The Call-In: Retailers Decline While Amazon Grows
LOURDES GARCIA-NAVARRO, HOST:
And this is The Call-In. We're not far into 2017, and already, it's been a brutal year for retail. Bankruptcies, store closures and stock declines have plagued companies that are trying to compete against e-commerce, specifically the behemoth Amazon. Sixty-thousand retail jobs have been lost in the last few months alone. Today, we're hearing from our listeners about what they think of this new retail economy, as well as what they choose to buy online.
UNIDENTIFIED WOMAN #1: Peanut butter powder.
UNIDENTIFIED WOMAN #2: Cat food and dog food.
UNIDENTIFIED MAN: Toilet paper.
UNIDENTIFIED WOMAN #3: Office supplies.
UNIDENTIFIED WOMAN #4: Today, I bought a sofa, a chair, a coffee table, a second chair, all online.
GARCIA-NAVARRO: Derek Thompson, who writes about economics for The Atlantic, will be our guide in talking through our listener calls. He recently wrote a piece examining the factors that have led to the retail meltdown. And he says it's not just the rise of Amazon.
DEREK THOMPSON: The story definitely begins with Amazon. Amazon's revenue has quintupled in the last five years. But it is more complicated, and there are two other factors that I looked into that are really important. First of all, in the 1980s and 1990s, America just built way too many malls. We have, by one measure, 40 percent more shopping space per capita than Canada, which seems to be doing just fine, and 10 times more than Germany. So we just have way too much space to shop, particularly now that our couch is essentially its own virtual mall. And Americans are shifting their spending from materialism to meals, I guess you could say, or materialism to experiences.
We used to spend a lot more in clothes than we do now. Spending on clothes has fallen by about 50 percent as a share of the average family budget since 2000. I mean, it's really rather remarkable. What are we spending more money on? Well, travel for one. Hotel occupancy is at a post-recession high. And we're spending a lot more on restaurants and bars. Restaurants and bars are growing 50 percent faster than all non-food retail right now. So this restaurant renaissance is also eating away - sorry, pardon the pun - from the rest of retail. So you add these things together, and you have a perfect storm for retail.
GARCIA-NAVARRO: I want to turn to some of the calls we got from listeners. The first one is from Carmela Moreno (ph) of Vista, Calif.
CARMELA MORENO: I am part of working poor, and I do most of my grocery shopping at the Grocery Outlet, which is a chain here in California, or the 99 cents store. I saw your question about do you get your groceries delivered. And while a lot of people in my area might be able to afford that, that is - I might as well - you might as well ask me, you know, when am I going to get my next Mercedes?
GARCIA-NAVARRO: So Carmela brings up an interesting point. How does income level play out in terms of who is shopping online versus in brick-or-mortar (ph) stores?
THOMPSON: This is a really interesting question and very important because retail, as a word, is such a broad idea. And what you're really seeing, I think, is that, you know, for the last 30, 40 years, we've talked about the hollowing out of the middle when it comes to income and when it comes to jobs, that you had a lot of low-paying jobs and a lot of well-paying jobs but a hollowing out of the middle. I think, in many ways, you're seeing something like that in retail, that a lot of these stores that sort of cater to the middle - J.C. Penney's and Sears and Macy's - they're faltering. These department stores are faltering. But on the one hand, you have some luxury brands that are doing just fine. And on the other hand, you have this enormous rise of dollar stores that have thrived even post-recession.
GARCIA-NAVARRO: OK. We had another call that I want to play. This one's from Pete Mulvihill (ph). He lives in San Francisco, Calif.
PETE MULVIHILL: I own two independent bookstores here, and things are challenging. The way people have moved their shopping online has great challenges for brick-and-mortar stores. The concern here is that I think people have to realize is that if they keep shopping online, then they're not going to have vibrant neighborhood corridors. Every time somebody shops online, they are voting to shut down that commercial corridor.
GARCIA-NAVARRO: So people want to live in neighborhoods with lots of shops. They want to have lots of things around them, but they're not actually going to those shops. What is the effect on neighborhoods?
THOMPSON: Oh, this is such a good question. And it is fascinating to think, you know, what happens when you have a lot of families, a lot of young families, let's say, that move to an area because of its shops, because they look beautiful? But then once they actually live there, they realize they don't actually want to spend money in those shops. They actually just want to shop online. They're sort of treating these shops like Epcot or something, you know? Like, it's there, and I want it to be there as a part of the atmosphere, but I don't actually want to spend money inside of that establishment.
This is a really important question when we think about the aesthetics of our city, the way we want to live, what we want to see when we walk outside of our door. Do we want to see empty space that has been shut down because Amazon's taken over everything and all the jobs have gone to warehouses and delivery people? Or do we want to support those local shops that offer us, you know, maybe something beyond the aesthetic of a cute, well-lit storefront?
GARCIA-NAVARRO: All right. This is from Grace Parker (ph). She's from Somerville, Mass., and she is a self-described millennial.
GRACE PARKER: I basically use the Internet to order anything I possibly can. I mean, I have a CVS a couple of blocks from my house, and I'll still totally just Amazon Prime, like, my toilet paper. And I know it's going to take two days, but at least I don't have to remember to stop at CVS on my way home from work.
GARCIA-NAVARRO: And it seems like she was coming home from work because she called us while she was running around outside.
GARCIA-NAVARRO: Are these changes being driven by millennials? I mean, you say it is across all age groups, but, you know, our millennials really kind of driving this shift?
THOMPSON: I think young people - first of all, young people drive lots of cultural shifts, specifically because they have very little stake in the status quo. In this case, you have a lot of young people who, let's say - and this is not describing all millennials, but those who, you know, went to four-year universities. Those sort of young people are more likely to live in downtown areas in major cities. And Amazon tends to have warehouses relatively close to those areas, so shipping tends to be very convenient.
You do have a situation where I think right now 50 percent of Americans, according to several things that I looked at - this is astonishing, 50 percent of Americans live in households where at least one person subscribes to Amazon Prime. That is just amazing. And it's - Amazon Prime, it creates precisely the effect you just heard on the phone, which is people thinking, well, I'm already paying for this anyway. I know I'm going to get really, really fast delivery. I'll just think of Amazon whenever a retail question occurs to me even when there's a CVS two blocks away.
GARCIA-NAVARRO: I want to talk a little bit about the future. One of the most interesting parts of this article, for me, was what you think is ahead for shopping.
THOMPSON: Probably, my favorite prediction has to do with self-driving cars. I think a lot of people think of self-driving cars as moving people around. But if you think of an autonomous vehicle as essentially a room with wheels that moves itself, well, it's real estate. And what are retailers interested in? They're interested in real estate and getting that real estate as close to shoppers as possible. So what about a future where retailers realize that the best stores aren't immoveable shops but movable cars, and they put a bunch of their merchandise in cars? And you press the Amazon button or the Bonobos button or the Warby Parker button on your phone, and a self-driving car with that merchandise rolls right up to your house. And you can either walk inside and take a little look, or it'll be right there in a little sort of cut by the window. I mean, this seems...
GARCIA-NAVARRO: For the really lazy - for the ones that really don't want to leave their sofa.
THOMPSON: Sure. I mean, it seems a little crazy. I mean, you already have, you know, Seamless essentially getting people's - you know, you go on to Seamless, and you order some food, and someone brings it to you. I see no reason why a smart retailer, unless there are specific regulations against the idea, wouldn't buy thousands even millions of these cars and turn the streets into the malls of the future.
GARCIA-NAVARRO: Derek Thompson of The Atlantic, thank you so much for joining us.
THOMPSON: Thank you.
GARCIA-NAVARRO: And next week on the Call In, student loans. Many of you may have been on college trips in the last few weeks, which means you're looking at your financial aid options. What are your questions about paying for college, and what options are you weighing? Call in at 202- 216-9217 and leave us a voicemail with your full name, where you're from, and your experience. And we may use it on the air. That number again - 202- 216-9217.
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