in the cozy realms of bricks-and-mortar stores.
Recent sales patterns suggest retailers have reached an inflection point. Analysts at financial services firm Cowen & Co. predict that Amazon.com is on pace to overtake Macy’s as the largest apparel retailer by 2017.
Meanwhile, airline travel is at record levels and restaurant sales growth has been solid, suggesting that consumers are choosing to shell out for experiences instead of goods that fill their closets or their kitchens.
“It’s finally all coming to fruition, this perfect storm that’s been brewing for so long is finally starting to hit,” said Marcie Merriman, a consumer-engagement consultant at the advisory firm EY. “I think this is only the beginning. It’s only going to get much uglier.”
My point of view:
Here in Europe the picture is the same (or sadly even worse). The shift from tangible goods to intangible experience will distort major parts of retail in the forthcoming years.
The impact on job creation?
Probably there will be jobs and just like in retail mostly lower qualified.